費利浦·麥克莫蘭銅金 (FCX) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

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

At this time all participants are in a listen-only mode.

Later we will conduct a question question and answer session.

(Operator Instructions).

I would now like to turn the call over to Ms.

Kathleen Quirk, Executive Vice President and Chief Financial Officer.

Please go ahead, ma'am.

Thank you.

Good morning, everyone.

Welcome to the Freeport-McMoRan Copper & Gold first quarter 2010 earnings conference call.

Our results were 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 anyone may listen to the call by accessing our website home page and clicking on the webcast link for call.

We also have several slides to supplement our comments; those are also available on our webcast link at FCX.com.

In addition to analysts and investors, the financial press has also been invited to listen to today's call and a replay of the webcast will be available on our website later today.

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

I want to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings.

On the call today are Richard Adkerson, our President and Chief Executive Officer, Jim Bob Moffett, our Chairman of the Board.

I have a number of senior operating team here today including Red Conger, Dave Thornton, and Mark Johnson.

I will start by briefly summarizing our financial results, and then turn the call over to Richard who will be going through our presentation materials.

We will then open the call for Q&A.

Today, FCX reported first quarter 2010 net income applicable to common stock of $897 million, $2 per share.

That compared with net income of $43 million or $0.11 per share the first quarter of 2009.

Our 2010 first quarter results include losses on the early extinguishment of debt totaling $23 million to net income or $0.05 per share.

Our first quarter consolidated copper sales of 960 million pounds were higher than the January 2010 estimate of 890 million pounds, but below first quarter 2009 copper sales of 1 billion pounds.

The favorable variance to the January 2010 estimate primarily reflects the timing of sales from our North American copper mines and the variance to the 2009 period reflects the anticipated lower copper ore grades at Grasberg resulting from plan mine sequencing and lower sales from our South America mines in the first quarter as anticipated.

These lower sales were partly offset by sales from the Tenke Fungurume mine in Africa where we sold over 60 million pounds of copper in the first quarter.

Our consolidated gold sales for the first quarter of 2010 totaled 478,000, slightly less than previous estimate of 490,000 ounces and lower than the first quarter of 2009 sales of 545,000 ounces.

That reflects a lower ore grade at Grasberg resulting from the lower grade material that we are currently mining.

Our molybdenum sales of 17 million pounds in the first quarter of 2010 were significantly higher than last year's first quarter of 10 million pounds, and higher than our estimate of 15 million pounds because of improved demand in the metallurgical and chemical sectors in molybdenum markets.

Our first quarter results reflect improved pricing for all of our products, copper, gold and molybdenum; our realized price for copper was $3.42 per pound in the first quarter.

That was almost double the price in the year ago quarter.

Our gold realization was $1,110 per ounce in the first quarter 2010.

That compared with $904 per ounce in the first quarter of 2009, and our realized price of $15.09 per pound first quarter of 2010 was over 30% higher than last year's first quarter.

Our consolidated unit net cash cost averaged $0.81 per pound in the first quarter of 2010.

As anticipated, it was higher than the $0.66 per pound reported in the first quarter of 2009 as previously discussed our higher unit cost in 2010 primarily reflect the anticipated lower copper volumes at Grasberg.

Our operating and cash flows in the quarter were very stong at $1.8 billion.

Those were significantly above our capital expenditures of $231 million.

We took additional steps during the quarter to reduce debt.

We paid reduced our debt by $281 million in the first quarter, and then on April 1, we redeemed another $1 billion in senior floating rate notes due 2015.

Going back to the first quarter of 2009, the last 15 months, we have repaid approximately $2.3 billion in debt, and that results in interest savings of about $155 million per annum.

After taking into account the April 1 payment, our total debt approximated $5.1 billion and our consolidated cash position approximated $2.7 billion.

We separately announced today a separate press release that our Board has authorized an increase in our common stock dividend from an annual rate of $0.60 per share to $1.20 per share; that's $0.30 per quarter to be paid with the next dividend scheduled in August of 2010.

At the end of March, we had 431 million common shares outstanding.

On May 1, our six and three-quarter mandatory convertible preferred stock will automatically convert into common stock.

Assuming the minimum conversion rate, FCX would have approximately 470 million common shares outstanding after conversion.

This will reduce our preferred dividends by about $194 million for the year, or just under $50 million a quarter.

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

Good morning, everyone.

Our first slide on slide three has a picture of our annual report.

We will have the wide mailing of this annual report go out later this week.

In it, we talk about the success we had in executing our operating plans in 2009, focus on our long life assets, significant reserves and mineral resources, and our prospects for growing our business over time.

The fact our assets are geographically diverse, we have a strong financial position as Kathleen just outlined, and we have a great management team that performed very, very well during 2009.

The first quarter 2010 highlights, which Kathleen just reviewed, are on page four.

When I look at these numbers, a couple of things really jump out at me.

First we had a quarter of where we had more than 5% fewer volumes, lower volumes in copper production, 10% lower production of gold, and that was driven by our mine plans, our sequencing at Grasberg.

Our operations performed very strongly in the first quarter of 2010, as they did if first quarter of '09, but we did have lower volumes.

We had copper prices that were twice, on average, the realizations that we had a year ago, gold realizations were up 20%, and it shows how leveraged our business is to these commodity prices.

Our revenues were up by two-thirds and our earnings were up 20 times over the quarter, a year ago.

But focus on the costs.

As copper prices have doubled, certain of our costs do go up.

As you know, energy costs, for example, are higher, but our cost structure is very similar to what we had a year ago.

Our net unit costs reflecting the benefits of the higher molybdenum prices and the higher gold prices, even though we had lower gold volumes, is in the same neighborhood as our costs were a year ago, and the lower volumes did affect our unit costs in terms of the cost before by-product credit.

But, our commodity price realizations are so much stronger than the impact of the elements of our costs that are rising, and our focus on efficiency of operations is yielding on going benefits that when you put the pictures together, the realization from prices with a cost structure inherent in our business, you end up seeing why we have a business that is able to generate operating cash flows like we did in the first quarter, of $1.8 billion.

The cost structure is given in more detail on page five.

As we look at what happened in the first quarter, our unit cost was $0.81 net of by-product credits where it was $0.66 a year ago.

If we look at it by region, particularly focusing on our operation and the Americas where we operate mines that are great mines, but have lower grades than we do in Indonesia, to have North America's unit cost be at $1.13 this quarter where they were $1.22 a year ago when we were in the depths of the downturn and to see the attractive cost structures we have in South America, and even in Indonesia, where we had lower volumes because of our mine sequencing we still ended up with $0.10 a pound.

It is very again emphasizing the point of the relationship between our costs and our leveraged commodity prices.

The markets continue to be good.

Copper market is strongly supported by China with the strength of its fundamental economy, continuing to be exhibited.

Copper imports continue to be strong; speculation is that some of those imports are going into warehouses and that might affect imports later in the year, but when you get through all of it, the fact that the internal Chinese economy is so strong.

The continuing growth in the standard of living is evidenced by consumer spending, automobiles, air conditioners and the like.

The continued building of housing for people and infrastructure indicates how strong this is.

We do have a market that's been characterized by strength in China and weakness in the developed world and the US and Japan and Europe, and elements in those economies continue to be weak, particularly in the construction side of the business.

But, we are seeing the beginning of signs of improved demand for our products in the developed world.

As we review what our customers are telling us about our business, important parts of the business continue to be weak, but there are pockets where we are seeing improved demand for our products, and as you will see, that's leading us to begin to change our strategy of where we had curtailment of our high cost production, and now, we are taking steps to restore some of that production and invest more aggressively in growth for the future.

We start with Morenci, the flagship mine in North America, our traditional mine in the southwest copper district.

We had been very aggressive in adjusting operations in 2008 and 2009.

Third quarter 2008, many of you will remember our unit cost at Morenci was approaching $2 a pound.

This is a mine where we don't have the benefit of by-product credits.

So we cut our mine rate in half.

We shut our mill down, we reduced our employment and our equipment fleet, and we pushed our cost down so that Morenci's unit costs were at a level that would allow it to remain cash flow positive at very low copper prices.

Now that we are seeing a more positive marketplace, we have begun to take steps to ramp up some of the curtailed production that we have.

We have restarted our mill.

We were already mining sulfide ore.

That will allow us to process that ore and recover the copper from it.

We will be increasing the mill rate to come to a rate of 50,000 tons per day by 2011.

We have cut our mine rate in half at Morenci, from over one million short tons to 500,000 short tons.

So now we are taking steps to ramp up the mining rate, to get that rate back up to 700,000 short tons a day, and we are studying going forward.

We are looking at increasing our performance at Morenci, which had been cut significantly by about 20%, and we are very encouraged that we are being able to find good workers to come back into the work force.

We are mining to do additional stripping, to expose the ore that we then can put on our leach stacks and process through our mill.

And this will have costs associated with that, and because of the nature of the SX/EW operations, some of the benefits of that increasing mining rate won't be realized immediately, but over time as we recover the copper from the leach stacks, you will see additional costs coming in Morenci.

When we look at the rate of return that we will have from investing in that costs, with this kind of copper market, it is, it is very positive.

So we are looking at adding to the copper production from Morenci.

We had a project that we were beginning to invest in in Arizona at the historical Miami mining district.

We had deferred that had project and now we are investing in some new equipment using and that will allow us to recover some copper as we continue to deal with the reclamation activities in that area.

At Safford, the relatively new mine that is very near Morenci, we had a project that we were pursuing to build a sulphur burner.

We're now moving forward with that project, we had already spent some money on it.

This will significantly reduce our need to buy sulfuric acid in the market place and give us a lot more flexibility as we go forward.

And Safford is a mine, like many of our other mines, that has very positive potential for further development with the sulfide ore body associated with the existing oxide operations and a major new ore body potential at Lone Star.

So over time, as we will at our other North American mines, we will be looking to invest in increased production with the sulphur burner give us flexibility to did that.

In South America, at our large mine in Peru, Cerro Verde, we are proceeding with a project to increase the mill rate there from 108,000 tons per day to 120,000 tons per day.

Not a lot of capital, but it will allow us to achieve in the relatively near term, incremental copper at a very low cash cost.

But this is a mine that has the resources, has the footprint, the resources available to provide for a major expansion, and we are now engaged in the feasibility study to look at an expansion that would involve a major investment in new drilling facilities.

With the potential to more than double this output, we will be completing that feasibility study by the end of this year and early next year, we would fully expect to go forward with the decision to do a major expansion project at Cerro Verde.

And Chile, at our El Abra mine, we are completing the mining and processing of an oxide ore resource that has been the basis of this operation for the past 15 years or so.

There is a significant sulfide resource, and we have begun work before the downturn on a project to develop that sulfide resource through a leaching process called Sulfolix.

We deferred that a year now; we are investing and going forward with that project.

It, in itself, would allow extension of the mine life by more than 10 years with significant production and it requires some capital, $535 million for the initial phase to be completed in 2010.

But as we have been conducting core drilling in that area, we have expanded the resource available, the sulfide resource, and we see the potential for a major mill investment and we see the potential for a major mill investment at El Abra.

We are working cooperatively with our minority shareholder Codelco, which has other mining operations in the area.

We have begun a pre-feasibility study jointly with Codelco to look at how we got -- might most efficiently consider this milling opportunity.

Again, it is a major opportunity for a mine.

Three years ago, we weren't aware that we would have this kind of opportunity.

It is real exciting for us.

We had in Indonesia, when we curtail capital we didn't curtail capital for our on-going investment in developing the underground resources in Indonesia because it is so critical to our future operations and strategy.

This is one of the most significant undeveloped resources anywhere in this industry, anywhere in the world, with reserves of 40 billion pounds of copper and 35 million ounces of gold.

You have watched this expand the DOZ mine, which was initially targeted to be a 20,000 to 25,000 ton per day mine, and now it is operating at over 80,000 tons per day.

And it is, that's going forward.

We are developing the high grade [big Gossan] mine, the Grasberg block cave which is the key to our future after the depletion of the Grasberg pit, which is currently scheduled for 2015.

We are studying the possibility of extending that for some short period of time, but the Grasberg resources will be there that will allow us to continue in a way that we didn't, we weren't planning for.

So in the relatively recent past to continue to operate Grasberg is a high volume low cost mine, we are seeing the production from underground resources, ultimately reaching 240,000 tons per day for our operations there, to give you just how significant that would be.

That would include initially the development of the Grasberg block cave, the continuation of the DOZ mine, which has significant life and the ultimate development of the deeper resources below the DOZ and adjacent to it, the deep MLZ mine.

All of that is really progressing well and on schedule.

In Africa we have the exciting potential of dealing with the resources at this very large concession, more than 600 square mile concession, Tenke Fungurume and the Katanga province of the DRC.

Our initial project which was being completed around this time last year, for the copper circuit is operating, and we just achieved the design copper production rates during the fourth quarter of 2009, and our copper circuit is operating is operating very well.

In the first quarter, we produced about five million pounds of cobalt, sold three million pounds; we are still working to get the cobalt circuit and the related SO 2 plant operating in an efficient fashion and dealing with start up issues.

At full rates for this initial stage of the project, we would have annual production of about 250 million pounds of copper in over 18 million pounds of cobalt with more than that in the early years.

We continue to do exploration drilling and exploration and development analysis for the resources to allow expansion beyond this initial project.

We have a feasibility study that we are currently working on for the next phase of development there.

Put this into context, we currently see the resources that are there available to us to reach a doubling of the current production outlook from the oxide resources, using an expansion of the basic system that we have now.

We would be approaching that in two steps, and this feasibility study is looking at the first step of that development to optimize the current system and looking at various expansion opportunities to expand production up to a half of where we are right now and then there would be a subsequent oxide development.

Beyond that, we are seeing a sulfide resource and a mixed ore resource that would allow significant further development that we would like to pursue aggressively, that would allow this to become a world class mine and we will be working diligently on our exploration and development analysis to see where we go.

We continue to have discussions with the government on the contract and revisitation process, and we are -- those discussions which have been going on now for a number of months continue to be positive.

And we continue to have a strong belief that we will be able to reach an agreement that is a mutual agreement, for both sides of this.

This project is so important to the country and we are committed to working with the country in a positive way and doing things in the right way.

You saw in the earlier financial information that the price has of molybdenum had also increased.

It reflects an improved marketplace, Chinese imports, and a good outlook, same way we have for copper.

We had adjusted our primary molybdenum at Henderson aggressively in response to market conditions a year ago.

That mine operated at roughly 60% of its capacity during most of 2009; we're now up to roughly 90% of the capacity at Henderson and we are studying the restart of the really attractive project for reopening the Climax Mine in Leadville, Colorado.

This is a project that's going to get done.

It is just a question of when we pull the trigger to do it.

It is probably the most attractive molybdenum project in the world.

Initial pace for that project would result in large scale production, 30 million pounds a year, attractive costs, $2 a pound or so and have future growth opportunities that would allow us to continue over time expanding yet maybe by as much as double the 30 pounds.

It is a project of where we spent some capital, we deferred it.

It would take two summer construction periods to complete it; we are evaluating when to start with that construction.

Page 13 talks about our current projects under evaluation.

All of you have been reading about the supply issues, affecting the copper business, and they're significant.

Faced with the growing demand for copper in China, the signs of recovery, and an ultimate recovery in developed world, the world is going need copper; and during this period of time, when we had to deal with the economic turmoil, projects have been deferred, the existing mines continue to age, and deplete, grades fall, operating systems are aging.

The industry is faced with significant capital, just to extend and maintain mine lives at some of the big mines around the world.

Some of them like we are facing at Grasberg are looking at going underground.

People investing in challenging projects these days try to find ore that can be developed and many of those projects have technological issues and community acceptance and post government issues.

What's so positive about our Company is that we operate in most of major mining districts around the world.

We have existing operations that have very substantial amounts of resources associated with current production.

Based on our core drilling to date, we have identified mineral resources that have contained copper of over 100 billion pounds, which is more than our existing reserves.

And so we are focused on planning on expanding these operations over time as the market needs them.

In North America, we are looking on a shorter term basis at starting mining at our Chino Mine in New Mexico where we have suspended operations.

We talked about further increases in Morenci's mine rates.

We acquired some additional land adjacent to our Sierrita Mine, in Arizona, the Twin Buttes property, and that gives us some development opportunities there for that resource, perhaps jointly, with Sierrita.

The Climax restart, and then, in North America, our major mines have significant sulfide resources that we are looking at milling options to develop over time.

We talked about South America, the expansion of Cerro Verde and El Abra; we continue to explore in Chile and have contacts with industry participants about joint participations there.

We talked about Tenke which has exciting growth opportunities, and Grasberg, we continue to find resources associated with the Grasberg districts and do exploration outside of Grasberg.

We are significantly stepping up our exploration budget this year.

We have curtailed it somewhat.

We really didn't slow down our exploration effort, but we had a lot of data that we'd accumulated in 2007, 2008, which we continue to evaluate.

We added reserves last year; we expect to continue to add reserves as we look to go forward, but we are increasing the exploration budget in range of $100 million or more.

We will spend money on exploration whenever it makes sense.

Looking at 2010, we had a good first quarter.

We are continuing to have a sales outlook of 3.8 billion pounds of copper, 1.8 million ounces of gold, 62 million pounds of molybdenum.

We will work for opportunities to beat those numbers to move volumes forward.

We have had success with that in the past.

But, for purposes of our guidance, we are continuing with that.

Even with a doubling of the price of copper, higher gold prices, higher molybdenum prices, and some higher input costs, with some lower volumes this year because of sequencing in Grasberg, we are forecasting a very attractive unit cost rate of $0.88 a pound.

Really, really positive thing for our Company.

At current outlooks for prices and costs, we would generate $6 billion of operating cash flows with $1.7 billion of capital expenditures.

Our sales profile going out through 2012 is presented on page 16.

You can see growth of about 100 million pounds a year from the projects we are announcing today that go from those three periods.

We're going to be focused on these growth opportunities and we will be updating our analysis for that as we go forward.

Our goal sales at Grasberg are strictly driven by the sequencing situation, the resources, the same; it's just a question of where we are in our mine sequencing.

On our website, with addendums to these slides, you have some information on that so you can visually see how this works.

We also have a five year outlook for prices beyond 2012 when we return to higher levels of gold sales at Grasberg.

For the year, those of you familiar with Freeport know that quarter-to-quarter results vary depending on this sequencing issue.

It's not a negative, it's just the way our business operates.

And when we mine at the higher reaches of the Grasberg pit, which is now about a kilometer deep, we have lower grades than when we are at the core as we were during 2009.

Those units, any time we draw a circle around and calculate a unit cost, are going be affected by those volumes, so you can see that as we sequenced out of the high grade section during the first quarter, we will be at a lower grade section of Grasberg.

You can see that on the gold slide; it's charted at the upper right.

In second quarter, when we report second quarter results, we will have lower volumes, higher unit costs for that quarter.

The key to it is to look at this situation over time and see just what an attractive story we have in terms of the volumes and costs in relation to the commodities that we are exposed to.

Our unit cost for the year, are presented on page 18.

If you go back and look at where we were going into the year, you can see that even though we have these high commodity prices, our cost structure is being maintained.

Our cost of $0.88 outlook now compares with $0.86 we had at the end of the first quarter.

In North America, at $1.24, is the same as where we were were at the end of the first quarter, as is South America and Indonesia, all are very consistent.

It is an interesting comparison actually to go back and look at where we were last year and think about again where we have so much higher copper prices that our cost structure being maintained at such an attractive level.

Page 19 shows EBITDA variations and operating cash flow variations over copper prices ranging from $2.50 to $3.50.

This is based on $1,000 gold and $10 molybdenum.

Average volumes for 2010, 2011 and over that range, our EBITDA ranges from approaching $6 billion to over $8.5 billion and our operating cash flow ranges from $3.7 billion to $6.5 billion.

That's $10 billion, $9.7 billion.

I can't read my own writing here.

$9.7 billion for EBITDA at $3.50, so at $3.50, you are looking at almost $10 billion of EBITDA and $6.5 billion of operating cash flows.

Sensitives are shown on page 29., so you can adjust based on your view of those factors.

Capital expenditures for 2010, 2011 in aggregate are up about $300 billion; we will continue to review those.

$300 million.

2010 is actually the same as our original estimate; some has been reallocated from a timing perspective, but we are going to be looking to spend more capital as we go forward.

We have, over the past three years, really significantly improved our balance sheet.

It was three years ago that we completed the Phelps-Dodge transaction, had over $17.5 billion of debt; today we have pro forma for activities, debt reductions, we took after the end of the quarter, about $5 billion of debt and $2.7 billion of cash, so our balance sheet, is extraordinarily strong.

You can see that on page 23.

When you look at our debt maturities, we have a minimal debt maturities going out through 2014, and we have been able to achieve what we wanted today do from a debt standpoint.

So, where does that leave us?

We have a strong balance sheet, very strong liquidity position, our cost management has been effective and we're committed to maintaining that effectiveness.

We are focused on investing in growth, with our existing sets of assets and being alert to other opportunities that are out there in the industry.

We have taken opportunities to reduce debt.

This is has now allowed our board being announced today to double our dividend on our common shares and with the amount of cash that we are generating, that's going to give us very positive opportunities to invest in this business, very positive opportunities to enhance shareholder returns through common stock dividends and give us the opportunity to consider executing on our share buy back program.

That's a summary, so we are very pleased now to turn the call over for questions.

Ladies and gentlemen, we will now begin the question and answer session.

(Operator Instructions).

One moment please for our first question.

Our first question comes from the line of Michael Gambardella with JPMorgan.

Yes, good morning, Richard, and congratulations to you and Jim Bob and the entire team for another great quarter and also thanks very much for action on the dividend.

That's a great signal to the marketplace.

My question is really around the Tenke project and how far can you push production without a rail connection to the port?

We can double production using our existing transportation system.

That's producing copper cathode, and actually the truck system has worked reasonably well much better than, quite frankly, expectations were.

There are times we have delays at the borders, but the system has worked reasonably well and we think that we see it working for doubling of where we are now.

So, you have the trucks on site right now for doubling the production?

Well, we use contractors, and there's some Congolese contractors and also some South African contractors, but the equipment availability is there.

When will you know or do you know right now what the size of production could be if you had a rail connection?

Over time, people have talked in the range of 400,000 tons, 500,000 tons.

It's really dependent on what we see with our continuation of our drilling as we analyze development options.

It's clearly something that could get up to world class mine levels.

Would that require you, or in most cases, result in giving up some portion of the equity stake in the mine for that rail connection?

No.

No, it wouldn't require it.

We will always look for what's the best structure and so forth in what we might do.

Nothing's required.

The rail connection really -- the optimal solution would be connecting with this railroad that's being built through Angola by the government of Angola, supported by the Chinese.

The connection within the country is really an old rail line that once was there to be restored; it is not the significant project that you have in Angola.

So, it is something that we are talking with the government about.

It's somewhere down the road; it is not a near term deal, but we are confident that could be built.

One last question on Climax.

The guys at General Moly had announced that they're teaming up with the Chinese on getting the financing to start their mine in Nevada.

How does that impact your outlook on Climax restart?

We focus on the overall market and we look at what's going on in the marketplace.

We're the world's leading producer of molybdenum, the lowest cost producer and we're going to protect our market shares as we forward.

Okay.

Thanks a lot, Richard.

Congratulations, again.

Thanks, Mike.

I really appreciate your comments.

Our next question comes from the line of Tony Rizzuto with Dahlman Rose & Co.

Thank you very much.

Hi, everybody.

Hi, Tony.

I have a couple of questions.

One is if regards to El Abra, and the other one is more strategic in nature, but the first one I notice that Diego Hernandez has joined up with Codelco.

I am wondering with Mr.

Hernandez now as CEO, do you see Codelco perhaps being a little more aggressive in how they approach projects and maybe a little more willing to work with you as you indicated that you are looking at this more significant expansion?

That's my first question.

All right.

Let me just answer that.

Diegio, we have known very well, got to be friends with him down in Chile.

I am pleased for him; he will do a great job.

We had worked with, developed a relationship with Codelco under the existing management that was extraordinarily positive.

There had been some history at El Abra, but I was just down at Cesco, met with Jose Pablo and his team and they were very positive about our work at El Abra, where they have a 49% interest.

They're enthusiastic about this joint project we are undertaking, and so we couldn't have been more pleased with our relationship with Codelco as it stands now.

I am sure it will be great under the new management team, the minister of mines is very positive about Freeport, and about Freeport working the new minister of mines with Codelco, so all of that is good.

Now Chile faces this significant reconstruction project from the damage caused by the earthquake, and that is affecting the finances for the whole country.

There looking at using some reserve funds, about raising some money in the capital markets, and they're talking about certain increases in taxes and royalties, broadly, not just for the mining industry.

That's going to have an impact on Codelco for some time, and we think that provides opportunities for us to expand our relationship with them.

So, we're happy for Diego, but we were very pleased with our relationship with Codelco as it's been recently.

Excellent insight.

And my other question, Richard, is more strategic in nature.

Obviously, you guys have done a lot of great things.

You are going to be net debt free by year end according to our analysis.

You have a 15% free cash yield, you've obviously got a number of excellent project, organic growth opportunities.

My concern is that your stock price is not reflecting this appropriately and there has been a decoupling from the copper price.

I am wondering -- I'm not sure what this is due to.

It may be due to, only to -- I know there are observers out there concerned about China and the macro and think copper is trading too far away from marginal costs of production, the nonbelievers, if you will, but I am wondering also is there a concern also that people are viewing your growth opportunities as not so much growth and Freeport is in a mature phase, and is this part of what may be going on?

How -- shouldn't we think about in addition to organic, shouldn't we think about the possibilities?

You alluded to looking for other opportunities.

Should we think about Freeport looking for external growth as well?

The first part of your question, as you noted, there's a lot of skepticism about China.

There has been since 2003.

About China's internal economy and bubbles in its property sector and just overall concerns about its ability to manage growth.

They have done it very well.

Their internal economy is doing well, but there's a lot of questions about this issue about the relationship between imports and internal consumption.

So that's there.

The US continues and the Western world continues to be -- have this overhang of the economic downturn on issue like Greece and Goldman Sachs over the marketplace.

It's just part of the world we live in.

Longer range we're very optimistic about China, ultimately about the recovery in the developed world's economy.

We like where our Company is placed.

We've got growth opportunities.

We are focused on liquidity protection beginning in late 2008 and into 2009.

Now, we are shifting gears a bit, and we are going to be working diligently on looking for opportunities within our existing sets of assets.

We are always alert to other opportunities, and over time, as we have done effectively over the years, we will show that the marketplace -- our issue is performance.

And I couldn't be more pleased with the performance in running our business, and we will do a great job in taking advantage of opportunities where they come to us over time.

I appreciate that, Richard.

I certainly am pleased to see you are shifting more to the growth and CapEx and hopefully the stock price will better reflect what you guys have achieved and are achieving.

Thank you.

Thanks, Tony.

Our next question comes from the line of Kuni Chen with Banc of America Merrill Lynch.

Hi.

Good morning everybody.

Hello.

I guess just a question on the potential return of capital to shareholders.

Can you just remind us on your comfort level with cash on the balance sheet, as far as when you look at capital spending opportunities going forward, what's your comfort range with cash and how much is too much?

Well, we -- we have certain amounts of cash that aren't available to us for corporate purposes.

But beyond that, we don't see any real need to maintaining substantial amount of cash within our company.

So we are going to be managing our cash position going forward by looking, as we always do, our forward view of cash flows, our looking for opportunities for investment, and then to the extent there is available cash, we will be talking with our Board about what's the most appropriate way of returning that to shareholders.

Okay.

And so one of the most the positive things, as we think about this issue of the global financial picture, is the availability of financing to us.

We have the opportunity of talking with the financial market players, the banks we have traditional relationships with.

Others are always trying to establish relationships, and the availability of capital to our Company right now is extraordinary.

For example, we have been advised that we would have financial support to, doing the financing we did three years ago with the Phelps-Dodge deal, rates are obviously very attractive today.

But capital availability is a really important feature for the marketplace, and it is available to us in a very significant way.

Okay.

Great.

And can you, can you -- I know there's some, some existing share authorization that is still out there.

Can you talk about whether there's a potential preference there between potential buy backs or a special dividend?

We are just going to -- we always just look at the marketplace and make decisions on that.

We have done both in the past.

They're both available to us, and today we have been focused on, looking at increasing the dividend which we had eliminated and then now we've had two steps to increase, but these are issues we get the counsel of our Board on.

They're up to the Board decisions, and we review it continually with them at every one of our meetings.

Okay.

Great.

And just one last one if I may, on Morenci, with the ramp up there I think that gets you back toward 80% of pre-crisis production.

If you are incrementally take that back to full production, that's, is that really just a labor issue to go back to 100%, if you could flush out what would be needed there and the timing, that would be great?

Yes, it is more like 70%, 75% rather than 80%, but yes, it is not a complicated process.

We have -- it is, it is equipment and people.

We have available equipment, and we were real pleased with our ability to ramp up in terms of earning, to find a lot of people to work for us; so, it is not constraint, it's a management issue.

It's not a constraint in terms of stepping up.

As I indicated on a couple of occasions, we're studying the next steps, beyond this one.

I guess it's two, starting the mill and increasing the mining rate.

Thanks.

Our next question comes from the line of David Gagliano.

Good morning.

Just wondering if you can remind us the total capital spending needs are for the underground development in Indonesia?

That's my first question.

The total extends over many years; we have now invested in building the infrastructure that allows us to get there.

We are beginning now to take the initial steps on mine development.

We are investing in our rail system for the first time.

There will be a shaft development in the underground.

Mark, why don't you make some comments on that; Kathleen can talk about some of the details.

This is a big year for us, as Richard stated.

We are ramping up our development rates in both the Grasberg block cave and Deep MLZ.

They're both going to come on line almost simultaneously in 2016.

At the same time, we are starting up the Big Gossan; we are finishing up the development of that.

We will start production there at the end of this year with our first stilt.

That's an exciting time for us.

We have issued the shift, the ore pull system.

We are getting the base plant ready.

So we are well-positioned there, as Richard said.

We are entering a period where this year we are going to have about 45 kilometers drifting for underground development.

That peaks out with the 2011 to 2013 time frame, when we get up over 55-kilometers a year.

And we feel well-positioned to achieve those targets.

In terms of the number, these are total numbers and these are amounts spent over a long period of time, but for the Grasberg block cave, it is just over $3 billion; and the Deep MLZ, the initial capital is roughly $2 billion, the Kucing Liar is roughly $2.5 billion.

We have also got some mill modifications, but we are looking at spending over the life of the mine, in the aggregate, on going throughout the life of the mine, being around $500 million a year, and our share of that being about $350 million a year for the underground development for the life of the mine.

Of the block cave, the $3 billion, the $2.2 billion, how much of that has actually been spent at this point?

How should we be thinking about that as it phases in over the next few years?

We have been spending at a clip going back, mainly on the common infrastructure, going back for several years now, but we are stepping up now the expenditures on the Grasberg block cave, and again we are going to be spending our share of spending is going to be in $350 million, $400 million range for the next several years.

That's the total CapEx for you, $350 to $400 million then, that's it.

Yes, for our share.

And when I talked about this being a, -- David, I'm sorry.

That's okay.

We have chart up on the wall and I read the wrong name, David.

That's fine.

When I talk about this being an under ground mine, compared with other un-developed mines, it is really significantly different, because we do have the mill and the infrastructure built for that.

We have the town sight, the port system, all of the supporting infrastructure.

So its development really relates to just what Kathleen and Mark were talking about, developing the under ground mine opposed to kind of what you would be faced if if this was a mine, that would be, to stand alone basis, somewhere else in world.

Perfect.

Then just a quick follow up what was the cash cost of the 66 million pounds of copper sold from Tenke in the quarter?

We are going to start reporting our cash cost once we get ramped up to -- the cobalt, ramped up, but in the first quarter, our cash cost averaged just over $1, and we are targeting getting $0.50 or below once we get the cobalt issues resolved and the issues in our SO 2 plant resolved, so we don't think the first quarter really was representative of what will be on a run rate basis.

But, that's what it was.

Perfect.

Thanks.

Thanks, David.

Our next question comes from Sal Tharani of Goldman Sachs.

Good morning.

Morning.

Can you hear me?

Sure, Sal.

Good morning.

Good morning.

I want to ask you, you made a comment about some pockets of demand you are seeing outside of China, particularly in the economies.

Can you elaborate where are you seeing and what are you looking at, at the moment?

It is more in the electrical side of the business, Sal, both here in the US and in Europe.

There's some pockets of parts of the economy as you can see, automobile production is one thing that is generating some business for people.

When we look at the residential, commercial construction business, it is weak but bottomed out.

You have situations of where our downstream customers are not facing further declines in their business.

They have very low inventories.

Because of the cost of copper and the financial situations, they're not carrying any inventory, so when they have pieces of their business that generate opportunities we can see immediate demands for copper.

Okay.

And what signs will you be watching in terms of data where you feel more confident or comfortable to ramp up further on your projects?

Well, copper is so correlated to overall economic output.

In the developed world, it is closely correlated to industrial production.

So as you see, it's the same thing you heard in the JPMorgan report where they were seeing some improvements in the credit card business and the like.

All of those things come together.

It will be a combination when all of those things and there's some positive signs with that, as they improved and then you will see demand for copper stepping up.

Okay.

And lastly, on the Tenke Fungurume resolution, any progress, anything new over there?

We continue to have very positive discussions, we have not completed those discussions, so there's nothing more to report on than that.

So, it is something that we are continuing to be committed to work with in a way that's beneficial to us and the country.

Has the frequency of discussions increased since the last time?

It is an on going basis.

So -- and the country is dealing with a number of issues now.

There has been a government that was formed in the first quarter, a restructuring of the government.

The people we work most directly with, the Mines Minister and the Prime Minister are still in their positions.

We work with the government.

Just to emphasize, we have a contract; we continue to work on that contract and get our business operating in the right way.

We are working on expansion.

None of this is holding us back at the present time.

We do need to get this resolved.

In our interest and the government's interest and we are working to do that.

Great.

Thank you very much.

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

Good morning, everybody.

Morning.

I am also interested in a little bit of detail about growth mainly in the Americas.

Would you be able to comment at all about what the cash cost profile of the incremental expansions might look like?

The range of incremental expansions is real broad.

So, you can see in the numbers we disclosed to you today what the steps we're taking today involve.

We talked about Morenci being in the range of $0.08 to $0.10 of incremental costs to do the stripping that's necessary to step up our mine rates there.

But from a cash cost-to-production basis, once it was in there, just looking at these numbers, you're currently running at about a 2 billion-pound run rate in the Americas.

If you lump everything together and they're pretty close on a cash cost site and delivery at about $1.15, if I am not mistaken.

So what would that $2 billion look like five years out and what cash cost -- is a better way to frame the question?

Okay, Mark.

You are asking me a real broad range question.

Yes, I realize that.

I am going to give you a real broad range answer.

That's fair.

Our -- as we look out at the major expansion projects, we think that those will come in with cash costs that is consistent with our current cash cost levels.

That's important.

And that's going be there, where we do.

The issue will be the amount of capital that's required to develop those because once you start talking about milling facilities for sulfide resources, that's a lot of capital.

But we would be looking at resources that should be able to be produced at attractive cash costs.

I'd like to make a comment about the sulfide ore.

We have talked a lot about the -- South America and North America any of these deposits, remember we talked about it in one of our other calls.

I made the example that if you look at this as a big pear sitting in the ground and the part of the pear that's exposed is the oxide ore, which is really just a small part of the pear, it has gotten ripened by the exposure to the weathering, etc.

So, you have got this big sulfide ore, whether it is South America or North America, underneath all of these oxide ores you are going to have a substantial sulfide ore.

That means you deepen the pit, you widen the pit, you mine the bridges in the pit, especially at Morenci to increase your production.

As Richard said, the most important thing is the capital outlay because the reason why the oxide ore is being mined as a preference especially the (indiscernible) properties, by playing into these pads by eliminating the necessity of the metal and smelting really put the oxide ores into their -- in the prominence; we were talking about much lower copper prices.

So, I think it goes without saying that there is a huge amount of ore which we drilled up since we made the acquisition that has confirmed that there is sulfide ore that hadn't been mined by anybody because of the fact that when you are looking back at the dollar copper.

A lot of people thought $.90 copper was a long rage price; all of that psychology has changed substantially.

So I think in answer to the question, we just asked, if you got to put into perspective, the fact that sulfide ore is more expensive to mine, not so much in the cash cost of production, but when you look at the outlay of cash to get yourself into production and the mills are more obviously more expensive, but the amount of ore we are talking about being able to access is five, six, seven times the amount of oxide ore that existed.

That's great.

Thanks for that Jim Bob.

Thanks for that, and as we think about -- again this is a little broad, but is 2.5 billion pounds a reasonable expectation based on the projects you have outlined?

You mean increasing our production in the Americas to that level?

Yes.

Yes.

My knee-jerk reaction is to tell you, yes, but we are going to be studying to maximize what these resources are available to us.

It is going to be an on going process of where we are going to continue to do analysis and work to decide where to go forward, but the potential for significant growth is there and we believe the market is going to allow us to produce it.

Go back to one thing I said earlier, the first major expansion opportunity that we have is going to be at Cerro Verde, and we think a year from now, we will have completed our feasibility study and we will be preparing to more than double the production from that mine.

So that is the first one.

Tenke Fungurume will be working in the meantime.

We are going to do an incremental studies of how we can enhance our near-term production and look for opportunities to make these kind of major investments that Jim Bob and I have been talking with you about to have the significant future increases that are available to us.

The Cerro Verde alone would go a long way to what you are talking about, Mark.

One other comment, just on our mineralized material, we reported 122 billion pounds of mineralized material.

A lot of that is in North America; over 70 billion pounds of contained copper is in North America in sulfide material and so that's just back to point that we were making about the great opportunity that we have in North America on milling.

Thanks very much, everybody.

Appreciate the answers.

Thanks, Mark.

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

Good morning.

Two questions, first you mentioned that it would take you two summers to bring the Climax project on stream.

Is there a reasonable chance that you may actually be able to do work this summer or are we talking about summer 2011?

Dave?

Dave Thornton who runs your Climax business.

We plan to do some work this summer.

We have some pipeline corridor work that we've had planned to do when the weather permits that we will do this summer.

So that was already in our plans to continue our construction efforts, although at a minimum rate, but we plan to do that as the weather permits this summer, so we are active this summer.

So you could be up and running in the second half of '11 then?

Well, no.

We are talking about that's unlikely this stage.

So, as we sit and look today, the likelihood would be beginning after the summer of 2012.

The second point refers to the security situation at Grasberg.

I know that you have done an awful lot of work on this and taken a lot of steps and we've heard stories about Russian trained sniffer dogs that, quite honestly, sound frightening to me.

As the situation stands today, do you feel that you have to take any further steps regarding security?

Is there any particular local body that you feel you need to sit down and talk to or as the situation stands today are you happy with the security situation at Grasberg on an on-going basis?

First of all, the dogs are American trained.

They are just part of the process that we've had to bring in resources to this.

We had a shooting event in January.

We've actually had two in the last six months.

We had hoped that all of the work that had been done last fall would have ended this situation, but we did have the other event in January, but not one since then.

The government has put resources on this.

We recently entered into a memorandum of understanding with the security forces.

We are encouraged by their crude organization and commitment to it.

We've adopted, with the advice of security advisors procedures for transporting people and equipment on our road.

To say we're satisfied -- we're not satisfied, because the investigation into the perpetrators of this has not been completed or they have not been found.

We are pleased with the enhanced security.

Our people there have great moral; they feel good about it.

We're not losing people as a result of this, but we are continuing to encourage the authorities to complete their investigation and get to the bottom of this and bring the people who are doing these terrible things to justice.

Thank you.

Our next question comes from Charles Bradford with Affiliated Research.

Good morning.

Can you give us guidance in the next few quarters, next few years, on how much cobalt you'll be producing?

We are producing -- we actually produced cobalt at a good rate the first quarter.

We had roughly 5 million pounds of production.

The quality of the cobalt, while it is marketable, it is not to the standards that we want it to be and we are getting some discount on that.

But we will -- the way to look at it is that the life of the mine rate, design capacity is 18 million pounds a year and during the early years, we will produce 20 million to 25 million pounds a year, beginning in 2010 and '11.

Thank you.

Our next question comes from the line of Mark Smith with Scotia Capital.

Good morning.

The question on the sales profile into 2012.

I notice 2012 you are talking about gold sales of 1.4 million ounces, which presumably reflects lower grades at Grasberg.

I am just wondering, copper sales around 4 million pounds, what would the composition of that be?

I assume that the gold grades are down in Grasberg, copper grades would be down, so would that make up more North American/South American production?

No.

This is a legacy Freeport disclosure, but if you will go back to slide 28, we have a five year plan for PTFI, and it shows copper and gold grades.

The copper and gold production.

This issue about the variance of the grades and the material at the core of the Grasberg versus at higher elevations is more pronounced for gold than it is for copper.

Okay.

But that's just a function of the mineralization.

It is just a such an incredible ore body, from a grade standpoint that when you are at the heart of it, in this golden horse shoe that we have talked about for years, you get extraordinary grades for copper, but really, eye popping rates for gold.

It is more pronounced to the variations, as you can see on this slide on page 28.

That's great.

One more quick question, if I could.

I noticed in the quarter, composition of taxes.

It was effectively all cash taxes very small deferred tax.

Is that going to be on going?

You know, the tax situation always depends on the relative contribution of taxable income in different areas.

We report our consolidated tax, but we pay tax by country.

And so when copper prices are low, because we have corporate overhead and costs here, we pay very little US tax, but a lot in Indonesia.

With higher prices, we generate taxable income everywhere we operate, so that's what you are seeing as the consequence of that.

Great.

Thank you very much.

Richard, I might just add to the comment about the gold rates.

We will go under ground, interestingly enough, we have discussed with you before, that you don't mind the waste material, the profile of the ore extraction will change significantly with underground you are taking the golden horse shoe and you're block caving that.

You don't take out the high walls and the symmetry of mining that we've had to deal with the last 20 years and the open pit is significantly different.

Suffice it to say that when you see these gold rates going as we move from the center of the open pit up to the high walls to keep the symmetry, that's when it has the most impact on the gold rate.

Once you get underground and get your block cave going, both underground operations where we hope to reach 240,000 pounds a day.

You are going to have more predictable gold grades as you stay out of the waste material.

Thanks, Jim Bob.

I will point out to everyone when you get your annual reports, there will be a table that shows each one of our underground ore bodies that will have the copper -- it's in the 10K as well so you can see it.

It has each one of our underground ore bodies and it has the copper and gold grades for it.

One of the things you will notice is in the KL ore body, some of that extend into the Grasberg block cave is that we have low recoveries of some ore that's affected by pyrite.

In fact, we are only predicting right now 50% of recovery.

One of the opportunities we have long range is to deal with the metallurgical analysis and processing of this ore to get more gold out of this ore than we currently can establish under the criteria for reporting improved and probable reserves.

But there's a lot more detail on that in our supplemental disclosures in our 10K.

Our next question comes from the line of Sanil Daptardar with Sentinel Investments.

Thanks.

Richard, you talked about restarting the Climax Mine.

I think it might take about two summers for you to restart that, on the project.

Are you concerned that -- are you not concerned that restarting that might put extra molybdenum into the market or do you think that the molybdenum strength is such, such strong, that it will not have an adverse impact on price?

That is the reason we suspended the construction.

If we didn't have that concern, we would have gone forward with it because the project is really a home run in today's molybdenum prices, but it is 30 million pounds in a market that's approaching 450 million pounds.

So, that is the issue that we are monitoring because we do produce significant Moly from our by-products from our copper mines.

And so, as we get comfortable that the market can absorb this moly, that will be the trigger for us to go forward, but, sure, we have that concern.

Okay.

The chart you showed of moly, 65 million pounds, roughly for early '11, 2012, this does include Climax or it does not?

It does not.

Okay.

So the Climax might be 2013 in that case?

Well, as we talked about, if we were to begin construction in the summer of 2011, by the end of 2012, we would be producing Moly from climax.

Okay.

And the Moly market from the beginning of the year to now have you seen an acceleration or a momentum, in terms of the moly, or how will you characterize that market now?

I can answer that, but I have the expert here.

Dave Thornton to comment on it.

Yes, we are seeing good demand growth in the molybdenum market, primarily if you compare it to last year, it is night and day.

Last year, we were seeing US steel utilization rates in the 40% to 50% range.

First quarter of 2010, we are in the high 60% to 70% utilization rate.

Auto sales are increasing in the US and in China.

That's a good demand source for steel, and also some molybdenum outlets on autos, so we are seeing some signs of strength in the metallurgical market.

We are seeing improved strengths in our chemical markets for molybdenum, primarily in the catalyst for de-sulfurization.

We are seeing some signs of improvement, but not quite where we were in 2008.

Are the increments coming broadly across the west or mainly from developing markets?

It's across.

Mainly driven by China, but we are seeing some demand improvements in the west as well, US and Europe.

Okay.

On the copper side, you mentioned that you would be going underground by 2015 in Grasberg.

When you -- as you include your production in the underground, do you think that there might be an increase in the cost of underground, in the average cost of the Grasberg Mine?

Currently you have a very low cost at the Grasberg Mine because of the by-products, but as you move more and more underground, is there a reason for us to think that there might be a cost increase?

No.

It depends on a number of factors.

If we look at the current cost structure of the industry, there would be some increase in costs, but you would still have these high levels of production at a net cash loss of less than $0.50 a pound.

There have been times, with varying energy costs, when our models actually showed underground being cheaper because you use a lot less diesel.

But if you look at the current cost levels and you think about a life of mine average for the pit being in the range of $0.30 say, and a million plus pounds of copper at $1000 -- well, at the open pit, it would be less than 25%; at a thousand dollar plus which would be another factor that will determine it, you are still talking about costs in the range of $0.30, $0.35 a pound.

Very attractive cost level.

(Inaudible).

One more factor on underground.

It's much more of a manufacturing like process.

In other words, there's more of a repetition of the way you operate on a day-to-day basis, and because of that, there's tremendous opportunities for technology to improve the cost structure.

I have talked with caterpillar and other suppliers and they are investing in that right now, other operators because the industry is going to be characterized as being much more heavily underground than where it is today because just where the resources are in the future.

So we are going to be working and looking at ways of using technology.

I thing that's a great opportunity for managing costs as we go forward.

Just a question on the DRC.

Any updates on that, any further negotiations or is it put on the back burner?

No, it's not on the back burner.

You must have missed some of the earlier conversations because we have addressed it on a couple of occasions.

We continue to have positive conversations with the representative of government.

There's a lot of issues going on within the country; they've restructured their government but we are engaged in on going discussions which we believe will result in a successful resolution to this for us and for the country.

Any time frame, you think?

I am encouraged about where we are today.

But, I have been very -- haven't been able to predict time frames on this process and I am not going to be able to do it today.

Thanks, Richard.

Thanks, all of you.

Appreciate it.

Appreciate your comment and again I will emphasize we are operating, under our contract everyday.

We are working to produce copper efficiently.

We are doing that; we are working to improve our cobalt circuit.

We're making progress.

We have got hundreds of trucks tracking back and forth between the port carrying copper down and supplies back.

So we are operating as we speak and we are investing So we are operating as we speak and we are investing in our next expansion project.

Our next question comes from Justine Fisher with Goldman Sachs.

Good morning.

Morning.

I did have a question on the US costs.

I know that the projections you guys talk about in the press release are net of moly by-products, et cetera, but they still seem a little higher than they were before and I'm assuming because you are restarting the higher costs capacity.

So before we take into account the by-product credits, can we expect costs in the US to go back up to what they were, let's say, in '08 which was a closer to $2 a pound, opposed to the low $1 a pound closer to $2 a pound, opposed to the low $1 a pound level?

No.

The answer is no.

We are not going let the cost go up to $2.

In 2009, Justine, our North American costs net of by-product was $1.11.

In our first, in our fourth quarter conference call, we had given the 2010 estimate of $1.23.

We are updating that to $1.24 today.

So, even though we are talking about spending some additional money, we're going to keep our unit costs down.

We are seeing, because as I mentioned, because of the mining more material and stripping at Morenci, that that it will add some costs.

We're showing costs before by-product credits of $1.50.

Three months ago we said it would be $1.45.

So basically, there, that reflects the decisions we are making today.

So there is some change to it, but it is not any kind of radically different cost structure than we have talked about.

Okay, so it'll be more in the mid-point, but it certainly won't go back up to those levels even if you bring back the higher cost.

It is not really a midpoint.

We were close to $2.

We are talking about $1.24 now but the time we are talking about close to $2, we were looking at copper at $1.50 a pound and a lot of people thought it was going lower.

Today, we got copper at $3.50 a pound.

Some people think it's going lower and higher.

My point is these changes we are seeing in our cost are proportionally much lower than the changes we're seeing in the realizations of our products, so the profitability is expanding by an amazing level.

Thanks.

One more for Kathleen, obviously, you guys have brought that down to around $5 billion, after the takeout of the floaters.

I am wondering if there's any other color Moody's has given you as to what you guys might do in order to work on an investment grade rating?

I know they're reducing total debt has been something.

Is there anything besides waiting?

Is there any other benchmark you set out?

No, I think you can read the report and see what things they been looking at.

We have on going dialogue with Moody's and we will continue to do what we think makes sense for our balance sheet and ultimately, we believe it should give us an investment grade rating but we will let them complete their analysis.

Okay.

Great.

Thanks so much.

I appreciate it.

Thank you Justin.

Our next question comes from Dave Katz with JPMorgan.

Hi.

I was curious when looking at the capital expenditure expectations for the year, with the $1.7 billion for the full year, yet we have the $230 million in the first quarter that implies a larger balance in each of the following three quarters.

What way do you expect that to flow through, do you expect it to be roughly equal or forward the end of the year?

It will vary depending on when we, when we get things done.

This is the cash expenditure.

So equipment is being ordered things are being done, and so it's not a smooth situation; you are talking about activities as varied as replacement equipment for Morenci and building an underground shaft and railroad system in Indonesia.

It's across the board.

As we look at it right now, we show it evenly distributed within the next three quarters, but that isn't the case when we're ramping up capital, it usually does get delayed quarter to quarter.

But as of right now for planning purposes, it is pretty evenly distributed.

I apologize if I missed this earlier in the call.

In the past there have been discussions between Freeport and the Indonesian Government about the sales back to the Indonesian Government of the 9.36% stake of Grasberg.

When we last spoke on the conference call prior to this one, you indicated nothing had happened recently with regard to that proposed sale.

However since then there have been stories indicating that the Government expects to take place his year, and I was hoping you could provide an update on that.

Let me clarify a couple of points.

We have a contract of work, which under its terms, does not require us to divest of any of interest in PTFI.

There were provisions in the contract to that effect when it was signed in 1991, but under its terms those have fallen away, so there's no requirement.

The Indonesian Government has asked us to voluntarily consider offering this interest that you refer to, just under 10%, the Indonesian interest, that was several years ago.

The Central Government itself had indicated that it is not interested in buying incremental shares.

They currently own just under 10%.

We have -- the discussion you referred to have been with the Province of Papua which has an interest in buying those shares.

We see some potential strategic benefits of working to achieve that so the Papuans have a shared ownership; we provide significant support to that community already through various programs.

We are committed to continuing to do that.

There's some structural issues associated with accomplishing that, and we are continuing to address those in a very cooperative and positive way.

It's really too early to say when this might happen or how this might happen, but it would be in a way that would not be detrimental to the FCX shareholders.

It would be something that we believe if we are successful in doing this under the structure we're talking about that it could have some positive strategic benefits in terms of our relationships with the Province of Papua and the people of Papua.

Okay.

And then finally, coming back to Kathleen's earlier comment about, about Moody's.

Moody's in the past has indicated they would like to see less concentration of Freeport in Indonesia.

Do you think that the sale of that 9.36% stake would further that ability to appear less concentrated.

No.

No, that wouldn't affect that analysis at all.

As we discussed with Moody's when they raised that issue several years ago, we have now, through the Phelps Dodge deal, significantly reduced the concentration of this Company, Indonesia because now it is one third to 40% of our businesses.

Before it was 100%.

We do have this geographical diversification.

But, Indonesia is an important part of the business, it's our corner stone asset.

The financial community's, view of Indonesia, as you may know, has really improved.

So, Indonesia's economies perform well.

It is stock market during this downturn has been the second second best in the world.

And the country is committed to improving its investment climate.

So, over time, we think, first of all, the world's view of Indonesia has improved and will continue to improve.

At some point, we will be able to demonstrate to Moody's that we are, indeed, an investment grade rated company, as the rest of the world seems to view us.

Okay.

Thank you very much.

We have reached our allotted time for questions and answers.

I will turn the call back to management for closing I will turn the call back to management for closing remarks.

Thanks, everyone for participating we look forward to reporting on our progress as we go forward in 2010.

Ladies and gentlemen, the this does conclude today's conference call.

Thank you all for participating.

You may now disconnect.