費利浦·麥克莫蘭銅金 (FCX) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the Freeport-McMoRan Copper & Gold first quarter 2008 conference call. My name is Jessica and I will be your conference operator today. At this time all participants are in a listen-only mode. After the presentation we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) I would now like to turn the conference over to Ms. Kathleen Quirk, Executive VIce President and CFO. Please go ahead, Ms. Quirk.

Thank you and good morning, everyone. Welcome to the Freeport-McMoRan Copper & Gold first quarter 2008 earnings conference call. Our earnings announcement was released earlier this morning and a copy of the release is available on our website at fcx.com. Our conference call today is being broadcast live on the internet and we also have several slides to supplement our comments this morning. They're also available on the internet at our webcast link at fcx.com. In addition to analysts and investors the financial press has been invited to listen to today's call and a reply of the call will be available later today by accessing the webcast link on our internet home page. Before we begin today's comments I'd 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 cautionary language included in our press release and slide materials and to the risk factors described in our SEC filings.

On the call today is Jim Bob Moffett, Chairman of the board; Richard Adkerson, President and Chief Executive Officer; we also have several members of our members of the senior operating team here on the call that Richard is going to introduce in a few minutes. I'm going to briefly summarize our financial results and then turn the call over the Richard, who will be reviewing our operations and outlook and we'll be using the slide materials that are on our website. We'll then open the call for questions.

Very pleased today to report our first quarter 2008 net income applicable to common stock of $1.1 billion dollars. That was $2.64 a share compared with $476 million, which was $2.02 per share for the first quarter of 2007. Our first quarter results included net losses on early debt extinguishments totally $6 million. That was $5 million to net income, a $0.01 per share in the 2008 period, and in the year ago quarter $88 million, or $75 million to net income and $0.31 per share. Our results for the 2007 quarter include the operations of Phelps Dodge beginning March 20th of 2007.

Our sales from our mines during the first quarter of 2008 totaled 911 million pounds of copper, 280,000 ounces of gold and 20 million pounds of molybdenum, as compared to 520 million pounds of copper, 956,000 ounces of gold, and two million-pounds of molybdenum reported for the first quarter of 2007. Our first quarter 2008 sales were higher than our previous estimates that we reported in January for the first quarter of 885 million pounds of copper, 170,000 ounces of gold and 19 million pounds of molybdenum, Compared with the pro forma period for the year ago, which included the preacquisition of Phelps Dodge sales, the first quarter of 2007 amounts were a billion pounds of copper, 977,000 ounces of gold and 19 million pounds of molybdenum.

Our quarter benefited from strong commodity prices. Our copper prices averaged -- our recorded prices averaged $3.69 per pound in the first quarter of 2008. That was about 23% higher than in the first quarter of 2007. The 2007 recorded realizations were impacted by a $0.07 per pound reduction from mark-to-market accounting adjustments associated with the 2007 copper price protection program. As you recall that was completed in 2007 and we financially settled that transaction for just under $600 million in January of 2008. Our first quarter 2008 realization of $3.69 were heavily weighted to the applicable forward prices at the end of the period because of the open pounds of -- and that was $3.82. Those will record $3.82 at the end of the quarter. Operating cash flows, which were reduced by $1.3 billion during the quarter for working capital uses, including the settlement of the copper hedges, totaled $615 million for the quarter and our capital expenditure approximated $508 million in the quarter.

We ended the quarter in a strong financial position. Our total debt approximated $7.6 billion. We had cash -- consolidated cash of $1.8 billion. At year-end 2007 we had total debt of $7.2 billion and $1.6 billion of cash. We borrowed just under $300 million under our revolving credit facility during the quarter to fund -- for short-term borrowings to fund a portion of the working capital requirements. As we indicated in the press release we've had recent upgrades from our rating agencies. Most recently we had upgrades from both S&P and Fitch to BBB-.

I'd now like to turn the call over to Richard who will be referring to the slide materials included on our website.

Good morning, everyone. It's a real pleasure to report to you the results of our first quarter for 2008. As Kathleen indicated, we have with us today our senior operating management team. As we previously reported, Tim Snider officially retired April 1st, although he's here in our office continuing to work with us on a consulting basis. Our operations are now managed by a team of five experienced management personnel, including three long-time veterans from the Phelps Dodge organization. [Red Conger], who is President of our America's operations is here, as is [John Marsden], who manages Freeport McMoRan Mining Company, which handles construction, our technology, our exploration and growth projects; Dave Thornton manages our important molybdenum business and is overseeing the operation at Henderson, as well as our expansion project at Climax; Mark Johnson, who is a long-time Freeport manager who many of know is -- continues to be in charge of operations at Grasberg; and [Phil Brumett] is the fifth member of our team who's actually here in the United States -- not with us today -- but he is managing our Tenke Fungurume project, living in the Congo, joined our organization after a distinguished career with Newmont where he managed the start up of the [Bautuhesia] mine in Sumbawa, Indonesia.

In the interest of time I'm going through the slides, but our team will be available to answer questions that you might have relating to their areas of operations. If you'll turn to page three you'll see a picture of our new annual report we just came -- which was recently published and the theme of our report this year is "A World of Assets, A World of Opportunities." The World of Assets refers to our current operations, our producing operations which has strong capabilities of producing copper and our other products as we can see in the first quarter, supported by long-lived proved and probable reserves with the reserves that we have. The World of Opportunities refers to what we're actually doing, and that's expanding our production volumes in an industry where sustaining production and expanding is very challenging for many reasons. We also have the opportunity that we are pursuing aggressively of evaluating our existing ore bodies to find the opportunities to extend the lives of our mines and provide for future expansion projects, and we have the opportunity to pursue and develop significant new ore bodies.

Our strategy is clear cut. We're focused on our internal opportunities and our operations and we believe it's a fabulous opportunity to create value for our shareholders. The first quarter was a record quarter for us and it was a record quarter even though from a volume standpoint, from terms of copper production, it looks to be our weakest volume quarter for the year. as we'll have increasing volumes as we move later on into the year, as Grasberg returns to the high-rate core of that great ore body, as our Safford Mine wraps up and as we continue to pursue our program of safely expanding operations. But having said that, given the very strong prices for copper, gold, and molybdenum it was a great quarter for us. Over $1 billion in net income and the ability to generate cash. We had to use some of that cash this quarter to pay the final payment on the legacy Phelps Dodge hedge program and for other working capital uses, but we're very pleased with where the Company is financially. We've executed on the financial plan that we set forth some time ago. That's being reflected in our balance sheet, as we got -- we were upgraded to investment-grade ratings by both Standard & Poor's and Fitch during the quarter. We didn't change our policy to do that, we just carried out our plan and the results resulted in the higher rating.

If you turn to page five you can see where those volumes came from in this quarter. For the year we expect to be pretty equally weighted between North America, South America and Indonesia. In the bottom right corner you can see just what the variance was between the first quarter of '07 and first quarter of '08 in Indonesia was at Grasberg, In the first of '07 we were in the very high-grade section of that mine, generated substantial volumes, we sequenced out of that beginning in the second half of '07, and by mid year we'll be returning to that. Just to reflect back it would be a much different conference call if we were reporting on the basis of OFCX for the quarter with those relative results.

Page six shows what our unit cost -- production costs were for the quarter. These are unit costs, so that fact that we had lower volumes results and higher units costs. But having said that, cost pressures in this industry are very significant. Energy costs, of course, with oil approaching $120 a barrel affects everybody in the industry, but steel costs and other input costs, sulfuric acid costs, are very significant elements and are really important factors in this industry. This cost pressure makes it difficult to develop new projects. to sustain production at older projects, and in turn creates significant values in the fact that we have producing properties and reserves that are -- generate very strong margins, even with the higher cost in the market environment that we have.

Page seven talks about the impact on our first quarter from the changes in copper prices. If we go back three months ago to when we were reporting our fourth quarter results, we were seeing the mirror image of this. During the fourth quarter of '07 the price of copper dropped dramatically from $3.70 a pound to $3 a pound. Now we see the price go from the $3 level to back to $3.86 and this has a positive impact this quarter on our reported results because of the nature of the way that our copper concentrate -- our contracts are priced. They're provisionally priced at the end of the quarter, they settled from a month to most of them up to three months after shipment, and a quarter-end price is a major determent -- determinate in the average recorded price that we report in our financial statements in any quarter.

At [March 38] we had 362 pounds of provisionally-priced copper at $3.82 a pound. We receive over time the market price for copper. This is simply the fact that we have to account for it this way because we have to draw a line in the sand at the end of each quarter. This has two impacts on the first quarter. We had an upward adjustment from the fact that open pounds since the beginning of the quarter were priced at $3 a pound and prices rose. That added almost $300 million to the revenue for the quarter. And that recorded price realized of $3.69 was more than the first quarter average market price of just over $3.50 a pound. So anyway, this will be something that is an ongoing feature of our financial statements, and as I talked about three months ago, this had a negative impact then and a very positive impact now.

Page eight has price charts. The world is driven today from a commodity standpoint by demand in China and the developing world and that continues to be very strong. The economic conditions in the U.S. are affecting copper consumption here in the housing market and the automobile market and beginning to see effects in the commercial markets, but yet the U.S. is a relatively small factor in the marketplace. We sell all of our copper around the world, including in the U.S., at the global price and we have the ability to sell all of the copper we can produce and plan to produce at market prices and the market continues to be very tight globally and the market outlook is very strong. Our sales outlook for the year at 4.2 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum will allow us to generate significant profits and cash flows during the remainder of 2008. On a model-projected basis at $3.75 copper, $900 gold and $30 a pound moly we would generate operating cash flows of $6.5 billion for 2008. We -- we dealt with the working capital requirements in the first quarter. 70% of cash flows will come in during the first half of the year. Our revised capital expenditure outlook is $3 billion, I'll talk about that a little bit more.

We continue to look for ways to spend capital because we want to take advantage of the opportunities that we have, but our projects are also being affected by the very substantial escalation in capital costs that's facing the mining industry today. Our projects are progressing. The Safford Mine is the new mine in eastern Arizona SXEW facility where we completed -- essentially completed construction by year-end '07 and we're now ramping it up. We produced 22 million pounds of copper in the first quarter. We're moving by mid year to produce at the design rate of 20 million pounds a month, a very efficient operation with significant opportunities for expansion as we look forward.

In the historical Miami Globe mining area, where we have significant reclamation activities ongoing from old mining operations, we're restarting the Miami Mine to help facilitate those reclamation activities and make some money doing it. We announced in 2007 incremental expansions in North America at Morenci, Bagdad and Sierrita. We're looking for bigger opportunities there, but in the meantime we're spending some capital to add some incremental production. Scoping studies indicate capital of $370 million for those three projects, the ability to add 180 million pounds a year of copper. We studying the engineering for that. The cost and scope may change as we go forward with that as we look at larger expansions of those properties.

Really excited about the new project in our molybdenum business, reopening the Climax Mine near Leadville, Colorado. Construction is beginning by moving snow there. I think there was over 300-inches of snow there this winter, but we are looking forward to the spring run off and actually putting equipment in the ground. We've ordered the equipment, everything's in line, and we have the major permit that we had to obtain to go forward. $500 million high rate of return project because of the positive marketplace. We're continuing to drill there. We have an expectation of adding reserves. This initial project has a design production capacity of 30 million pounds a year. We know we could double that with what we have now and there's an opportunity to look for more reserves, long mine life, it's just a great project in a market that's very attractive.

Just returned from South America and visited our operations there and morale is high. Our people are very excited about what we have available to us there. Red's team is doing a great job in managing those businesses and looking for expansion. El Abra has been a very productive oxide SXEW operation, has the world's largest tank house at its site. We're ending the end of the oxide resource. We have a sulfide resource that has mineralogy that's amenable to leaching and we are in the process of going forward with a project there. We have the government approval to proceed with a new project that will extend the life of this mine for more than ten years and we are beginning construction with that project to develop the sulfide ore resource that's available to us. Cerro Verde in Peru is a mine where we had an expansion that was completed right at the end of 2006, it ramped up in 2007 to triple its production level and this is a resource that has the opportunity to be expanded in a significant way in the future. We're doing drilling there, we're undertaking studies about environmental issues, water-power power issues, but the location of this mine, the footprint, all of these things point to it being an excellent opportunity to be a growing part of our asset base in the future.

Indonesia has performed very well. The Grasberg Mine is a -- of course one of the mining industry's great ore bodies. It's what allowed our Company to create the Company that we have today. We continue to look for opportunities there in addition to the open pit, where I might just point out we met the challenge that we've been facing for years in terms of meeting our mining rate objectives there. Our mining rate was in excess of 700,000 tons per day and Mark and his team did a great job in moving the material, which exposes the ore for us to generate the kind of volumes that we have available to us. Beside the pit, the DOZ Mine is one of the world's, if not the world's largest single block caving operation. Originally a 25,000 tons per day mine, operated during the first quarter at over 60,000 tons per day. We're expanding it to have a sustained rate of 80,000 tons per day. We are now beginning to do mine development activities under the pit at the Grasberg Block Cave operations. Our new Big Gossan Mine is on track to produce in 2011. And we have continued to optimize our milling operations, the world's largest single-site milling operation in the industry and it's always been a star of our operations, but we continue to drill at Grasberg and you look for more reserves, the opportunity to optimize operations as we go forward.

In the Congo we are very excited about what is available to us there. This is a very large concession, 600 square miles, which is yet to be fully understood from a geologic development standpoint and we're working hard to gain that understanding. We are increasing drilling activities, we're undertaking exploration processing analysis to see where ultimately we might go with this and our expectation is that we'll be able to undertake a series of development projects, focusing initially on the oxide resource and ultimately going to the mixed ore and the sulfide resource that's there and is yet undefined. Capital costs have risen substantially and our new estimate for aggregate cost is $1.75 billion plus another significant amount to develop power for this operation.

This is a significantly higher cost than we were looking at when we made our acquisition a year ago and that reflects several factors. One is we put a new team there and based on our experience in developing the Grasberg Mine and developing a structure that will allow for future expansions, we are developing more supportive infrastructure than initially was contemplated. We're looking at a larger tailing deposition area, we're looking at at more housing, we're looking at more on-site personnel to manage the operation so it can be done in the right way, we're looking at more investments in social programs and community activities. In addition, the industry, as I said, is facing significant cost escalations. You can see that as you listen to every company's reports about their own projects and that certainly is a factor in doing business in the Congo and we've built those into our new estimates. It's a challenge to do business there. That's not a surprise to anyone and as we get more of an understanding of how to operate there we're seeing more cost.

Having said that, the opportunities for the resource are very significant and we are aggressively going after it and have not lost any enthusiasm about it.. We reported that the government is undertaking a review of all the contracts in the country, including our contract. We are responding to issues that the government has raised, we're meeting with an interministerial group that's formed to review contracts, and we feel very positive about the direction of those discussions. They remain to be resolved and we will be continuing to work with them and report to you the results of this as we go forward, but we have confidence, based on our discussions with the government and the encouragement that we're receiving, that we'll be able to proceed with our project in a satisfactory way. We have construction underway now, we have over 2,000 people on site working, we have management personnel that are living at site, we're providing support from our headquarters group. John and his team were just there for over a week on site dealing with our contractors and our plans. You can see the picture on page 15 that we're making progress. Our current target is to bring this into production during the second half of 2009 with our initial project.

As I mentioned, a real focus in this world of opportunities is looking at our existing ore bodies and what's available to us. As an indication of that the bar chart on page 16 shows what our current reserves are in terms of recoverable proved and probable copper that's located in our ore bodies, priced at $1.20 a pound for long-term prices, and significant reserves of over 90 billion pounds. But beyond that based on drilling to date, and we're continuing to drill more and gain more of an understanding, we have roughly an equivalent amount of contained copper and mineralized material at $1.50 a pound and that just gives us the opportunity to work to convert that to reserves and then to producing assets. We are doing active drilling. We have more than 80 drill rigs operating around the world. In North America focusing on Safford, Lone Star, Morenci District. In South America, focused at Cerro Verde where we have significant resource. At Grasberg in Block A and also now drilling has commenced outside Block A. And at Tenke Fungurume, which on that very large concession has plenty of drilling opportunities and surface exposures of minerals and also significant indication of minerals in areas that don't have surface exploration, so it's a tremendous opportunity for us.

We've upped our exploration budget, shown on page 18, to $180 million for the year and you can see how that's distributed around the world. I mentioned growing volumes on page 19, expanding from pro forma 2006 before our merger combined 3.6 billion pounds up to a level that we're targeting 4.8 billion by 2010. Very significant stair-stepped expansions there. You can see our mine plan -- how our mine plan's affecting Grasberg where essentially all of our gold sales are off the chart at the top of page 19. For those of you who follow Grasberg, we have on the website the sequencing charts that we've updated so you can see how our sequencing over the five-year period will affect our access to the high-grade ore over time.

Page 20 comes back to this issue I started with. This was a record quarter, and yet you can see from a volume standpoint we're looking to have significantly stronger quarters in the second half of the year, as Grasberg gets to high grade and as Safford ramps up. So depending on commodity prices we have the opportunities of having extraordinary financial performance as we move forward in 2008 and you can see fourth quarter gold get us 600,000 ounces, which we've done that and more at Grasberg in the past. These increased volumes will have a positive impact on our unit cost and we're currently projecting, given $900 gold, $30 moly, net of byproduct credits, average unit costs of $1 a pound for the year and you can see how that break out regionally.

We've updated our modeled projected cash flow charts on page 22. Increased the price levels that we used to reflect market conditions. This just shows $3 to $4 a pound and you can see at $3.50 a pound our annual average operating cash flows for the two years is roughly $7 billion annual averages. Use whatever prices you want, the variance amounts are shown on page 23. A $0.20 change in copper is $575 million impact on operating cash flows. Capital expenditures, as I mentioned, have been updated to reflect the new higher cost estimates at Tenke Fungurume and escalations at our other projects and our continuing opportunities to invest. We're now looking at $3 billion for '08, $2.4 billion for '09 and $1.3 billion for '10. And on page 25, to illustrate the free cash flow generation opportunities for our business we show our operating cash flows reduced by our capital expenditures, our roughly $1billion requirement for our current annual common and preferred dividends and who just how much excess cash flows that we would be projected to have using our outlook for our operations and just modeled prices at $3.50 copper over a two-year period we'd have excess cash flow that would exceed $5 billion.

In closing, I just want to reiterate the clear-cut financial policy that our board has set for us. We are committed to maintaining a strong financial position. We've gotten our balance sheet to the point of where we were targeting that and we have now two credit rating agencies that consider our Company to be investment-grade rated. The continuation of the positive copper markets, and we're optimistic about markets over the longer term. We recognize risk, as always, but the market continues to be fundamentally strong,, supported by growth out of China and the challenges of the industry to produce volumes and develop new projects, with positive copper markets we will be generating substantial cash flows, as I just pointed to. This allows us to invest aggressively within our business to grow near-term volumes and develop longer-term opportunities.

We're going to look opportunistically for situations that allow us to reduce debt. We don't have debt maturities, but the dislocation in the credit markets may give us an opportunity to reduce debt on an economic basis and we're focused on shareholder returns as a way of maximizing long-term shareholder value. That is through an aggressive dividend policy, which we'll be reviewing as we go forward, and we have an improved share buy back program. Didn't buy any shares in the first quarter, as we weren't generating cash flows in excess of our working capital requirements, but in the second half of the year we'll generating very substantial amounts of cash flows, which will allow us to consider opportunities to execute on our share buy back program.

With that, we've summarized our great quarter here and I'll be happy to -- happy to respond to questions and our team's here available and Jim Bob's on the line, as well. Operator, can we open the line for questions?

Operator?

Your first question comes from the line of Michael Gambardella of JPMorgan.

Good morning and congratulations on another great quarter.

Thanks, Mike.

One question. Can you explain the better performance in your gold volumes in the quarter versus your previous guidance?

Mark -- Mark Johnson's here, I'll let him answer that.

Mike, one of the opportunities that opened up to us in the first quarter is we had a relatively small mining area in the pit bottom in an area we call Six East. It has very high grades and we were able to advance some of the volumes from that area in the first quarter and that's where we got our extra gold. The mill performed well. We had slightly better recovery through the mill, but we're on target in the other pushbacks and the Six East area opened up and we essentially are advancing volumes -- gold volumes from 2009 by mining in that area.

Okay, great, thanks a lot, Mark.

Mike, if we go back to -- going all the way back to 1998 over the past ten years and the story of the Grasberg, we developed long-term mine plans and then operationally when we have the opportunity to grab some high grade -- and it typically doesn't involve very much material -- and we do can that in a safe way, in a way that does not negatively impact our long-term mine plans, we've done it and the history has been over that time that we've produced significantly higher volumes than our plans at any point in time would have shown -- shown us the ability to do.

Okay. Thanks a lot, Richard.

Okay, Mike.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of John Hill of Citi.

Good morning and congrats, also, on a strong performance in the quarter. Just a quick question on sensitivities in the presentation. On the one hand the sensitivities to changes in the metals' price, that matrix doesn't look like it shifted but the charts on page 22 and 29 essentially look like the cash flow performance is similar now but we've raised the underlying gold assumption from $800 to $900 and moly from $25 to $30. Is the right way to look at this in that many regards cost escalation has offset the by-products, or is there more to the relationship?

No, that's essentially it, John. As you can see in the unit cost numbers, the site cost, that -- it's just obvious. Higher sulfuric acid cost, higher diesel costs, labor cost increases. All of those things factor in and the way you just described it is byproducts, which together represents maybe 20% of our revenues, the increase there is essentially funding the cost escalation that we're seeing for our total operations.

All right, got it, got it. Then shifting gears a bit to -- back to Grasberg, this is very exciting that you're finally undertaking the Grasberg Block Cave development this year, I was just wondering if we could get a little more detail on that. What are we looking for for milestones, Block characteristics, and what are we learning down there?

John, this is Mark Johnson. Really no surprises. We're on track. We may have discussed it before, but we're developing the Block Cave from three different directions. We've got the common infrastructure, we've got some ventilation declines, and we've got some drifts that we had available associated with the KL development. So from those three areas, we're advancing all of those drifts and in 2008 they'll start to connect and allow the ventilation and drainage networks to be established. And in 2009 we start in earnest on developing underneath the Grasberg Block Cave and really no surprises.

If you'll turn to page 28 on your slides you can see a schematic that shows what Mark was talking about. Prior to our putting in what we're calling our common infrastructure drift, we had in the 1990s pushed in at it from the mill at the 2,900 meter level of the Amole at it, which dewatered the pit but it also provided us the access for exploration drilling at the KL Kucing Liar ore body, the Grasberg Block Cave and now this new tunnel system is 400-meters below that. We've been working on it for several years now. It connects the deep ore zone and associated ore bodies and the Block Cave, Grasberg and KL ore bodies to our mill.

It's -- all of these numbers are capital costs that have been included in our numbers perspectively in underground. There's a lot of information on this in our recently filed 10-K. Our underground team at Grasberg has just done an exceptional job. We've been block caving there since the early 1980's,, both in terms of operations, expanding the DOZ mine that I mentioned earlier, and now with what we're facing here it gives us a lot of confidence for our future. We're projecting the pit to be essentially mined out in the 2015 range, but we'll continue reviewing that. And then we have this great ore body to develop underground similar metallurgy and with the processing facilities and experience, we have a lot of confidence about what we can do there.

Great perspective. Thank you.

Thanks, John.

Your next question comes from the line of Oscar Cabrera of Goldman Sachs.

Good morning, everybody, Congratulations on these strong results. Just focusing on Tenke Fungurume increasing in (inaudible) there, I think you say, Richard, this is happening across the industry. Interested in hearing your perspective, though, on the increasing scope in the project. What are your expectations in terms of bringing that production higher from the levels that you're indicating here in the slides?

Thanks, Oscar, I'm going to let John Marsden comment on that.

Yes, Oscar, we're projecting -- this initial phase of construction we're looking at 115,000 tons per year of copper and between 8,000 and 11,000 tons per year of cobalt and one of the things we've done in the last 12 months or so is we have increased the mill throughput from 7,000 to 8,000 tons per day and of course we've had increased volumes and other construction costs associated with that increase, so to accomplish this first phase, we have -- we have been implementing a slightly bigger project than we'd originally anticipated. But going forward, we are including -- we're putting in some infrastructure, other facilities and ancillary facilities to support a broader, bigger expansion of the Tenke district going forward, and we're still evaluating what those expansions -- that expansion or further expansions look like going forward. But we're obviously confident and optimistic that we're going be able to add additional capacity going forward. So, just to summarize, we've put in -- with this project we're putting in additional facilities and beefing up some of the facilities that we had in the original plan to accommodate those potential future expansions.

Great, but what would your name plate capacity then with be 8000 tons per day, both copper and cobalt?

Yes, it's still -- Oscar, it's Kathleen. It's still 250 million pounds a year of copper and 18 million pounds of cobalt is the initial project. But as John was saying, we're doing planning to have additional reserves and plan to be able to expand the project, and so we're spending capital on the initial phase that'll benefit us for the long term, but the initial phase of the project is still 250 million pounds of copper.

But that's just the beginning of story, of course, Oscar. We'e doing three things. One, we're drilling more. The first is going to be to extend the potential life of this first project and then to quickly determine what an expansion would be from the oxide standpoint and then to understand the ore beyond that -- the mixed ore and sulfide ore and where to go from there. The grades here are so high that looking at the processing rate it can be deceptive, particularly for us that's accustomed to the mining operations at Grasberg. As we look down the road, we can see some very substantial amounts of copper coming from a relatively low amount of material that's going through the mill. Stripping rates are minuscule here. You can have the opportunity to produce, say, 500 million pounds of copper from a facility that processes 32,000 tons per day. So a lot of what you're seeing here from a capital standpoint is setting the stage for aggressive subsequent development opportunities, which we will be settling on as we go forward with our drilling and our processing analysis of how we deal with this.

No, great. Thanks very much. Blue sky's always good. And then if I may just a quick one. In terms of South America, the power constraints are a big issue right now. I would be interested in hearing your perspective in terms of the -- I don't know if you could give us a cash per ton on your South American or Chilean operations and how you see that evolving as we go through the winter months over there? Thanks.

I'll tell you, first of all I'lll let Red talk about just the overall power situation of our operations in Chile.

Yes, Oscar, in Chile in the north it's a separate grid, not interconnected. We've lost natural gas from Argentina. The natural gas generators have converted to diesel conversion. That all seems to be working very well and we haven't had any supply problems. We we have one generator there that's struggling with the regulated customers that the mining industry has been working with to try to find a solution for them. We continue to work with them, so we see that as a good development going forward. In the central grid we've been affected by drought. The reservoir levels are dropping, but we're optimistic that those are going to cover. Based on experience in the past, we're optimistic that rain will come again and fill up the reservoirs next year and we should be okay on the central grid.

Having said that, power is a huge issue there and the system is -- as you well know, Oscar, is totally committed for the mining operations and the other uses in Chile with its growing big economy and its big agriculture operations, so it is a real constraint on the future development of projects there.

Thanks very much for the perspective.

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

Thank you very much, good morning. I wanted to ask a few questions about the capital cost changes at Tenke and just trying to understand the numbers. In slide 14, you showed $235 million for infrastructure for the larger scale you were just talking about.. That implies that cost escalations account for the other $615 million, but I think it's a bit more complicated than that and I was hoping you could elaborate a little bit more on the numbers on slide 14?.

Yes, John, why don't you comment on that?

Yes, if you look at the box -- the inset on slide 14, you'll see there that the first bullet is cost escalation. $385 million, and that's related to cost for equipment, materials, construction labor, supervision labor, all of those. We've seen dramatic increases over the last year, 18 months, and those are reflected in that pretty significant number there. If you look at the next line item, which is scope changes and higher quantities, I alluded earlier to an increase in the mill throughput and associated facilities at Tenke and so that has resulted in increased quantities of materials and equipment to achieve that slightly-higher throughput rate, and also we've expanded the tailings facility. We've changed the size of some other facilities to beef them up for subsequent expansions, so that's captured in the scope changes.

The third category is enhanced infrastructure, which again, that is what Richard was talking about earlier. We provided some additional infrastructure that will set us up well in the district going forward and facilitate future expansions of production capacity. So those three items between them account for the great majority of the changes. The other increases, there are some increases in duties and some other things that are captured in that other category, so that's really the high-level break down of the increases.

And, Victor, let me just say, too, this also reflects -- and sometimes it's different just to drop it into buckets, but a more informed understanding of what it requires for us to set up the kind of operation we want to set up there. We redesigned the housing people have. We're making additional investments in the health facilities and health controls that are there. All of these things -- the roads, we're working with other companies on projects to improve road system, the railroad system. It's very significant challenges. It's a tough place to do business because of the infrastructure and location, getting equipment there, getting people there, getting contractors to work on a reasonable basis. We put a lot of management -- new management resources there. As we put people there for the project, we're getting a better understanding of what's required and we're investing to do this thing in the right way, as I said, to build a platform for what the future will be there.

Great. Thanks, Richard. If I could ask one follow up.

Sure.

What was the original budget for the tailings facility and what is the new number? What is the capacity of that facility?

What we've done is we are putting in a facility that is going officially accommodate a greater capacity. Rather than having to rely on incrementally building up the tailings facility every year, we giving ourselves a facility that's going be a larger scale design to avoid such additional construction of the dam on an annual basis, and so it gives us more capacity up front, which from a start up and commissioning point of view will be an advantage to the project. But essentially, the core scope of the tailings facility is pretty much similar.

Yes, and it's not a big part of the element there because this is not a huge processing facility, so in terms of the overall changes, it's really inconsequential.

Great. And is it -- can you give me a figure for what it is costing in total?

For the tailings facility?

Let me get back to you.

We'll get back to you on that. We were flipping through our numbers here. It's not a huge part of the total project and we do not have that available, but we'll get back to you, VIctor.

That's fine. It was more out of curiosity than anything more than that. Thank you so much.

All right, thank you for your questions.

Your next question comes from the line of Brian McArthur of UBS.

Good morning. I just want to go back to Tenke for a minute, please, and can you just remapped me how the funding works. I know it is 70% Freeport and 30% [Lundeen], but I thought there were levels which you carried them, and obviously with the larger capital cost overrun, do you end up having to give them quasi loans or how is this going to work out?

It's not a carry, but under our -- under the deal that was negotiated a number of years ago with Lundeen, who had the original contract for the concession going back to 1996, we have an obligation to fund through a loan mechanism certain cost overruns and it's basically overruns for 125% of the original project definition -- or project scope, and that means we finance that and provide funds for it. We re-- those amounts are repaid to us out of future production with interest.

Right, so the 125% bayed on what, the original $650 million or the $500 million or --?

It was based on the original project definition.

The original feasibility.

The original feasibility study.

So you car -- it's not a carry, but that 125% stuff, do you -- we'll start at, let's take a number of easy math. Say it's $500 million, once you get to $625 million, do you then loan everything after $625 million and it's still 70/30 on the first 25% or how does that part work?

It's 70/30 on the initial project and then to the extend there are are overruns, as defined by the contract, at 125% of that we provide the funds for it and then that's repaid out of Lundeen's future production. It's a similar situation to the financing mechanism that both partners have for the [Jeckomeens] interest, where Jeckomeens doesn't put up capital. The two partners fund that and that gets paid out of Jeckomeens interest in the project from the future.

Okay. Great. Thank you.

That was part of the original deal that was negotiated to bring partners into this.

Right. But none of that Jeckomeens stuff and all that's on the table for the current negotiation with the government?

Well, one of the issues the government's raised was Jeckomeens interest in this -- this project, so that is, as you say, on the table for discussion.

Okay. So this whole thing still has to be worked out a little bit going forward, if I put it that way?

As we said we're working with the government. We are of the strong view that the overall participation of the government in the contract -- and this is a contract that was renegotiated. We've already gone through a renegotiation. The original contract in 1996 over a multi-month transparent process, a new contract was renegotiated. It provides for Jeckomeens interest, taxes, royalties, and signed in 2005. It by world standards, is a very fair contract from the perspective of the government and our position is that we have a contract that's mutually fair and one that provides us the basis for going forward and gives the government fair participation in the project and that's what we're talking with the government about now.

Okay, thank you. And maybe just switching to something totally different, can you just conceptually talk a little bit -- you made this comment Cerro Verde on page 12 where engineering and project capital costs maybe higher than initial estimates, that's happening in the industry, as you mentioned, but what exactly conceptionally are we talking about here at Cerro Verde when go all through tha as far as size of expansion, or can you give me any details on that?

There's two things to talk about here. One, this is a-- this is more of a fine tuning of the most recent expansion and the ability to debottleneck, to come into play, and it's really a small number and the cost escalation we're talking about that is steel and energy and labor, it's so those sorts of things. It's really not anything significant. The bigger opportunity there is to have a major expansion. Indications are that the ore body there would support that and that's what we're really putting our focus on in terms of looking at the environmental issues, the water and power issues to expand there, because we think that ore body is going give us an opportunity to do that in the context of today's copper world in a straight-forward way.

And just if I could, one other final question, just in a totally different part of the world, just -- and I know I've asked this before, but as we've gone through the common infrastructure and taken that out you got pretty well over to the Grasberg underground now and you were tunneling through that whole undrilled area, can you give us any update on exploration there?

We are drilling there, as we talked about, in what we call the gap, looking at the area between the Grasberg Block Cave and Kucing Liar and the DOZ that drilling is progressing. We're very encouraged by it. There's been some positive indications of mineralizations, as we expected to see there. You can see that -- again referring back to the chart on page 28, the driving of the common infrastructure add, it's given us access to that. We're seeing mineralization and we will continue to be testing that as the opportunity of significantly increasing the underground resources at the deep MLZ and associated ore bodies and drilling's been positive, Brian.

Great. Thank you very much, Richard.

All right. Thanks for your questions.

Your next question comes from the line of John redstone of Desjardins Securities.

-- verify the capital expenditure that you have for Tenke, $1.75 billion, that does include the $475 million you already spent on the project?

It certainly does.

Okay, excellent. Now, moving on to something completely different. On your molybdenum operations, I wonder if you could give us a little bit more detail about the proposed start up and scope of Climax. For example, given than every ounce seems to count in the molybdenum market these days, I was wondering how much of the 18 million-pounds that you have forecast in sales for next year is actually going to come from your Climax operations?

None. Climax is scheduled to start in 2010, so all of our production for next year will come from our Henderson Mine, as well as byproduct production from our mines in the U.S. and from the Cerro Verde Mine in Peru. The Climax, we feel confident about our ability to bring it on within the timeframe. Dave Thornton's here. We're also optimistic about adding reserves. If we look out -- and you point out very well, John, the value of these molybdenum pounds in today's world and we're looking for additional molybdenum resources from our byproduct operations at our copper mines. We're looking for a resource in Grasberg, and so it's really an important of our business.

Although you have your productions from moly operations this year's flat to trailing off through '08 you're going to it get it up to ten million-pounds next year, right?

That is correct and that's principally Cerro Verde where we added a molybdenum circuit in our expansion, It's being ramped up and will be -- we expect it o be onstream at its capacity level for 2009.

Excellent. Thank you very much indeed.

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

Good morning. On the demand side I was wondering if you could connect on implications of what high prices you're seeing, if any? And a second won, if you could comment on the sulfuric asset situation? I don't think it has any effect on you, but any implications of that on supply? Thanks.

Okay, Mr. Liinamaa. Let's see, implications of higher prices. The implications for us are great. It is great margins, great cash flows, allows us to invest. My guess is you're talking about markets and high prices. The way that markets work is price is used to allocate scarce commodities to their highest uses and that's happening,. So, we see plumbing -- uses of copper in plumbing in the U.S. dropping, but uses of copper in energy-saving devices around the world and [mechanicalization] of processes everywhere and higher use applications. The world is getting increasingly -- developing things that need copper, and so worldwide copper demand and uses are very strong and just incredible growth in China and increasing growth in India and around the world, we feel great about the market. But as prices remain high, copper will be allocated away from its lower-value uses to its higher-value uses.

Very good. And on the sulfur?

We are affected by acid, by the way. We have substantial SXEW operations and expanding operations, and so we're -- and Tenke Fungurume is a leach operation, so least this remarkably-higher acid costs are affecting our costs. We are planning on how to deal with it. For example, right now we're buying acid Safford but we're in the process of constructing a sulfur-burning facility there to generate acid for ourselves. We have a facility where we will be constructing at Tenke and we're doing some long-term planning in how to deal with acid in South America, North America and at Tenke, so it's an important business issue for us that we're working on every day. We use acid at El Abra and Cerro Verde and will for the future.

And quickly we get back to Africa. A significant amount of growth over the next three years is supposed to come from projects over there. We're seeing a lot of issues arising about how to divide returns between providers of capital and the host countries. Are you seeing -- can you comment on the delays industry-wide that we might see as this stuff works its way through the system? And I'm done after that, thanks.

You ought to look to the other companies to talk about their situation because it's not -- we're not in a position, really, to talk about specific operations, but, you look at what we're dealing with and the quality of projects that we have and you translate that so other projects. It's not just Africa, but Africa clearly faces issues. Financing projects for some companies around the world is very tough today and all of these cost elements affect everybody. But globally around the world, particularly from major underground developments and greenfield projects, this cost situation is really -- every one in the industry is having their eyes pop out and it's something that's developing in recent months.

We're fortunate that we've got such robust projects we can absorb it and we've got good markets, but it is certainly a factor in terms of looking at future supply situation for the industry ,as a whole. Mark, Kathleen passed a note to just -- on the acid situation to note that we produce a significant amount of acid at our Miami smelter and at our smelter [Atlante] Copper, so in the past we've been relatively balanced in southwest U.S., but as we're expanding we'll have needs to get outside sources of sulfur and we're looking at what we might could do in Miami, but we are a significant acid producer.

Your next question comes from the line of Daniel McConvey of Rothport Investments.

Congrats, again, on delivering in tough times. Your answer to Oscar and Mark's question really answered the guts of what I had and they were good answers, but I'm just wondering, in terms of consumables of any kind, whether it's sulfur or power or et cetera right now for your operations, given the stress in the world right now, are you finding in any other consumables difficulty in getting access to consumables, including diesel?

Well, you can get access to diesel, that's not an issue, it's just the cost of it. But diesel is -- because of the nature of the oil markets, it's available. But beyond the ones you've mentioned, there are huge issues today with all elements of equipment and supplies for the mining industry. Long lead times for major equipment. Purchases for mills, for trucks, for shovels, component parts are an issue. Tires, which everyone's talked about for several years now, continue to be very tight. We have programs Red team's worked to extend the life of tires and used different approaches.

It goes -- man, I don't think it's overstating it -- to every element of our business. Contractors today are stretched and trying to get the right contractors, whether it is for our underground develop operators or construction management is issue. If you ask these guys sitting around the table what our biggest issue is, it's people, and we're taking steps to aggressively add to our internal management team and develop workers at all levels. But this is an industry of where years of under investment, slow times, conservatively-managed companies are catching up with us and we have these great opportunities now and the resources are very scarce.

Thanks Richard.

Your next question comes from the line of [John Timazos], private investor.

Hello, [John Tumasis], good morning. Your 11 incremental expansion projects that you described seem very, very powerful in improving your existent permanent assets and the $180 million in exploration for 80 or so rigs running. Could -- is it too strong to infer from that 200% of your team's time is being spent on the projects in hand and that acquisitions of big companies, or acquisitions of little companies, like Tech bought something for $400 million last week, you're not really -- probably don't have time for things like that, given than you have such wonderful opportunities at your existing operations. Just tell me if I'm reading too much into your actions?

No, John, I'd use a couple different words, but your point is exactly right. Our team's really focused, as I mentioned at the outset, on internal investment opportunities. We stay in touch with what goes on in the world. We are able to do that through the steady line of investment bankers who come in and talk to us about what's going on in the world, but in terms of our people, the operating guys sitting around this table, our focus is really on our operations. One, we want to produce as much copper out of our operations as we can, much molybdenum, much gold with the prices that we have and then the chance to have this great Company we've put together with assets and the team and the people to invest, so you're exactly right.

Now, historically, both Freeport and PD were very conservative operationally and financially and the slide you showed for reserves at 120 copper, incremental at 150 copper is based on the data before these 80 rigs drill for the year and $180 million of outlet. Would it be too strong to characterize the 11 projects incremental as the tip of the iceberg and then a lot more is going to come out of the work you're doing?

We really think so, and while putting together Freeport and Phelps Dodge we can be more aggressive. The Company is much stronger together, The strategic rational of matching up Grasberg with a former Phelps Dodge set of assets allowed us to have a Company that be more aggressive and from day one, it started with due diligence but from day one, March 19th a year ago, we are aggressively looking for opportunities to invest and as we do that, we're more encouraged, more encouraged -- more encouraged as time goes by.

Finally --

There's challenges with greenfield projects that are significant. You see those reflected in what we're saying about Tenke Fungurume, which has this incredible mineralization. They're challenges, but they're much less significant for brownfield expansions. They're much less significant. So what we have is ore bodies that haven't been understood, even though they have been mined for 100 years, and as we gain understanding, as we look for opportunities there and have these markets, it'is more much straight-forward to expand a Morenci, than it would be to develop a new project anywhere in the world.

Richard, this is Jim Bob. Let me just emphasize too, John, what we said several times. The brownfield opportunities that we have, the bolt-on reserves to existing mines, we already have infrastructure, is not only that opportunity, but what we find is with new core holes, the kind of opportunities that we see in terms of grade and volume rival any greenfield opportunity that we might have. So, the ore we're bolting on is not low grade. In many cases it's just ore that has been left undefined and therefore we are having greenfield-type hits on brownfield exploitation. That is the best of all worlds.

Absolutely, and I'll just come back to Cerro Verde, where we do have some issues to deal with, but have opportunity just to completely replicate -- twin what we have there and take an operation that produces 600, 700 million-pounds of copper a year and over time have the chance to double it.

Rich, is that air permit at Climax the last permit and is everything now completely in place for 30 or another 30, 60 million-pounds?

Dave Thornton's here, Dave? Yes, John, that's the last big permit we needed for phase one. If we were going double the facility, we'd have to apply for another permit.

There's some county-type things you have to do, like building your house, but in terms of major permits, we're done for the first project.

Which month is your target production in 2010?

We're still early on in the engineering. We just got about 20% of our detailed engineering completed today, so we're still looking at that, John. It's too early to actually say when in 2010.

This mine,, for those of you who don't know -- I know John knows -- is sitting right on top of the Continental Divide at 11,000 feet, and so we have to construct during the summer, but we're very confident about our ability to basically complete construction 2008, 2009 building season and start up in 2010.

Thank you, and good luck.

All right.

Your next question comes from the line of David Common of JPMorgan.

You guys have mentioned opportunistic debt reductions. We note that you purchased a little more than $30 million of 9.5% senior notes in February of 2008. We're just hoping that you could possibly put some more color behind the debt reductions? Are you look looking at opportunities based on coupon payment, maturity, current trading levels or is it some other metric?

David, this is Kathleen. In terms of our (inaudible) policy, we're really focused, as Richard mentioned, on our internal investments and then beyond that returning cash to shareholders. We've essentially met our debt reduction targets and at his point what we're looking at in terms of dealt buy backs is just as opportunities come to us we look at the economics of those and if we have a dislocation in the market or some opportunity to do it we'll do it, but it's not something that we're out actively looking to do. It's just as things come to us that are very attractive from an economic standpoint, we'll take steps to do that. We're also interested in taking steps to further simplify our balance sheet and clean up some of the securities that are out there, so to the extent we have opportunities to do that we'll look to do that, but only on a real attractive economic basis.

It's just a PV analysis and we have some call dates coming up in the future that we'll have a chance to deal with our debt.

Okay, thank you very much.

Your next question comes from the line of Brett Levy of Jefferies.

A similar question to what David asked. As you guys look at what you're going do with capital, I'm guessing that Moodys is at some stage and maybe you could give me a sense what Moodys is thinking with respect to you guys and investment gradeS? And then also just talk a little bit about whether or not you guys are planning to stay investment grade and a little bit about your state of acquisitiveness. And are you looking at anything that might be a releveraging acquisition here or anything else along those lines?

Well, Brett, Moodys will reach its own conclusions. You can read what they say about us and the issues that they take into account with their -- with their ratings. With respect to all the agencies, we communicate with them and we've had a clear-cut situation. We are very comfortable with our ability to run our business as a non-investment grade rated company. We always felt that with the strength of our assets and the markets our balance sheet would improve to the point of where the agencies would conclude we should be investment grade and that's happened with two of them now and we believe over time Moodys will reach a similar conclusion. We have sufficient cash to fund our investment plans for growing our business, and so we don't anticipate levering up the Company to do that. Our strategy is not grow through acquisitions. If there was an opportunity that came to us that made a lot of sense for our shareholders, we're in a position to consider it. But our strategy is to grow through investments and our cash flows will fund those investments.

Thank you very much, guys.

Okay.

Your next question comes from the line of Teneal (inaudible) of Centennial Asset Management.

Teneal? Maybe he's dropped off. Operator, let's go to the next question, the next --

Hello?

Hello? Yes. Hello?

Teneal, your line is open.

Teneal, if you can't -- we can't hear you. If you can't get through, call us after the call and we'll respond to the questions. Let's go forward.

Your next question comes from the line of Laurence Jollon of Lehman Brothers.

Hello, Laurence?

My question has been answered. Thank you.

Okay, thanks, Lawrence.

Your next question comes from the line of [Edward Okine] of [Veso Capital].

Edward?

Can you hear me?

Good morning.

Hello?

Yes, good morning.

Oh, yes. Okay, good morning. My question was for (inaudible) cobalt and just wondering what your marketing plans for that product will be? We all know the big guys are roaming in Africa and trying to (inaudible) all of the cobalt there is in the DRC, so I'm just trying to find if you're going to use a third party to market it or you would set up your own marketing for that?

Well, we have a marketing group. We don't have to -- we don't have to set one up. We're in the market in a significant way with copper and molybdenum and copper concentrates and our marketing group is actively working in the marketplace to find the placement of cobalt. It's a very small market, but it's in great demand right now and so we are -- we're taking steps in the marketplace to find a home for the significant amount of cobalt that we will be producing in the future.

Okay. And the other question that I have is with regard to the loan to Snell, which is what I believe is getting this loan for [part] and for [special development.] Is this going to be -- is the loan going to guaranteed by the government or is it going to be secured by the assets and how do you get paid for loan? Is it through revenue base? Just share some more information on how this loan is going to work.

Yes, Edward, it's Kathleen. We're advancing roughly $140 million to the state-owned power entity there to refurbish the facilities for our power. We will be repaid that loan through our power -- through our power purchases. It's not -- to answer your question about guarantees, it's not guaranteed or secured. It's a situation where we'll be repaid over time as we consume power at the operation.

And the news is because of the ava -- we have to make this investment and work with Snell in establishing reliable power. Once we have that we'll have a very attractive power source and attractive cost for our operations and contacts of worldwide power requirements.

Okay, thank you.

Thank you.

One other follow up to Victor's question earlier about Tenke and the tailing [sam], capital cost included in our estimate is just under 5% of the total project, it's about $80 million of the $1.75 billion.

Okay, operator, any more questions?

At this time there are no further questions.

All right. Anyone that has follow ups, we're always available. We appreciate your interest in our Company and as you can tell, we're awfully excited about what we have in front of us.

Richard, just let me just add one comment about our exploration. We said to John Tumasis that have greenfield-type opportunities in a brownfield exploitation program, and what we mean to do is, in light of the new price syndrome that we see, there's a tremendous opportunity by just using higher prices for our cut-off grades. But let me emphasize that as we do that, we are not seeing just the lower grade portions of the ore body on the perimeter, these ore bodies. We're seeing deeper hits that are greenfield-type of opportunities and gives us an opportunity to bolt on significant reserves at almost all of our operations. I hate to use the word limited -- limitless opportunity, but the size of these ore bodies, like Morenci, like Cerro Verde, like El Abra, when you see the ore that's being bolted on, it's like discovering a new greenfields property in the same vicinity where all of our infrastructure exists. Before -- and a lot of people wondered on many occasions. well, why are those opportunities are there.

We just have to remember -- and I know everybody's aware of the fact that we're in a new era of pricing, but with this $3 and $4 copper prices, the incentive for us to spend the money to define the outer limits of these reserves is just so compelling compared to what it was in the days of $0.80 copper and $1 copper.. And with this $180 million of exploration that you see in our budget, if those were all greenfields projects, you spend so much money on greenfield projects just getting the logistics set up and in many cases if you spend $50 million or half of it on greenfield projects, it's just getting the logistical parts set up and getting started. In our case, in the $180 million, so much of our budget is focused on bolting on these vast amounts of reserves by using these different outlooks on price cut off and grade cut off, it's amazing how much money of a percentage of our $180 million, almost every nickle of it goes in the core hole, and tat is a huge difference than if the $108 million, as I say, was all greenfield's projects.

So the money we're spending is not only money that's bolting on reserves, but the efficiency of the amount of money we're spending compared to a green -- to a typical greenfield project is just overwhelming. So, we'll be reporting on those results as we get more definition where we're adding to the base and these side -- or these amazing oil bodies that we already have the opportunity to own. The resources that we're going be proving up for the shareholders is going be one of the greatest opportunities we could ever have had and is a huge plus for this acquisition and combination of these two companies. Thank you, Richard.

Jim Bob, thanks. Thanks to everybody for your interest.

Thank you, everyone, for joining us today. This concludes our call. You may now disconnect.