費利浦·麥克莫蘭銅金 (FCX) 2007 Q4 法說會逐字稿

Ladies and gentlemen, thank you very much for standing by and welcome to the Freeport-McMoRan Copper & Gold fourth quarter 2007 earnings conference call.

During this presentation all participants are in a listen-only mode.

Afterwards, we will conduct a question-and-answer session, and if you should have a question at that time, please press the one followed by the four on your touch-tone phone.

(OPERATOR INSTRUCTIONS)

I now have the pleasure of turning the conference over to Kathleen Quirk, Executive Vice President, Chief Financial Officer and Treasurer at Freeport-McMoRan Copper & Gold.

Please go ahead, ma'am.

Thank you, and good morning, everyone and welcome to the Freeport-McMoRan Copper & Gold fourth quarter 2007 earnings conference call.

Our earnings announcement was released earlier this morning and a copy of the press release is available on our website at FCX.com.

Our conference call today is being broadcast live on the Internet and we have several slides as usual to supplement our comments this morning.

We will be referring to the slides during the call and they are accessible using the webcast link on our FCX.com website home page.

In addition to analysts and investors, the financial press has also been invited to listen to today's call and a replay of the call will be available by accessing the 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.

I would like to refer all participants to the cautionary language included in our press release and slide presentation and to the risk factors described in our SEC filings.

Also on the call today are Jim Bob Moffett, Chairman of the Board; Richard Adkerson, Chief Executive Officer; Tim Snider, Chief Operating Officer, and we'll also have several members of our senior operations team with us today who Richard will introduce in his comments.

And it's all of our great pleasure to be here today to talk about our spectacular year that we had in 2007 and to our outlook.

I will start by briefly summarizing our financial results and then turn the call over to Richard who will discuss our operations and outlook.

We will then open the call for questions.

Today FCX reported fourth quarter 2007 income from continuing operations applicable to common stock of $423 million, $1.07 per share compared with $426 million, $1.99 per share, for the fourth quarter of 2006.

For the year ended December 31, 2007, we reported income from continuing operations applicable to common stock of $2.7 billion, $7.41 per share compared with $1.4 billion, or $6.63 per share for 2006.

Our 2007 financial and operating results include the wholly-owned subsidiary Phelps Dodge's results following our acquisition on March 19, 2007.

Net income in the fourth quarter from continuing operations included net charges totaling $0.29 per share, $120 million, which included $143 million or $0.35 per share for the effect of purchase accounting, and a gain of $23 million or $0.06 per share to mark-to-market the copper price protection program.

These contracts were financially settled in January 2008 for approximately $600 million which concluded this program.

Our fourth quarter results also included a reduction to revenues of $281 million.

This was $137 million to net income, or $0.33 per share for prior period adjustments to concentrate sales.

Our sales during the quarter from our mines totaled 878 million pounds of copper, 161,000 ounces of gold, and 19 million pounds of molybdenum.

We exceeded our previous estimates of 875 million pounds of copper, 100,000-ounces of gold and 18 million pounds of molybdenum.

Pro forma sales for 2007 including the preacquisition sales from Phelps Dodge totaled 3.9 billion pounds of copper, 2.3 million ounces of gold and 69 million pounds of molybdenum.

Our recorded realized prices for copper before hedge adjustments averaged $3.12 per pound in the fourth quarter.

That was 4% higher than the year ago quarter.

Our recorded realizations were less than the market average price of $3.28 because they were heavily weighted to the forward copper prices of $3.02 per pound at the end of the quarter.

Our operating cash flows during the fourth quarter totaled $1.3 billion and over $6.2 billion for the full year.

Capital expenditures during the quarter were just over $600 million and $1.8 billion for the full year.

In October, we completed the sale of our international wire and cable business, Phelps Dodge International Corporation, for $735 million.

PDIC's operating results are reflected as discontinued operations in our consolidated statements of income, and PDIC's assets and liabilities have been reported as held for sale in FCX's balance sheets.

We fully repaid the remaining $1.55 billion in term debt at the end of 2007 bringing our total debt repayments since the March 2007 acquisition to over $10 billion.

At year end, our total debt approximated $7.2 billion and consolidated cash was $1.6 billion compared with total debt of $8.7 billion and cash of $2.4 billion at September 30, 2007.

We've also included in our press release our preliminary estimate of consolidated reserves.

Recoverable reserves of copper totaled 93.2 billion pounds, of gold was 41 million ounces, and molybdenum was 2 billion pounds at the end of 2007.

Now I would like to turn the call over to Richard who will be reviewing our operations and outlook and will be referring to the materials included on our website.

Good morning, everyone.

I want to really focus our call today on our outlook and comment on our fourth quarter results, but I think it's certainly worth noting just what a great year it was for FCX during 2007.

We transformed the Company from a company that had a single great asset in the Grasberg mine in Indonesia to now the leading publicly owned copper producer in the world, and we are very pleased about where the Company is situated, about the longer term markets that we are involved in and about our growth prospects.

We've made great progress during the year in successfully integrating Phelps Dodge and FCX into a single Company where now we have a single operating team, a single financial administrative team, and that process has gone very well indeed.

I have here with me today Tim Snider, who has served as our President and Chief Operating Officer during 2007.

Tim has had a very long and successful career in this industry and with Phelps Dodge and has been key in helping us successfully integrate the companies.

He is retiring April 1 but will continue to work with us on a consulting basis and we value his participation.

We will have a senior management group now in the operating group who will serve the chief operating functions.

Red Conger is here today who is leading now our operations in North and South America.

John Marsden heads Freeport-McMoRan Mining Company which deals with technology and exploration and construction and support functions for all of our businesses globally.

Dave Thornton heads our Climax Molybdenum business with excitement in that business including the restart of our Climax mine.

And Mark Johnson is here who is our Chief Operating Officer in Indonesia and has had a long career with Freeport.

We have one other executive, Phil Brumit, who we've recently hired had a long career with Newmont running their -- at one point in his career running their Batu Hijau mine in Indonesia.

He is now located in the Democratic Republic of Congo and leading our Tenke Fungurume group.

That will be our operating management going forward.

A couple of other broad comments.

Kathleen mentioned the progress that we've made in reducing our debt.

Repaying this $10 billion of term debt in roughly nine months from the completion of the transaction is a major step for us when this time last year we were targeting doing that within a three or four year period.

Now we have that behind us.

And that allows us to be very aggressive as we approach our business going forward.

We are in an industry where it's very difficult for companies to meet production goals and to add new production.

We have a Company where our production is growing.

It grew this year and I will be talking about the growth that we have in front of us from projects that we've already identified, and we have a great set of properties and resources that we are now analyzing and considering how to develop those to add production beyond our current plans.

We are generating substantial cash as our financial statements show.

Our directors increased our common dividend by 40% during the fourth quarter of '07.

We now have an authorized 20 million share open market purchase program for our common shares and particularly beginning in the second half of 2008 we will be generating excess cash flows.

Slide four, you can see a series of charts that just illustrate the change in our business.

Revenues grew from under $6 billion to roughly $17 billion in '07.

Net income from $1.4 billion roughly doubled.

Our cash flow went from less than $2 billion to over $6 billion as cash flow from operations after taxes and interest, and the enterprise value from year end 2006 to 2007 grew by four times.

Our Company is a changed Company, a strong Company financially and one with good opportunities.

Page five shows the nature of our business now where previously Freeport was a copper and gold Company.

We still have the largest gold mine in the world, but on a percentage basis it represents roughly 10% of our pro forma revenues.

Molybdenum, which we are the leading producer in the world, and we have great assets and great growth opportunities is a positive contributor to our business.

78% of our revenues come from copper.

Two-thirds of that comes from copper concentrate and one-third from SX/EW operations, which Phelps Dodge over the years has been a technological leader in developing that process which allows us to profitably mine lower grade deposits.

A lot of our growth in the future will be sulfide ore bodies.

We've been leaders in the development of technology for processing those ores and that will be key to us as we go forward.

Page five has the operating data comparing '07 with pro forma, that's combined Phelps Dodge and FCX for the fourth quarter of '06.

As we had indicated, our volumes were lower in the fourth quarter than they have been or that they will be on average going forward.

All you have to do is go down to that chart at the bottom right side of the page six and see the significant drop in volumes from Grasberg during the fourth quarter.

We had over 400 million pounds of copper in the fourth quarter of '06, 183 million pounds this year; over 500,000 ounces and 124,000 ounces more than projected.

But that simply reflects the sequencing timing issues and for those of you who have followed Grasberg over the years you understand this, that at certain times we have to mine the upper reaches of the mine in order to get to the very high grades at the center of the mine and that's what affected our volumes for the fourth quarter.

We actually, on a consolidated basis, met our projected targets for volumes during the fourth quarter.

And we consider the fourth quarter operationally to have been a very strong quarter.

You can see that our volumes are roughly split between North America, South America and Indonesia and reflecting our operations and we had good performance out of molybdenum business during the year.

Our earnings came in this year for the fourth quarter below analyst consensus.

There was one reason for that.

And that has to do with the fact that two-thirds of our copper sales are sold under industry standard contracts which provide that shipments are priced provisionally at the time they are shipped, and ultimately settled over a one to three-month period following shipment.

What this means for us is that about half of our sales in any quarter are going to be priced at the price at the end of the quarter and not at the average price during the quarter.

The actual cash that we will realize will be roughly over time at the average price.

But for accounting purposes at the end of the quarter we accrue sales and for half those sales it comes in at the price of the end of the quarter.

Fourth quarter '07 was a quarter in which the spot price of copper began the quarter at $3.70 and ended the quarter at $3.01.

That meant that during the fourth quarter there was a downward adjustments for the accrued sales we had going at the end of the quarter and half of our sales were recorded $3 roughly a pound which was less than at average pounds for the quarter.

We have the details for that here.

But here we had a quarter in which we met our production guidance.

Our costs were in line with expectations, and the financial results simply reflect the pricing in the marketplace.

Prices had risen during January, and as those professionally priced contracts are settled, they will have the benefit of the prices whenever they settled and in the first half of January they were higher than they were going into the quarter.

I just wanted to make that point for that.

On page eight, we again show our annual sales.

You can see how the sales are divided between our North American mines, South American mines and Grasberg and our annual unit cost.

Unit cost reflect volumes.

Because the lower volumes at Grasberg this year, its costs reflect that.

Throughout the industry everyone is being affected by input cost, and we are as well.

Diesel costs, coal costs, labor cost, all reflect into this number.

For the year, our consolidated net cash costs, net of by-product credits, the gold and aluminum credits was $0.75 a pound which is certainly an attractive cost number for an industry of where the average selling price was well over $3 a pound.

Our reserves are presented on page nine.

This year we have priced reserves using a copper price of $1.20.

Last year Phelps Dodge used $1.05 and Grasberg used $1.

In addition to the increase in prices, the reserve calculations, which are an economic determination as well as a physical determination, reflect the higher cost of input.

So there is higher commodity prices, higher input cost.

As a result of our drilling activity and price changes, our reserves of copper were essentially the same at the end of the year as at the beginning of the year.

Additions and revisions essentially offset production, 90% of production at least.

Molybdenum reserves were slightly higher and gold reserves went from 42.5 million ounces to 41 million ounces.

Interesting at the bottom, just to see what our reserves are doing over a longer period of time and you can see the Company as we have done a great job, or the companies have done a great job in maintaining the reserve position.

Our reserves are split between North America, South America and Indonesia as indicated on the chart on the right side of the page.

Markets.

There's lots of questions about markets today because of the turmoil in the financial industry and what impact that might be having on the overall U.S.

economy.

With our business today we are continuing to see tightness in the copper marketplace.

The U.S., beginning at the end of 2006, saw the impacts on copper consumption of the slowdown in the residential marketplace and the slowdown in the U.S.

automobile industry.

To date the copper demand in the U.S.

from nonresidential construction and other uses continues to be relatively strong.

It will certainly be affected about the course of the (inaudible) questions there.

Globally, globally China continues to lead in the world's copper demand and growth was extraordinary during the years in China.

Global inventories remain very low, a bit lower today than they were a year ago, and the copper prices stronger today than it was a year ago.

And so we are approaching the world with a very positive long-term view about our commodities.

We believe that we can focus on developing supplies, maintaining production out of our existing mines, and be in a position to benefit from these positive markets for our shareholders as we go forward.

For 2000 -- turning to page 11, for 2008, we are looking to produce 4.3 billion pounds of copper, 1.3 million ounces of gold, and 75 million pounds of molybdenum.

Using $3 copper, $800 gold and $30 spot price for molybdenum, that would indicate operating cash flows for our business of $5 billion.

Our cash flows for 2008, operating cash flows will be affected by significant working capital uses during the first half of the year.

We have paid the final payment on the historical Phelps Dodge copper price protection program and we had to write a check for $600 million in January.

That's reflected in this number.

There is also significant cash taxes that were paid.

So we will by the second half of the year we will be generating very substantial cash flows, three quarters of our cash flows will come in in the second half of the year on this model basis.

We have capital expenditures which reflect all of our expansion projects that I will be talking about, estimated at $2.4 billion for 2008.

The debt reduction is illustrated on page 12.

At the time of the acquisition, we had $17.6 billion of debt, $10 billion of term loans, $6 billion of senior notes as well as the remainder being existing debt that came over from the companies.

We have now paid off $10 billion of that and really have remaining only the $6 billion of notes and other long-term debt for the Company.

We are at the capital structure that we were targeting when we did the transaction.

Now our cash flows are going to be focused on investment activities and to the extent that we have excess cash flows we will be in a position of following our historical practice, returning those to shareholders.

We are really excited about our development opportunities for this Company.

On page 13 we begin a discussion of those.

The Safford mine in Safford, Arizona, the first new mine developed in the United States in many years; 12 years or more Phelps Dodge worked to get the rights to develop this mine.

Construction is complete in all material respects.

We started up the processing facility in the fourth quarter producing copper in December.

This project is designed capacity of 240 million pounds and it's a very efficient operation that will be a contributor to our Company.

We are starting a historical mine and historical mining district with the Miami mine.

We expect to produce 100 million pounds copper a year by 2010.

This operation will facilitate the ongoing reclamation activities that we've had in this area from historical operations, as well as contributing cash to our Company from the investment that we were doing.

At Morenci, the flagship mine of the U.S.

copper business for 100 years, we have restarted an historical mill, added a new processing facility using new technology developed by Phelps Dodge to leach concentrate from this mill facility.

The mill has a design capacity of 54,000 tons per day and we are approaching that.

We continue to ramp up the leach plant.

This project will add 115 million pounds of copper annually and help our cost profile there, and give us great experience to use if we go forward with other expansion opportunities.

I mentioned when I introduced Dave Thornton we restarted the Climax Molybdenum mine.

This is, again, an historical mine which has been one of the great mines in the history of the U.S.

mining industry.

It hasn't operated in a number of years.

After a completing a feasibility study, we are now embarking on a restart of this operation.

It's not developing a brand new mine, but we have been processing the water that's coming out of the historical mining facility.

It's a $500million project.

It's an open pit operation with very attractive cash costs for a commodity which is currently selling for over $30 a pound with cash costs of $3.50 a pound.

The initial project is designed with a new mill that we are constructing to produce 30 million pounds of molybdenum a year.

The resources are there to double that and we are going to be monitoring the marketplace and reaching decisions on whether expansions of that operations as we go forward.

But this is the largest, highest grade undeveloped moly resource in the world, and it's going to be a great asset to go along with our Henderson mine and our by-product moly production to allow us to continue to be the leader in that marketplace.

The Cerro Verde mine in Peru, a $900 million project completed just over a year ago.

By the second half of the year it was operating at capacity.

It tripled its production level to over 400 million pounds a year.

It has a moly component that we will be bringing to the marketplace during 2008.

We're continuing to do exploration drilling there and looking for further opportunities to expand this great ore body.

In Chile, the El Abra mine, which has been a very positive producer from the oxide ore body that's there, has a significant sulfide ore body that we are now looking to develop which will extend the mine life significantly.

We are working with the government on the environmental impact of this project.

Again, it's not a new mine, but an alteration, an expansion of an existing mine that will be -- that we will look forward to moving forward with our partner, Codelco, at that mine.

In Indonesia, we are continuing with our work underground.

Today, the DOZ mine, which is the current producing underground mine.

We now have been block caving underground at the Grasberg area for 20 years now very successfully.

The DOZ mine went from 25,000 tons a day to 35,000 tons a day nameplate.

We completed a 50,000-ton expansion mid last year, actually operated that over nameplate at 59,000 tons per day in the fourth quarter, hit 80,000 tons per day on at least one day, and now we are going to be looking to expand it to 80,000 tons per day on a consistent basis.

That makes this a very, very large block cave mine by any standards around the globe.

Great indicator of the future of the Grasberg district when the Grasberg, following the depletion of Grasberg pit in roughly 2015.

To be prepared to deal with the transition underground, we have been developing this common infrastructure project which is getting very near completion to drive a new adit at 400 meters below our existing adit to get to the underground reserves below the Grasberg, and we will be beginning development activities for the Grasberg Block Cave in the first half of '08.

We are also developing a smaller stoping mine, the Big Gossan, which will be in production by 2010.

At the same time, we are enhancing our mill using high pressure grinding roll facilities with our older mill line to improve this productivity and taking further steps to improve this mill facility which is the industry's largest mill facility globally.

Then we, on the other side of the world in the middle of Africa we are really excited about what we have to work with with the Tenke Fungurume concession in the Democratic Republic of Congo.

This is a very large concession, 600 square miles.

It's a project that where we are continuing to do exploration drilling and analysis of the ore body which has very high grades of copper and cobalt near surface.

And while we were engaged in a initial project, which is a good project, $900 million project, we are targeting bringing it online initially during 2009 to produce 250 million pounds of copper and 18 million pounds of cobalt annually.

The real focus here is where we go beyond this initial project.

How aggressively can we define the ore body, develop the logistic systems, put the resources in, work with the government on all of the issues that involve doing business where we are physically located.

But this is an ore body that has a chance of joining the Grasberg as one of the world's great ore bodies and that's what we are committed in pursuing and doing so aggressively.

I mentioned we've hired a new President, Phil Brumit, and we are also bringing over a number of people who have experienced in the expansion that we did at the Grasberg during the 1990s.

We are going to leverage off that experience on how to deal with the community issues, the employee issues, as well as the production and logistic issues of developing this great ore body and it's something that we are tremendously excited about.

Immediately after we completed the merger, we began an ore body by ore body review of each of the producing and historical ore bodies in the Phelps Dodge portfolio of assets.

And we are continuing with that project.

We are looking to first see what kind of information we had to understand the geology of these ore bodies.

And in a number of cases we are significantly expanding our core drilling to understand those ore bodies and what further expansion opportunities may be available to us.

What kind of additions to reserves can we do?

How can we then translate reserves into cash flow producing assets?

Today, we are announcing a first step in that process.

We are looking at incremental expansions beyond those previously announced at Morenci, Sierrita, Bagdad and Cerro Verde.

These are relatively small projects, but in total they will involve capital of $400 million, incremental annual metals that will -- when they reach full operations of over 200 million pounds of copper and 7 million pounds of moly, very attractive rates of return on this project.

So we are going -- we are already -- these are approved our board.

We're spending money on them and we're going forward with these projects.

And then at the same time, John and his team working with our operating groups are now looking to see what potential larger scale expansion projects might be available to us as we look at all the issues that go into expansions -- the economics, the geology, the technology, the land rights, water uses, all of those types of issue will affect that.

Page 19 illustrates what opportunities we might have available.

I mentioned earlier we have over 90 billion pounds of recoverable copper reserves at $1.20.

We will be reporting in our 10-K a resource at $1.50 of mineralized material that has contained copper of 100 billion pounds and that's what gives us these opportunities to look for further expansions of our reserves and our production facilities.

We are continuing to explore.

We are substantially increasing our exploration budget.

This year we spent just under $120 million and next year we plan to spend $175 million.

This is principally drilling activity in North America.

We will be focusing on Morenci, as well as the Lone Star deposit which is a very large indicated ore body adjacent to the Safford mine which we were doing drilling on now.

And in South America it's Cerro Verde and other places.

In Africa, the Tenke Fungurume, we have a greenfield project nearby in a prospect we are calling Kisanfu, and are continuing our exploration in Indonesia in areas adjacent to and at depth of the Grasberg and then outside of the Grasberg's producing area.

Exploration really is what ultimately distinguishes a natural resource company.

It's what built our Company and it's what we will use to build our Company going forward in the future.

Tenke Fungurume is a tremendous exploration prospect.

We have identified a project.

We are looking for further projects to go forward there as I mentioned.

In Indonesia, we have the rights to over 2 million acres that lie outside of the Block A of the PT-FI [cow] where the Grasberg is located.

Grasberg is the only mine on the western half of Papua, same geological features that created the Grasberg were at play throughout the mountains that go through there and we were continuing to explore there.

We also have other greenfield projects around the world that we are looking at.

Page 22 just gives some details of the diamond drilling we are doing with 10 drill rigs at Tenke Fungurume.

We are going to be very aggressive in pursuing this and understanding what the geology gives us and what the projects will be for going forward.

Page 23 is a chart, I think, that's indicative of what we are about as a Company and why we wanted to combine these companies and go forward.

We are looking at increasing copper production from 2006, 3.6 billion pro forma, 3.9 last year, 4.3, 4.5, 4.8.

That's not something you see typically in this industry.

These are projects that are approved.

We are spending capital on.

Beyond that, we are looking for other ways to expand longer term and to enhance our operations.

Looking forward into 2008 itself, I mentioned how our volumes will be back end loaded this year.

You see that on page 24 where we will have a first quarter from a volume standpoint that will be very similar, very similar to the fourth quarter of '07, then increasing in the second quarter with really strong operations in the fourth quarter -- third and fourth quarters.

Fourth quarter should see us at over 1.2 billion pounds of copper, 600,000 ounces of gold, and this will be similar to where we were during the first half of 2007 with the Grasberg's operations.

Page 25 shows the vision of our volumes by region.

It also shows our net unit costs.

Unit costs again reflect obviously the lower volumes that we have.

We have copper and the increase in the unit cost inputs as we go forward.

It also shows the by-product credits from molybdenum and gold.

Unit costs on this basis are projected to be at $0.96 a pound.

From a cash flow standpoint, we continue to have the opportunity to generate very strong amounts of cash flow.

Page 26, shows that at $3 copper, as we go forward the annual average operating cash flows for 2008-2009 would be $6 billion.

You can see the variations with different prices and on the following page we have for your use the sensitivity to commodity prices or changes in those units.

And you can see we are very highly leveraged to copper.

Capital expenditures, as I mentioned for 2008 on slide 28, are projected at $2.4 billion.

As we then begin completing our projects, our current budgets provide for significant reductions in 2009 and 2010 in capital expenditures.

What we hope is that we can find new projects, new opportunities to spend capital on profitably as we go forward and that's what we are working to do.

Page 29, then comes back to just how strong our cash flows are.

If we look at our cash flows, that would be operating cash flows reduced by our known capital expenditures.

Look at the cash required for our annual dividend now of $1.75 a share on our preferred dividends.

You can see at $3 copper we would be generating excess cash flow on an annual basis of an excess of $2 billion a year.

And that is really a significant amount of excess cash.

Financial policy is -- has been clear cut and one that we are maintaining.

We are going to have a strong financial position.

We believe -- we were optimistic about our markets going forward.

A year ago if you'd said that copper was over $3 a pound now, it would have been something we were happy about.

Yet we are at $3 a pound and still worldwide inventories are low.

The outlook for the metal long term is very positive considering the dynamics how copper is used around the world and in particular the challenge the industry is having in producing copper.

We are optimistic about future copper markets and strong markets would allow us to have ample cash to invest in new projects, to continue to look for opportunities on an economic basis to reduce debt.

We really don't have maturities to deal with.

And then to provide cash for shareholders.

And we are committed to our longstanding tradition of maximizing value for shareholders.

I mentioned the increase in the dividend, the share purchase program, and we will be reviewing market conditions, the performance of our Company and the cash availability on how to execute this financial policy as we go forward.

With that, I would like to open the line for questions and we look forward to responding to your questions.

Absolutely, sir.

(OPERATOR INSTRUCTIONS) Our first question comes from the line of John Hill of Citi Investment Research.

Please go ahead, sir.

Your line is open.

Great, thanks.

Good morning, everyone, and thank you for a detailed presentation as always.

Since it is, I guess, Tim's last go-round on an earnings call and we will certainly miss him and his steady hand at the tiller with the operations, can we talk a little bit about an aggressive approach to projects in the southwest, U.S., Sierrita, Bagdad and Miami you had a conservative approach to reserves at $1.20.

There's some sensitivities in the slides, can we talk about how new or old these expansion projects are and then what the sources of sensitivity in reserves are and where we should look for the biggest upside?

The approach we taken, John, thank you for your comments, is, I think, illustrated by the fact that we have begun this project of reviewing opportunities.

And we are taking it in steps.

We are looking at undertaking the projects that I mentioned which will first of all be good rates of return projects in and of themselves for the capital we are committing.

And they would be good projects at much lower copper prices than we have today.

At the same time they are also setting us up to be in a position to more aggressively pursue the bigger projects that are available to us.

And a number of these projects are sensitive to prices.

You can just see that in the resource number that we gave to you.

And as we go forward, we are going to be seeing how we can approach it based on the market conditions as they progress, based on the progress we make with these initial steps.

We are looking at technology to see how that can help us achieve this.

The work that we have done with the high pressure grinding rolls is a big forward step in energy efficiency for milling operations.

The work that we are doing with the concentrate leach has potential application to a number of these projects.

We continue to do work with process technology and with mine technology to be more efficient, all of which in addition to positive prices allows us to go forward with it.

The great thing is we have the resources that are available to us.

It's not a question of having to go out and do exploration.

While we do have issues related to some land rights issues and water issues and permitting issues, those issues aren't nearly as challenging as they are when you're starting up a brand new mine in a new area of operations.

So we believe this is a great opportunity for us to take steps towards getting higher volumes, and then be in a position to move on larger projects.

We will be reporting on our analysis to you on an ongoing basis every quarter.

You will understand where we stand with these -- with this process.

Great answer.

And then on that subject, on Climax, anything new in terms of the approval process and how confident are we that we can adhere to the timetable that has been laid out?

John is, hang on one second.

I think Jim Bob had an addition to your earlier question.

Pardon me.

John, I just wanted to -- this is Jim Bob Moffett, I just wanted to add to Richard's comment and emphasize what he said about the fact that this is not like exploration.

Because in the case of all the ore bodies we have discussed we have drill holes that have defined mineralized material.

With a we are doing with our program, 75% of our exploration budget is actually on exploration.

There is a sheet of ore underneath all of our proven ore that just needs more density of core drilling in order to be able to qualify it for a proved reserve.

Tacking on it would be a word I would use to existing ore bodies is much different than exploration.

If you look at our monthly report on core analysis when we have [mass age] you would think these were all explorations.

You're getting intercepts of anywhere from 0.5% to a 1% copper and the stuff we are doing in Africa, the core holes averaged 3% to 5% copper and have 0.5% to 2% cobalt.

So we have, in our efforts here we have the opportunity to be drilling exploration-type intercepts on exploration wells which will bode great in the future for the things you were talking about.

Originally referred to when we said we have opportunities to expand our resources without having to go out and find new ore bodies.

Great perspective.

Thank you.

And, John, you were asking about Climax and the permitting process there.

Or maybe I should just get off the queue.

Don't want to hog the call, sorry.

No, no.

Climax is important to us.

One of the great things about Climax is the incredibly positive reception that the restart that mine has received in the local community and by the State of Colorado which is unusual for a natural resource companies today.

But this is an area that had a tradition of mining and really needed the economic velocity that the new mine will provide.

Dave, why don't you make a comment on the permitting process?

John, the Climax mine is progressing great.

We kicked off our engineering team.

And we are progressing.

There is really no issues there.

We don't see any issues and we expect this project to come online in 2010 like we said.

Perfect.

Thank you.

All right, thanks, John.

Thank you, sir.

Continuing on, our next question comes from the line of Brian MacArthur of UBS.

Please go ahead, sir.

Your line is open.

Good morning.

I just first wanted to talk about a couple things.

First of all on cost.

I notice year-over-year you have your TCRCs down from $0.21 to $0.15 and I see just (inaudible) commenting that you've just set a lot of terms.

I assume that $0.21 to $0.15 reflects all those new terms you just negotiated?

Yes.

That's correct.

In today's world there is a tremendous shortage, a tremendous shortage of concentrate for the world's smelters.

So the smelter rates which once just two years ago were receiving very high returns because of the structure of the contracts with price participation provisions are now being renegotiated with an absence of price participation and at rates that are approaching historical low levels.

That's just a reflection of the tightness of the availability of copper concentrates coming out of mines.

But, yes, it does reflect that in those numbers.

And so can I assume most of it is contract -- Grasberg is contracted, Candelaria's contracted, everything is pretty well contracted so that's a hard number right now?

It's a number that, yes, that reflects that considering our current state.

You know that certain of our mines including Grasberg have some long-term concentrate contracts that have some minimum rates and about 30% of Grasberg's production goes into the smelter at Gresik, which under its original financing has a minimum rate which is averaged into those numbers.

Right.

I was going to ask about that, doesn't that eventually pay out when it earns a capital return?

I don't know when that occurs.

Or is that --

No, it had a time limit for that expires in -- expires in '08.

We will be dealing with that as we go forward with our partners there.

Great, thank you.

The second question is just on site costs at Grasberg, they have trended up an awful lot over the year from $1.14 in the second quarter, $1.66 in the fourth quarter and I realize volumes have gone down from 334 million pounds to 183.

There is a big volume effect.

If you could elaborate if there are any other extraordinary other than oil, the regular stuff that's causing costs there to go up dramatically?

Or is it just all volume and natural input cost increases?

It's just that, Brian.

The volumes, obviously, if you have x divided by y and y is half, the volumes will go up by arithmetic.

The Grasberg over the years is now a mature mine.

It's a kilometer deep.

It's 2.5, 3 kilometers across.

So hauls are longer.

That means you burn more fuel.

You have more, in those conditions particularly with the weather and altitude, maintenance costs on trucks are high.

We work every day to try to be efficient and reduce costs.

But there is just over time some natural elements going through.

And then diesel costs, we were at the market for that.

That is what it is.

Steel costs or steel balls in the mills are what they are.

It's nothing unusual there, other than the volume factors and the general factors that affect input costs.

Great.

And two other just real quick, easy questions.

Just following up on your slide on page 28 which gives your capital expenditures.

I assume Climax and Tenke and I assume the new expansions in the U.S.

southwest are all in there.

I just wanted -- and Miami is in there.

Is El Abra in those numbers yet?

Have you effectively decided to do the sulfide and is that in that capital program?

Yes, it's in there.

We were still working on the environmental impact statement and so forth.

But that project is one we have a lot of confidence in.

And those numbers are in there.

And my final one, just to be clear that I heard you correctly, when you talked of your operating cash flow of $5 billion which is after cash, taxes and everything else, did I also hear you say that's after the $0.5 billion or $600 million that you paid out on the old Phelps Dodge puts, so it includes that one time payment?

Yes, it includes that -- it's $600 million this year.

It was $800 million the first quarter before the merger in the first quarter of '07.

And in January we paid the final installment.

There are no more derivative contracts for our mining operations whatsoever.

That $600 million is there.

That's the difference between the $5 billion and $6 billion of annual cash flows.

We have been talking about $6 billion at $3 copper.

Right.

Great.

Thank you very much, Richard.

All right, Brian, good to hear from you.

Thank you.

Thank you, sir.

Continuing on, our next question comes from the line of Victor Flores of HSBC.

Please go ahead, sir.

Your line is open.

Yes, thank you.

Good morning.

I have a couple questions.

The first one is fairly simple.

Could you update us on what the status is of some of the discussions that were being held in the Democratic Republic of Congo with respect to licenses and have they said anything to you?

That whole thing went sort of quiet.

It has gone quiet.

And we have not heard official word from the government about that process.

We have a lot of confidence about our contract, about the equity of that contract from the perspective of the government and our shareholders.

I can tell you that the government is actively encouraging us to go forward with our projects and to go forward faster and bigger because the country is in dire need of employment and economic activity and taxes and royalties.

So we are hearing nothing but encouragement from the government about going forward with our project.

We have not had official word on the status of the contract review.

We believe our contract is a fair one for all parties.

So no news is good news?

Obviously, the best news would be to get official word on it.

Indications are at some point we will.

But it is not -- I guess, Victor, the good news of it is that we aren't slowing down anything.

We are spending money.

We're putting resources, we are in construction.

We want to get this thing on stream.

And we are not delaying any exploration work or further evaluation work.

We want to see how quickly we can go to the Phase 2 project, Phase 3 project and phase 4 project.

That's -- we aren't slowing down at all because of this government review process.

Great.

Thanks.

Follow-up question actually has to do with the production profile.

And Brian just asked you about what -- which of these new projects are included in the capital profile.

My question goes to the production profile.

Of some of these things that you've mentioned which are the incremental production expansions at Morenci, Sierrita, Bagdad and Cerro Verde.

Are those included in the production profile that you put through 2010 and is Tenke included in that as well?

The answer to your question is, yes.

Obviously, it's a ramp-up.

We are actually going to be able to get volumes out of Morenci relatively quickly.

But it will be by 2010, 2011 when we get to the full production which actually ultimately gets to over 300 million pounds a year.

The average was 200.

But that's what we are working towards, getting that and we have some volumes for Tenke beginning in 2009.

But at a full rate in 2010.

Right.

And then is the El Abra sulfide included in any of those figures?

It is.

But it's a longer term project.

It really -- you know, we still have oxide ore that will be the source of volume through this time frame.

What the sulfide project does is give us the extension of that life for 10 years beyond when we otherwise would have had been depleted.

It does not add near-term volumes, but it adds significant reserve life.

Okay.

That's great.

Thank you very much, Richard.

Okay, Victor.

Thanks for your question.

Thank you.

Continuing on, our next question comes from line of John Tumazos of John Tumazos Investment Research.

Please go ahead, sir.

Your line is open.

Congratulations on all of your progress and, Tim, good luck in your future endeavors, please.

Thank you, John.

Congratulations on stepping up from 26 to 55 rigs operating near existing mines.

Could you give us a review of in '07 how those rigs were allocated by location, and in '08 what the allocation would be?

It's very exciting to hear that you are adding 29 rigs near the mines.

Yes, John, let's see.

I could talk about it in broad terms.

In broad terms as we did this, and as Jim Bob talked about, we began initially looking at what was available to us potentially from the existing mines.

And so we have -- and also we are now -- as you can appreciate, we are a larger Company than either Phelps Dodge or Freeport was previously.

In that context, in terms of looking at particularly greenfield projects, but also in terms of looking at certain brownfield projects, the projects have to be of a larger size to be impacted.

So we have allocated rigs away from smaller projects, particularly away from smaller greenfield projects, to areas we believe have the most potential of having significant additions to reserves.

And what that has led us to doing is really putting more resources at Morenci, more resources at Lone Star and the Safford area, at Cerro Verde where we had significant drilling program and a real excitement about drilling there.

And then we will go all out with resources in terms of looking at Tenke Fungurume and there is no limit to -- there is no budget limitations for us on exploration.

It's a question of how do you effectively deploy resources and process the information.

We are going after it as aggressively as we can go after it.

So, Rich, is it fair to say that the emphasis is at the four locations you are saying, rather than Candelaria or El Abra or Sierrita or Bagdad or Chino/Cobre --

You know, we are still drilling at Candelaria, basically the resource for our project has been defined at El Abra.

There is still some work going on there.

We are certainly looking at Sierrita and doing active drilling in that area.

And then drilling to a lower extent at some of the smaller mines to see what we have there.

We have a broad scale program.

I was talking about the strategic emphasis is going to be in those areas where we have the opportunity of having larger scale projects.

And, Rich, you didn't mention with those first four mines Grasberg.

I presume there already was a big effort at Grasberg and you didn't need to add to it?

I think I did say that we aren't going to have any limitations on what we were doing in Grasberg.

We are drilling there.

We are back out, outside of Block A this year.

And the fact that we put more rigs in Africa doesn't have any impact with a we are doing in Grasberg.

We are looking at -- we are going after it just the same way we were, or would have done had we not done the merger.

Thank you for the update and good luck with the drilling.

Thank you, sir.

Continuing on, our next question comes from the line of Laurence Jollon of Lehman Brothers.

Please go ahead, sir.

Your line is open.

Good morning.

I wanted to touch on the revenue adjustments, I guess, starting with Indonesia.

If you go to exhibit Roman numeral 18, on a per pound of copper basis, there essentially a loss of $0.55.

I want to confirm those are the revenue adjustments related to the difference between provisional pricing and final pricing?

Yes, that's correct.

That's the fact that -- and there is accepted accounting standards of how you deal with this.

The SEC has been involved and directing how this was done.

So that means going at the end of the third quarter, we use forward market copper prices to price the open pounds in Indonesia.

Those pounds basically priced during the fourth quarter and because the price went from $3.70 to $3 at lower prices, then you had that downward adjustment.

In the third quarter and earlier quarters the price goes up and you get the upward adjustments.

That's what it is.

Okay, so in theory, I know you are positive on the outlook, but in theory if copper pricing continues to decline below the $3 level you will have the double whammy hit of 50% of your sales are at spot, and then the other 50% there will be another revenue adjustment downward, that correct, in theory?

It's spot.

And when you look at the overall numbers and the difference between the consensus analyst expectation and where we are, it's the fact that the half the production during the quarter gets priced at quarter end price.

Okay, sorry for using the term spot.

That's incorrect.

Right, so, yes.

It's either a double whammy or a double goody, depending on if the price goes up or the price goes down.

And it's just an accounting convention.

The actual cash that we realized from these contracts is spread over the periods.

It's a delay from shipment by the one to three months open quotational period.

And that could either work to our benefit in the rising price environment, or it would be lower if the prices drop in relation to the date of shipment.

This is just an accounting convention.

And you've accurately described how it works.

Okay.

Then just to be clear in South America you had a similar, what I would say, hit of $0.40 per pound of copper.

But in North America, I really didn't see -- I only saw $0.07 per pound hit.

Can you --

And the reason for that is in North America we essentially produce copper cathodes through SX/EW operations.

It's the bulk of our business and so you don't have -- and then we convert that cathode into rod and we provide just under half of the copper rod to the United States market.

You don't have the concentrate open pounds situation.

Those are sold at prevailing prices at the time they are shipped to customers.

And in South America we produce both copper cathode at El Abra, and then we produce concentrates at Candelaria.

We also produce concentrates at Cerro Verde and they have the impact like we do in Grasberg.

Okay.

Appreciate that.

That was my point about why I said about half of our copper is priced that way.

Because of the mix of our business.

That's great.

I appreciate the clarification.

And then lastly, as we think about free cash flow in the first half of the year, and specifically in the first quarter, I want to confirm that the $600 million settlement of the copper hedging will essentially be a reduction of payables and will be picked up in working capital so the cash impact will be hit in working capital, is that correct?

That's correct.

It's already happened.

Okay.

I just want to make sure I'm modeling it correctly.

Yes.

Thank you very much.

Thank you.

Continuing on, our next question comes from the line of Justine Fisher of Goldman Sachs.

Please go ahead.

Your line is now open.

Good morning.

Good morning.

I just have a quick question to clarify the CapEx spending in '08.

I know you guys have given some good detail about how much you will spend on each of your expansion projects, but is there any way you could clarify what the largest expenditure is for projects will be in '08?

In other words, which of the expansion projects will be represented, I guess, by most of that $2.4 billion?

Okay.

Let me see here.

The biggest chunk is going to be at Tenke Fungurume, which will be roughly $500 million.

The Climax restart, which is roughly half that.

And the underground mine development at Grasberg.

Okay.

Then it seems from, I think, even consensus estimates and certainly the way we run our numbers that you guys have more than sufficient cash flow to finance CapEx.

I was just wondering if you would think about drawing down on any bank lines to fund it.

It doesn't seem necessary, but would you have another reason to keep more cash on hand rather than using cash from operations for CapEx?

No, we have no need to keep cash in the business and we will use all of our available cash.

We still, because of the timing of cash flows, expect that we will have some draws under our credit facility during the first half of the year and those will be fully repaid in the third quarter.

And that's just because of the $600 million payment and then uses of working capital for other reasons, too?

There are three factors.

One is our volumes are split, one quarter in the first half and three quarters in the second half.

You have lower volumes in the first half.

The second reason is the $600 million payment.

And the third reason is other working capital uses, principally, we made so much money last year we are writing the governments around the world big cash checks for taxes, and those are being paid in the first half of the year.

That's not too bad a reason to use your cash.

We aren't complaining.

In all of this -- in all of this turmoil that's going on around the world as we look at our business, as we talk to our customers and as we look at just thinking back about where we were a year ago and what risk we might be facing, we don't see the world quite as badly as a lot of people -- as maybe the general consensus view is right now.

We understand the risk but we are just real happy about where our Company is financially and operationally and from a growth standpoint.

And I have one last quick question.

Could you update us on the labor situation in Latin America.

I know there are new issues with subcontract workers down there, not particularly with your mines, but some court decisions that could maybe change your labor costs there?

Yes, right, well, we do have labor contracts for our workers that are coming up for review this next year and the next year.

We have less significant use of contractors in our operations than some the other miners there.

And over time we've had a policy of increasing the work done by our employees and decreasing contractors.

We are continuing to do that.

That is a factor for the industry there.

From our standpoint we have good relationships with our work force and our contractors.

We are -- we feel good about being able to respond to the changing conditions.

Super.

Thank you.

Thank you.

Thank you.

And our next question comes from the line of Brett Levy of Jefferies and Company.

Please go ahead.

Thank you.

Hey, guys.

Most of my questions have been answered.

In terms of the stock repurchasing, that looks like it's about a $1.5 billion, is that at all price sensitive in terms of when you sort of wander into the market?

And do you plan on doing all of that during early 2008?

All of 2008?

Can you give some sense of timing?

Let me summarize that.

We have historically executed our cash purchases of shares in the marketplace as we generate cash and in response to market conditions.

From the conversation that I just had about the cash the flow generation of our business, we are not going to be generating excess cash during the first half of the year, but we will be generating it during the second half of the year.

And we will look at conditions.

We never want to be more specific than that in terms of how we execute this program because it is a situation that is driven by the marketplace and our cash evaluation.

So all I will say is that's the facts relating to our cash generation.

And we have this authorized and we will be talking with our board and making decisions about how to execute it over time.

Got it.

And then in terms of you mentioned this is kind of your target level of debt until the nature of the Company changes.

Have you talked to the rating agencies about that and have they had any thoughts about whether or not to kind of move you up a notch at all?

We have ongoing discussions with the rating agencies and we will continue to meet with them and talk about our plans and update them on our progress.

We now have a positive outlook from both agencies.

We are one notch below investment grade for our corporate rating.

We have very strong credit statistics for our high yield issuer.

The rating agencies are obviously where they are right now in terms of the overall financial markets.

And all I can tell you is as we have, we will continue to work with them to get what we believe will be an appropriate rating for our Company.

We don't have needs of going to the marketplace for new capital right now.

We are generating excess cash.

We were paying down debt.

And in fact while we are at an attractive debt level, if we have opportunities that are economically positive for our Company, we could well use some cash to take advantage of those.

We have a lot of flexibility in what we will do financially.

We are not dependent on rating agencies.

We will work hard to get the right rating for our -- what we consider the right rating for our Company.

And that leads to the very last question which is do you have any long-term ambitions of being investment grade?

You know, we've always been able to operate effectively as a non-investment grade issuer.

We were able to do this transaction and finance it efficiently.

In terms of saying that it is an overriding goal, we won't say that.

Our principal goal is going to be building value for our shareholders.

We believe that our Company should qualify as an investment grade rating credit and we will continue to management on the basis that we've laid out here today and work with agencies to see if we can't get the right rating.

But we are focused on having what we and our board consider to be a strong balance sheet and in providing good returns for our shareholders.

Fantastic.

Thanks very much, guys.

Thank you, sir.

Continuing on, our next question comes from the line of Charles Bradford of Bradford Research.

Please go ahead, sir.

Your line is open.

Good morning.

You've got a series of footnotes on page Roman numeral 4, including "C" which talks about $125 million of purchase accounting costs, added depreciation.

There is also one "D" that talks about $96 million of additional costs.

Can I assume that those will go away?

That's the historical cost of G&A associated with the PD activity, the Phelps Dodge activity.

Right.

But the $96 million seems like it was almost a one-timer.

No, it's not a one-timer.

That's just the ongoing G&A associated with the Phelps Dodge part of the business.

Okay.

So we can continue to see the G&A as high as it was in the fourth quarter?

Well, there were some -- I wouldn't look at the fourth quarter alone because there was, Chuck -- this was a complicated year related to a number of factors.

You point out to the purchase accounting issue under today's accounting rules that's a tremendously complex undertaking.

The accounting standards and particularly the way the SEC interprets them requires you to do all these detailed valuation analyses and that comes in.

Then this year was also a year in which we were taking steps to integrate our business and that meant integrating compensation plans and employee benefits plans.

We had a number of people in the, particularly in the finance administrative area of Phelps Dodge that left and they had preestablished severance plans so there was some unusual costs flowing through this year.

And I wouldn't look at any particular quarter, but look at the cost over time.

The purpose of the footnote was really to point out when we are comparing the fourth quarter 2007 with the fourth quarter of 2006.

The fourth quarter of 2006 was historical Freeport and didn't include the Phelps Dodge operation.

It was just helpful to understand those changes.

And what kind of a tax rate can we look forward to for ongoing quarters?

You also pointed out that one reversal that affected the tax rate in the fourth quarter and also affected the minority interest.

All right, the two things -- I guess I get to talk about on these calls are, one, the provisional pricing and, two, the tax rates.

The tax rate, Chuck, is going to be driven by the proportion of total income that PT-FI contributes.

We have a much higher tax rate in Indonesia than we do in South America or Central America.

And so if PT-FI is contributing a significant amount of the income, then the overall average tax rate will be higher.

In quarters where PT-FI is contributing relatively lower income as it was during the fourth quarter, our tax rate is going to go down.

The tax that we pay on our income in these countries is essentially fixed.

It doesn't change.

It's just how the mix comes about between those tax rates.

And so as we look forward in 2008, I will tell you and we will put this in our 10-K so all the world is aware of it, we are currently looking at the kinds of commodity prices that we had at roughly an annual rate of 34%.

Okay.

Now that will vary quarter by quarter because in the early part of the year PT-FI will be down and it will be higher later on.

And can you give us an estimate of depreciation including the further purchase accounting number for '08?

Looks like about $1.6 billion.

We will get that for you.

Hang on just one second.

Including the $940 million that we talked about in the press release for the actual depreciation associated with the step-up in assets, we are estimating about $1.9 billion in annual depreciation.

Thank you.

All right.

Thanks, Chuck.

Thank you.

And continuing on, our next question comes from the line of Ken Silver of Royal Bank of Scotland.

Please go ahead, sir.

Your line is open.

Hi, good morning.

My questions are answered.

Thanks.

Thank you, sir.

And, therefore, it appears that our final question will come from the line of Sanil Daptardar of Sentinel Asset Management.

Please go ahead, sir.

Thank you.

Just two questions, on one on the supply side industry-wide, do you see that supply is going to be tight from the industry for a couple -- in 2008 and going into 2009 also?

Or are you thinking that supply might increase probably given what conditions of the economies are?

Let's see, I missed the first part of your question.

From the supply point of side, do you think there might be industry-wide problems that may continue in 2008 that were in 2007 like mines disruptions or labor disruptions, that may cause supply to dwindle and supply remain very tight in 2008?

And you are talking about global, industry-wide conditions?

Yes.

Well, since the recovery from the U.S.

recession during the early 2000s, the global, I guess, the global recessions and since China became such a dominant factor, the industry's productive capacity has been stretched.

That means because prices rose, we and all of the other copper producers are trying to produce as much copper as we possibly can.

Prior to that time an estimated 5% of the industry's capacity, including some of Phelps Dodge's operations, were curtailed.

But with high prices, you can rest assured that everybody is going to be out there trying to produce everything they can produce.

And in that environment when you have aging mines and all the major mines around the world today are aging, pits are getting deeper.

As I mentioned with our Grasberg pit results in geotechnical issues and you can see that in a number of mines around the world, all of the operating systems are stretched.

Workers around the world are looking for greater participation so there has been a recurring series of strikes and unrest with contractors and other issues.

All of these factors mean that if there is a supply side response, it's inevitable it will be negative for supplies.

And the conditions we have today in the industry are no different than they have been in recent years and the likelihood is we don't know where it is or where it will occur.

But there will be mines that are currently producing at 2007 that won't produce what they expect to do in 2008.

And I don't think there is nothing around the world today to change that.

There is no slack in the system.

You mentioned during the commentary in the presentation that the demand for copper in the U.S.

is relatively good.

Against what --

Let me clear that.

I said the market is tight.

The demand in the U.S.

has been affected for copper by the weak residential housing market.

That was evident in the last half of 2006.

It has continued in 2007.

Our fourth quarter in the U.S.

in 2006 was weak and our fourth quarter in 2007 was about the same as it was in 2006.

But, and then also in the U.S.

the automobile industry is weak, and yet globally the automobile industry is strong.

In the U.S., and this is almost totally a U.S.

issue, but plastics are taking market share away from copper in plumbing applications.

But having said that, the U.S.

nonresidential market has been relatively strong.

While overall demand is down, the U.S.

is a much less significant part of the world's copper use today than historically, roughly 12%.

And the weakness in the U.S.

has been offset by strength in the global economies.

It would likely take from a demand standpoint a global recession to have a major impact on copper demand.

It's not going to occur as a result of supply side factors.

The supply side situation in terms of current production levels in new projects coming on stream continues to be very supportive of the copper price.

Okay.

And just from China's perspective, have you seen any kind of change in China's patterns, buying patterns given what the (inaudible) financial markets are and the economies are, have you seen any kind of change from China while you continue to --

We saw a heavy indication change in China during 2006 when the copper price reached $4 a pound in May.

There was an absence of Chinese buying in the last half of 2006.

A year ago the copper price was below $2.50.

And that primarily reflected Chinese buying patterns.

Chinese came back into the marketplace strong in 2007 and so, yes, at any point in time the copper price is going to be influenced by buying patterns, by investor sentiment, by funds flow and all those things.

All that will happen around us and it will affect our price and the way the market views us.

From our standpoint we look on a longer term basis, and look at just how difficult it is to produce copper and find new projects and that's why we are very encouraged about where we are.

Longer term the world will need copper as the undeveloped places in the world including China and India and other places develop.

They will need copper.

The world will be increasingly focused on energy conservation and how to use less energy for economic and environmental reasons.

And every application where that comes into place requires more copper.

And for a number of factors we are really encouraged, although we never try to predict and have no confidence in our ability to predict what will happen in the next week, next month in the short-term in the marketplace.

But we are running our business with a very positive longer term view of our marketplace and that's the way we are working today.

Okay.

Thank you.

Thank you.

Everyone, we really appreciate your participation on the call.

If you have follow-up questions, please feel free to call us.

We look forward to reporting our progress as we go throughout 2008, and appreciate your attention and interest in our Company.

Thank you, sir.

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

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

Thank you, once again, and have a great day.