費利浦·麥克莫蘭銅金 (FCX) 2011 Q2 法說會逐字稿

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

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

Later, 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 Chief Financial Officer.

Please go ahead, ma'am.

Thank you and good morning, everyone.

Welcome to the Freeport-McMoRan Copper & Gold second quarter 2011 earnings conference call.

Our results were released earlier this morning, and a copy of our press release is available on our website at fcx.com.

Today's conference call is being broadcast live on the Internet, and anyone may listen to the conference call by accessing our website home page and clicking on the webcast link for the conference call.

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

They're also available on our webcast link on 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 our comments today, we'd like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements.

We'd like 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 Jim Bob Moffett, our Chairman of the Board, Richard Adkerson, our Chief Executive Officer.

We also have Red Conger with us today and Dave Thornton.

I will start by briefly summarizing our financial results and then turn the call over to Richard, who will be reviewing our recent performance and outlook using the slide materials on our website.

Today FCX reported second quarter 2011 net income attributable to common stock of $1.4 billion or $1.43 per share.

That was more than double last year's second quarter of $649 million or $0.70 per share.

Our second quarter 2011 results included net losses on early extinguishment of debt totaling $54 million or $0.06 per share.

We also had adjustments to environmental reserves totaling a $36 million charge or $0.04 per share.

For the six months of 2011, our net income attributable to common stock was $2.9 billion or $3.00 a share, compared with $1.5 billion, $1.70 per share for the first six months of 2010.

Our sales in the second quarter of copper totaled one billion pounds.

That was higher than our April 2011 estimate of 965 million pounds, primarily because of the timing of shipments, principally in North America.

Our consolidated copper sales for the second quarter of 2011 were also higher than the second quarter of 2010 of 914 million pounds, and that reflects our increased production in North America and the timing of shipments in South America and Africa.

Our consolidated gold sales during the second quarter of 2011 of 356,000 ounces were slightly lower than our previous estimate of 365,000 ounces but higher than second quarter 2010 sales of 298,000 ounces.

The variances were primarily related to the timing of mine sequencing at Grasberg.

Our molybdenum sales in the second quarter of 2011 totaled 21 million pounds.

That was higher than our estimate of 17 million pounds and the second quarter 2010 sales of 16 million pounds, primarily reflecting the improved demand for molybdenum.

Our sales for the year 2011 for copper are expected to approximate 3.9 billion pounds, 1.6 million ounces for gold, and 77 million pounds for molybdenum.

Our forecast for the third quarter includes 940 million pounds of copper, 415,000 ounces of gold, and 18 million pounds of molybdenum for the third quarter of 2011.

Our results in the second quarter included positive pricing of all of our key commodities, copper, gold, and molybdenum.

Our realized price for copper of $4.22 per pound was over $1.00 higher than the previous year's period.

For gold, our price of $1,509 per ounce in the second quarter 2011 was higher than last year's $1,234 per ounce realization, and our price of molybdenum of $18 per pound approximated the year-ago period.

Our consolidated average unit net cash costs -- these are net of byproduct credits for molybdenum and gold -- have averaged $0.93 per pound of copper in the second quarter of 2011.

Those were lower than last year's unit net cash cost of $0.97, primarily because of higher gold and molybdenum credits in the second quarter of 2011, and those were partly offset by higher site production and delivery costs as a result of increased mining and milling activities and higher input costs including materials, energy, and currency exchange rate impacts.

With strong cash flows during the second quarter totaling $1.7 billion, those were significantly above our capital expenditures, which totaled $527 million during the second quarter.

For the six months, our operating cash flows totaled $4 billion, and capital expenditures totaled $1 billion.

We ended the quarter with our cash balance exceeding our debt.

Total debt approximated $3.5 billion, and our consolidated cash balance approximated $4.4 billion.

During the second quarter, we repaid $1.2 billion in debt, including the April 2000 redemption of 8.25 senior notes.

On June 1, FCX paid a supplemental common dividend of $0.56 per share, which was in addition to FCX's current annual common stock dividend of $1.00 per share, which is $0.25 quarterly.

We've paid common dividends year to date of $949 million, which includes nearly $500 million for the supplemental dividend paid on June 1.

We have approximately 948 million common shares outstanding.

I would now like to turn the call over to Richard, who will be referring to the presentation materials on our website.

Good morning, everyone.

As I look at these numbers on slide three, you just look at them, and they speak for themselves.

It was a very good quarter for us.

The thing about it is, looking under these numbers, we faced a number of the same issues that the industry is going through in terms of issues involving operations, equipment issues, weather issues in South America.

We had to deal with a -- an unfortunate industrial accident that we had in the underground at Grasberg, where we sadly lost two people, and we had to curtail production for a period of time.

But the fact that the numbers are so strong reflects the focus that our operating team -- and I congratulate everybody on the team -- has had on maintaining safety but working to maximize current volumes as we go through.

And as you'll see, we've made great progress during this period on advancing our growth projects, and that is really the strategy of our Company that we've pushed forward.

Kathleen has given you the numbers.

Only a couple of things I will pint out is, as projected, we had about 100,000 ounces less gold sales out of Grasberg this year than a year-ago quarter, and that has an impact on some of our unit cost numbers.

And looking at the key statistics of our operating cash flows in relation to our capital expenditures clearly demonstrates the strength of our Company in terms of having these large volumes of production, attractive cost structure, very attractive commodity prices, and investing in our business to grow and generating such strong cash returns.

Our cost numbers by region and our production numbers by region are shown on slide four.

Our costs did come in lower than we had projected, a bit higher than first quarter last year, and that reflects the 100,000 ounces of lower gold sales.

But at less than $1.00 a pound, with prices now in the $4.40 range, that's tremendous margin for us.

Costs were higher this year than a year-ago period because of income -- input costs, but the good news is we're not seeing a trend within this year that affects our overall cost structures.

Before byproduct credits, our first quarter unit costs were $1.61.

We averaged $1.63 for the second quarter.

Later on, we'll talk about our outlook for the year where our attractive cost structure continues.

We had very strong performance in the Americas.

These mines met our target production targets.

They controlled our costs.

With Grasberg, despite some of the issues that we had with the underground in terms of investing in some new wet muck equipment and taking some time to ramp back up to full production, we had good performance.

Our moly business, Dave Thornton is here, really performed well.

And our African project at Tenke Fungurume continues to meet its targets, despite the ongoing issues we have of amending that business and getting it set up for significant future growth.

Markets today are very interesting.

After having some weakness during the second half of the quarter as a result of the slowing global situation in the US and Europe and the problems in Japan and uncertainty in China, because of their efforts to cool their economy,.

By the end of the quarter, prices were ticking up and today are very strong.

There appears to be little investor funds flow that's driving this.

It is supported by the fact that there's clearly a de-stocking of inventories in China, even though they're taking efforts to slow the economy down.

June industrial production growth was over 15%.

I know there's a PMI number out this morning that's weaker than it has been, but underlying these efforts in China to slow their economy down is tremendous amounts of spending on infrastructure and housing.

The country has the financial resources to continue to invest in the face of the global economy.

And also the commitment that's evidenced by their most recent five-year plan to continue to invest.

Gold is highlighted in the press every day and is at record prices.

The molybdenum markets we believe look good.

Seasonally, this is a slow time of the year, and the recent price movements reflect that.

The price has ticked down a couple of dollars here during the quarter, but as we talk with our customers and plan for the second half of the year, we're looking for that to be a relatively strong market for molybdenum.

Molybdenum hasn't recovered to the extent that copper has from its highs before the financial crisis, but we believe it's a strong market, and we'll be talking about what we're going to be doing with that business later on in the presentation.

Slide six just reflects what we're doing.

We have our exploration team working to continue to identify resources and qualify those resources as reserves.

We're investing principally in our existing mines and are having success -- and have had significant success since the Phelps Dodge merger and adding to our reserves.

And then we're taking those reserves and have our development teams look for projects to invest in because we're so optimistic about the future of the copper business.

We want to grow production as quickly as we can.

One of the reasons the crisis is so strong throughout the industry is that takes time with getting permits and power and water and enough development analysis to get projects going, but we're progressing with that with the ultimate goal of increasing our cash flows.

The first step in that line is we started following our curtailment of activities in late 2008 and 2009, really beginning about two years ago and accelerating into 2010 was to focus on some near-term projects in North America and in South America as well that would add incremental volumes to offset some of the curtailment activities that we had taken during the slowdown.

You see some pictures here of Morenci Miami and Chino in New Mexico.

Our report card where we stand with those is reflected on page eight.

We had shut down our mill at Morenci.

We had basically cut our mine rate there in half, and we're stepping that back up in stages.

And the first stage is complete with 125 million pounds a year of incremental copper restored.

We had deferred the Miami project in connection with our reclamation areas there.

We're now ramping that up.

The Chino mine in New Mexico was actually shut down, and now we're ramping it up to 200 million pounds a year.

We have taken advantage of the performance of the sag mills at Tenke to incrementally increase its production with relatively little investment in new mining equipment.

We took a de-bottlenecking step at Cerro Verde.

All of this added about 500 million pounds of copper, individually small, but 500 million pounds of copper.

We have made the decision now to restart Climax.

We are going to do this in a measured way -- in a way that's sensitive to market impacts, and I will talk about that more, but that will ultimately have a capacity in this initial stage of 30 million tons a year with the ability to expand.

For a year we had deferred the El Abra Sulfolix project to replace the depleting oxide ores there with the sulfide resources.

That project is complete and operating, and we've had a multi-year investment in underground infrastructure at Grasberg to replace the pit when it's depleted, currently scheduled in 2016, and that is going on schedule.

With respect to Climax, we are now taking steps to be able to start up the operations in 2012.

We expect to ramp up to 20 million pounds a year by 2013 at an annual rate.

We last year had hired miners.

Now we're going to be hiring operators.

We will monitor its production levels and also our production at our Henderson underground mine in Colorado as well and manage those operations which we can do at reasonable cost basis to supply the market depending on the market demand.

So as we stand right now, engineering is complete, construction is 75% complete with the summer season.

We're actually mining now, and we're going to go forward, complete this construction early in 2012 and start our ramp-up at that time.

Great project.

$700 million, about $6 a pound average cost.

The best moly development project in the world.

And we'll support our leading position in that industry as the world's lowest cost and largest producer.

We commenced production at the El Abra Sulfolix project in the first quarter.

That project extends the life by over 10 years at 300 million pounds a year.

We will complete the capital spending on that project in the next few years.

Most of that capital has been spent.

Now, beyond this project, our continued exploration drilling has identified a much larger sulfide resource than we had anticipated when we started getting involved in El Abra, and we've got a team that's working very aggressively to see how we develop that sulfide resources.

That would be a development that would be incremental to the Sulfolix project.

It would involve a concentrator mill, which in Northern Chile involves getting access to water resources, but we are involved in the planning for that and very optimistic that we will have a major expansion project in our future at El Abra beyond Sulfolix.

Slide 11 summarizes where we stand with the underground development in Indonesia.

Besides the open pit, today the existing DOZ mine, which is a continuation of block cave mining that Freeport started in the early 1980s, has a capacity of 80,000 tons per day, which is 35% or so of our throughput to the mill.

We've also begun mining at our high-grade Big Gossan mine, which is not a block caving mine, but has had very high grades and incrementally adds to our production.

What we're focused on is the development of the Grasberg block cave, which is an extension of the ore body that we've been mining from the surface since the discovery of the Grasberg and the development in the early 1990s.

As that open pit reaches its ultimate limits, which we expect in 2016, we'll then move to mine that same ore body from underground.

We're expanding the DOZ.

We've completed a feasibility study there.

That will be an important contributor with the start-up of the new mine section there in 2015.

When you add up what we'll be doing in the DOZ MLZ complex and with the Grasberg block cave, we will have aggregate underground production at mill rates consistent with what we're doing now, in the 240,000 tons per day.

This will involve a lot of capital.

We expect to spend $500 million a year over the next five years in pursuing this development.

The next slide gives a little bit more detail about the underground block cave at Grasberg.

The first point is these reserves are in proximity to our existing mill facilities and with our infrastructure development are now connected to the mill through a horizontal access.

We're not having to hoist ore here, but we actually have a new train system that will be delivering them on a horizontal basis from the side of the mountain into the mill, which gives us significant cost and efficiency benefits.

Its large scale, high-grade -- as I said, production of 240,000 tons a day is consistent with what we're doing right now.

We're using this highly efficient block caving operations.

It's a low-cost mining, and it will be among the lowest cost producers of not just underground mines but any mines in the world.

This table shows that our 2010 mining costs per ton from our DOZ existing mine is comparable with the Grasberg open pit.

There's no overburden to mine underground.

The cost per ton mills basis are lower in the DOZ than the Grasberg open pit.

We are going to be evaluating the optimal time for transition from the open pit to the Grasberg underground, and we'll be looking at the economic trade-offs of the higher mining costs per ton of ore as open pit versus the timing of the metal release underground.

These operations have common facilities, support costs, mill costs, and so it all -- when you look at the per pound numbers, we will expect our average cost per pound to be consistent in the underground era as we have in the open pit era, and any year is going to be depending on the price of gold, the price of copper, and the price of input costs.

But it's not a radical change from what we're experiencing now.

And still, high-volume, low-cost asset.

Beyond this $500 million expansion in Climax, we're working very aggressively with larger-term, near-term copper projects that are currently under evaluation.

In Peru at Cerro Verde, we have now completed a feasibility study to triple its mill throughput.

At 360,000 tons per day, that will be one of the largest milling operations in the world.

It will produce 600 million pounds of copper.

It will require, we think, 3.5 billion pounds -- $3.5 million of development costs and achieve full rates in 2016.

Morenci, as we take the next step there in terms of, one, adding mill capacity, and two, increasing our mine rate, we continue to enhance that project.

Previously we had thought we'd get 150 million to 200 million pounds a year.

Now we're targeting 225 million pounds a year at an attractive capital of $1 billion.

Expect that to come -- begin producing in 2014.

And our next stage at Tenke would be to increase our mill rate to 14,000 tons a day, to add 150 million pounds of copper a year at roughly $800 million.

And that we expect to come on in 2013.

So here we've got the next stage of projects, which would add roughly a billion pounds a year of incremental copper, involve 5 billion pounds -- $5 million of capital over the coming years, and that's very exciting.

Some details on Morenci is on page 14.

Interesting, you don't have to go back too many years before our acquisition of Phelps Dodge to hear people saying nothing but negative things about Morenci.

We have this little chart here to show that since the modern era of mining in 1943, when the first modern concentrator was put in service in Morenci during World War II, our aggregate production has been 26 billion pounds of copper.

Today we have 14.5 billion pounds of reserves and 11 billion pounds of indicated recoverable material -- contained material from our resources, and we're continuing to drill there, continuing to find there.

So really, Morenci, which many thought was on its last leg, is really -- looks to be only at best halfway through its productive life and still available to generate profits in today's world of higher prices.

But we are -- we will complete the feasibility study for this next expansion by the end of the year.

Permitting is beginning.

Permitting here is a step we go through, but it's not a major project like it would be for starting a new mine.

We're confident we can achieve full rates in 2014.

As I said, we continue to expand resources and reserves through our exploration program, and the chart shows the incremental production that we would expect to achieve with this expansion.

Cerro Verde, I mentioned the tripling of the size of the milling capacity, the $3.5 billion of capital.

Again, exploration continues to add to our reserves.

This is proven technology.

We just had completed a major expansion at Cerro Verde in 2007.

We've got water resources which have been an issue in Peru by working with the local community, where we're investing in a much needed -- and Arequipa is the second largest city in Peru -- wastewater treatment plant, so the community is real positive about that.

And we will have access to some of that water for our expansion.

We are filing our environmental study the second half of this year.

That would put us on schedule to start construction in 2013 and complete in 2016.

Tenke, we see a series of expansions over time there, and we're committed to pursuing those expansions.

The first step is this 14k project.

That would involve increasing our mining rate to 150,000 tons today, adding some tank house capacity, spending about $800 million of capital, and adding 150 million pounds of copper a year in an approximate two-year time frame.

And exploration drilling and analysis continues to focus on how to maximize the oxide resource and ultimately how to process what appears to be a very large resource of sulfide material and mixed ore material.

Now, the next stage in the pipeline is near-term immediate projects, then longer-term projects, and we have a whole series of those that we're working on today.

That involves a very significant milling investment at Morenci, investments at Sierrita, with how to deal with this new resource we acquired at the adjacent Twin Buttes property.

We're looking at number of alternatives there.

Expansions at Baghdad, which is a property where you've got copper production supported by molybdenum production with the indicated resources.

We're now looking at a currently shut-in mine at Ajo, a historical mine in Arizona that Phelps Dodge operated.

Safford has a sulfide resource in connection with the current oxide operations we're doing in an adjacent potential development project called Lone Star.

We mentioned El Abra mill, the future expansion at Tenke.

So we have before us a lot of work, a lot of opportunities.

We've significantly increasing our exploration spending, essentially doubling it from last year to $250 million.

You can see it's distributed globally.

90% of the core holes we're drilling is on our existing projects.

We have some greenfield projects.

It would be great news if those come in, but really our confidence about our ability to identify resources, reserves, and development projects with our existing ore bodies is what's driving us.

Our 2011 outlook is really consistent with what we told you in the first quarter -- 3.9 billion pounds of copper, 1.6 million ounces of gold, 77 million pounds of moly.

Outlook for unit cash costs, this is at $1,500 gold, $15 molybdenum for the remainder of this year, would be about $1.00 a pound, and this is a good news story.

We're not seeing -- we see moving parts in our cost structure, but we're able to offset some of those, and we get the benefits of higher gold prices, of course, but at $1.00 a pound, we've got a very attractive cost structure.

At $4.25 copper for the remaining six months, we have approximately $8 billion of operating cash flows, and our current estimate for capital expenditures this year is $2.6 billion.

We're spending capital as aggressive as we can, and that's what we estimate we'll spend this year.

Near term, we're showing our quarterly results with really no changes that we have.

This is the annual results -- annual outlook for 2012, 2013.

It's really consistent with what we told you before, with incremental molybdenum sales coming in of about 10 million pounds in 2012 and 20 million pounds in 2013, reflecting the net of our Climax restart and other adjustments to our operations.

Our quarterly results are shown -- outlook is shown on page 21.

Consistent annual results, essentially some shifting from the third quarter to the fourth quarter at -- that's reflecting Grasberg.

On July 4, our ETFI union workers in Indonesia commenced an eight-day illegal strike which led to a temporary suspension of all our mining, milling, and concentrating shipments.

On July 11, we reached an agreement with the union to end the strike, and the operations have resumed safely and we are ramping up production.

We estimate that the aggregate impact of production lost during the strike period was 35 million pounds of copper and 60,000 ounces of gold.

That is reflected in these outlook numbers on slide 21, together with mine plan changes that we would have made in any event.

The numbers would have been this much higher had not we had the strike.

We have now begun the negotiations with the union.

They started -- the second day was completed overnight tonight.

This is a contract that's scheduled to renew in October.

We had not begun any negotiations with the union when the strike occurred.

There was issues related to the certification of the union leadership, and so now we're just beginning to talk with our unions about the new contract.

The first stoppage we've had of this kind at Grasberg in over 40 years of operations.

The government is supportive.

Of course, the government is losing taxes and benefits as this occurs.

The initial discussions with the union and government officials as we begin negotiations have been positive with a lot of comments about avoiding strikes in the future.

We've always been able to work cooperatively with our workers there, and we expect to be able to continue to do so.

We pay at the highest levels of worker compensation in Indonesia.

I had mentioned the cost structure, and that's on page 22.

The outlook for the year continues to be attractive at site production costs of $1.70.

Before credits, we were at $1.67 in the first quarter, so we're seeing offsets there but no significant jumps in unit costs, and net of credits at $1.00 a pound.

Again, this is at $15 gold, $15 moly, and $14 cobalt.

You can see that goes across our boards in an attractive way.

Cash flow generation will be strong at these levels with our current level of operations at $4 copper, about $8 billion of operating cash flows at $4.50 copper, over $9 billion of operating cash flows, and I will just remind you that's after cash taxes and after cash interest.

The sensitivities are shown on page 24.

And while we are subject to input cost variations, our leverage of copper is so great that the factors that might push input costs one way or the other are more than offset by copper movements.

$0.10 in copper is $270 million of net operating cash flow impacts to us.

That's both up and down.

Our current outlook for capital expenditures has been adjusted slightly by $100 million in this year to 2.6, $400 million next year.

I want to point out that they do not include the capital spending for the project at Cerro Verde.

It does include in 2012 some increase in Climax, about $64 million, and then studies at Cerro Verde and other projects which are part of the planning for future developments.

We expect our capital spending to go up as these projects are advanced and improved.

Financially, we're very strong, of course.

Kathleen mentioned this.

We end the quarter with $4.4 million of consolidated cash and 3.5 -- $4.4 billion of consolidated cash and $3.5 billion of debt.

We're going maintain our strong balance sheet, our liquidity, we are going to invest in attractive growth projects.

We've paid debt down.

We may have an opportunity to refinance or pay some debt down next year.

Our Board will evaluate our common dividends.

We've paid supplemental dividends that the Board will evaluate as it reviews our financial policy on an ongoing basis.

Strategically, we're going to continue focusing on safe production, advancing development opportunities as we continue to look for opportunities to benefit from these positive commodity markets throughout the industry.

With that, we'll open up for questions.

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

(Operator Instructions).

Brian Yu with Citi.

Great.

Thanks, and good morning and congrats on the results, Richard and Kathleen.

On the cost side, you guys have had pretty good performance year to date, and I was wondering if you could help me with the math here.

If we look at your site production costs for the full year and multiply it by volumes, you're looking at spending of close to $6.6 billion, and year-to-date spending is about $3.1 billion.

So if we look at first half versus second half, what's driving the 10% increase in total spend?

It's 2 factors.

One, we're increasing mining rates.

As we ramp up on some of these projects that we talked about, we're increasing mining rates at Morenci and our other North American mines.

We're increasing mining rates in South America.

And so that's 1 factor.

The other factor is input costs, impacts.

The mining rates lead to some additional input costs.

The incremental ramp-ups are at a higher -- since we scaled back mining activities with higher levels of unit costs, as we ramp up, we're incurring some higher levels.

So it's those 2 factors, increased activity in mining rates and input costs.

For example, at the end of 2008, we idled 100 big haul trucks.

Red, it was just at Morenci, right?

Or it was in total North America?

Morenci, yes.

It was Morenci.

All of those trucks are back at work now, and we're ordering trucks.

Some of them had to be rebuilt.

They had to be rebuilt.

We cannibalized some of them, but we don't have idle trucks.

We went from 100 idle trucks to all of them working and buying new trucks.

So as we go through that, that's going to involve some incremental spending.

Okay.

Great, thanks.

Michael Gambardella with JPMorgan.

Good morning, Richard, and congratulations again.

Thanks, Mike.

Question on the Climax start-up.

It sounds like, depending upon the market, you would reduce your moly production at Henderson, if the market couldn't bear the weight of Climax.

Is that correct?

Ultimately, that could well happen.

But what we're doing with Climax is we're going to phase in the production.

We're doing it a more measured way than we would do it if we had $30 moly.

We've gone through a lot of discussions and analysis.

The first step was to go ahead and spend money so that he we would be in a position to make this decision.

Now that we're making it, and we'll complete construction this year, we started hiring some miners last year to do stripping and get ready to get the ore to the mill.

Now we're hiring operators, and -- but we're going to take this slower than we otherwise could take it.

So we're going to come in, with $10 million in '12.

We're currently thinking about $20 million in '13.

And then from there, we'll be balancing Climax and Henderson.

They're both scalable.

We showed that in 2008, 2009, when we --

Dave, what did we cut Henderson down to?

Cut from the over $40 million to around $20 million, mid-$20 millions.

We did that with a little bit of impact on unit costs, but not like you might expect.

We still had attractive costs.

So the good thing that we have, of course -- the byproduct moly comes, it just comes with copper production.

Right.

But we now have 2 mines that are -- can be flex producers, and we'll be operating them like that.

We have enough confidence in the market that we believe that the market could absorb the amounts that we're adding.

Now, for example, our Cerro Verde project has 15 million pounds of copper -- of moly -- coming with it.

If we expand Sierrita and Bagdad, that's more moly coming with the project.

We're seeing some moly at Morenci with our future expansion.

So we're going to be the leader in this industry, and we're going to be the lowest cost producer, and we're going to be in a position to be responsive to market requirements.

Rich, as you mention your cost estimate at Climax of about $6 a pound, what is it at Morenci, and how does that fluctuate -- how did that fluctuate with the decrease back in '08?

You mean Henderson?

I meant Henderson, yes.

Henderson is around $7 a pound, Mike.

Around $7 a pound.

And it was lower than that back in '08, because input costs were a lot lower.

My recollection was our costs went up about $1 a pound as we cut production in half.

Okay.

Thanks a lot, Richard.

Which is still, Mike, as you know, very attractive in terms of industry cost structure.

Oscar Cabrera with Bank of America.

Good morning, everyone.

Richard, congratulations on the strong results.

Thanks, Oscar.

Looking at your -- at Cerro Verde, what is the burn rate you think in terms of development CapEx that you will see from 2013 and '16?

And have you had any discussions with the new government regarding potential increases in taxes and royalties?

Okay, I am going to let Kathleen talk about the CapEx spending, then I'll come back and talk about the new government.

Oscar, the -- during 2012, for most of 2012, we'll be in permitting.

We don't expect to see the CapEx ramp up really coming until 2013 and 2014.

So for the next 18 months or so, we'll likely spend in the $300 million range for engineering and permitting costs.

So 2013, we're looking at ramping up.

So the cap -- the rest of the capital would be split between 2013, '14, and '15.

Can we assume, like normal projects, about 40%, 40%, 20% over those 3 years?

I would say like 20% in 2013.

Most of the spending will be in 2014.

Thank you.

Okay.

Now, that's obviously dependent on getting our permits and our discussions on our tax situation and watching developments as they go on in Peru.

Where we are with the stage of the project is we completed the feasibility study, and we're prepared to file for the environmental permits, which would normally take about a year.

And then we're looking at what our tax and royalty situation would be.

Big picture, Peru has made very significant advancements as a country, principally driven by mining investments.

Our Company has had a really longstanding partnership with the country and with the local community, and we're really positive about the outlook for both the country and our project at Cerro Verde.

When you look at the taxes and royalties in total that we currently pay, and a lot of those are in different buckets in Peru so they don't necessarily have complete transparency when you first look at them, they're in line with international standards.

And we've been an important contributor to the region of the country.

It's 18% of the GDP in the Arequipa region.

Arequipa is the second-largest city in the country, and 1% of the GCP.

We're investing and have invested significantly in benefits to the local communities.

We did a water system earlier, this waste water system that we're working on, and we're targeting 1% of our revenues for community support, even though that's not necessarily required.

So we've worked very positively with them.

Now, the election was a surprise.

Humala wasn't expected to win just a few months ago, and he emerged as the candidate that was elected by the people, and we always work with the elected governments.

We don't get involved in internal politics.

During the course of the campaign, Humala made positive comments about being supportive of mining activities.

My own judgment is that anybody who is running that country is going to look to support mining, because that's what they need to advance their country, and without mining, they have limited amounts of other business to fall back on.

So we're going to work cooperatively with them.

Overnight, or yesterday, the administration -- the ministers were announced.

The mines minister is an individual we have worked with in the past and believe we can work with in the future.

So we're certainly not affecting our operations.

And we're going forward with our expansion plans with a positive view of working with the new government to get our plans approved and to invest.

We believe the local mayor, for example, who was a Humala supporter, is very supportive of our operations and we have a great working relationship with him.

It's a question of time will tell, but we're not discouraged about where we stand right now.

(Operator Instructions).

Your next question --

Operator, what we'll do is, we'll let people have one follow-up question when they're on the line, and then if you have other questions, everyone, just queue in the line again.

If we have time, we'll get back to you.

Yes, sir.

Paretosh Misra with Morgan Stanley.

Good morning.

Good morning.

Couple of questions.

One, it seems like for your revised cost guidance of $1.01, you are using slightly higher diesel and electricity costs.

In fact, it seems like you're using $3.40 gallon diesel and spot is at $3.10.

Is that right?

Well, when we're putting these numbers together, we surveyed what our people were paying.

There's basis differences, so you can't just say there's a single price.

But Paretosh, let's see --

Kathleen, do you want to comment?

You're about right as the base price.

But $3.40 is our cost, including the freight cost, is what we've got assumed.

Got it.

Okay.

But we're using current prices for diesel in these numbers.

Okay, yes, that was my question.

Then second, at Grasberg, do you buy any electricity from outside, too, or it's all internal, your own power plant?

Well, we -- prior to our fourth concentrator expansion that we did in the mid 1990s, we had burned diesel.

With that, we developed a coal plant to generate electricity.

We have 3 facilities there, we buy coal from Indonesia, and the coal provides our base load, and we supplement that with diesel.

We have a project that we're working on with the province of Papua now that's targeting the development of a hydro facility in Papua, which we're very encouraged about.

It would be a project that would provide feasibility is established, we've begun work on it, we're encouraged by it, we have work to do.

But it's about 100 kilometers away from our operations, and it could potentially deliver power for us on a cost advantage basis.

And the province is very interested in it because it could assist in helping the further economic development of the province of Papua.

So we're working on that as a project.

Thank you.

Thank you, Paretosh.

Tony Rizzutto with Dahlman Rose.

Thank you very much and good morning, everybody.

Thanks for all the color, too, on the Peruvian situation.

Appreciate that.

So I guess I will ask about molybdenum.

In the release, you talked about improving demand.

I was wondering if you could elaborate on that a little bit and also if you could maybe provide some color, Richard, on why you think the moly prices pulled back, somewhat sharply here recently.

I'm going to let Dave comment on that, but we believe the recent pull-back principally reflects seasonal factors.

It's something we've seen in the past.

But, of course, moly is tied into this global economic situation, and we've seen a slowdown in the growth that was occurring during 2010 in the economies in the US, Europe, and, of course, Japan is still recovering from the earthquake tsunami events.

But Dave, why don't you make a couple of comments on the moly market.

Yes, Tony, we continue to see a strong outlook for moly, overall.

In the US, steel capacity utilization continues to improve over last year, although modestly.

We're seeing some improvements in steel demand in the EU, some weakness in China as they've trimmed back on some of their economic slowdowns.

Japan -- with the tsunami and everything, we've seen a slowdown in Japan.

Haven't yet seen the recovery there in the auto, mainly in the auto fields.

So automotives continues to be strong in the US and Europe, and overall steel growth continues to be strong.

We're seeing strong growth in our chemical segments as well, so overall, we continue to have a positive outlook for moly in 2011 and going forward, as the world economies continue to come back and to grow.

But we're taking a fairly modest approach on that, not a strong recovery.

Like Richard said, on the price side, we think this is more seasonal.

We typically see a slowdown in the third quarter, as primarily in the EU, we see the steel industry take maintenance curtailments and turnarounds.

And we're also seeing a continued slowdown in Japan as they recover from their natural disaster.

So we think last year we had a similar outlook.

We saw the prices weaken in the May, June, July time frame last year and then recover in the fourth quarter.

And we think this will be a similar situation this year in 2011.

Wonder if I may ask a follow-up there.

If you gentlemen have a number in mind as to what the capacity additions in addition to Climax over the next several years, over the medium term, in terms of how you're modeling out the supply growth.

Tony, that's the question.

We have looked at both the potential moly development projects.

We also keep in touch with what is going on with copper projects.

There's a lot of expansion of copper projects that people are pursuing.

All of those have uncertainties associated with them.

Sometimes it's economic uncertainties, because of the higher cost structure some of these moly projects have.

The permitting issues that everyone faces.

There are other issues that affect the timing of the copper projects.

And all of these are what we've been analyzing and considering for the past couple of years now as to what to do with this.

We've reached a conclusion that we want to in some ways get out ahead of some of these projects with our powers help us maintain our market share and our market leadership position.

So I think what we're doing here is going to throw some question marks as to what happens with others development.

So we don't really have a clear-cut view as to what's going to happen, even though we follow what's going on in the industry.

I would certainly agree with that, Richard.

Thanks very much, gentlemen.

Thanks, Tony.

Charles Bradford with Bradford Research.

Could you talk a bit about TCRCs, which had gone up quite a bit, and whether the situation in Japan is having much of an influence and how that might develop?

Yes, Chuck, that's an interesting question.

We're having a lot of discussions internally about that.

As you know, and I think most of you know, we're on both sides of that equation.

We're a very large copper concentrate producer that we sell in the marketplace.

We have an investment in a significant smelter in Spain.

Our Atlantic copper smelter in [Welva] we have a minority equity ownership interest, and we're a supplier to the Gresik smelter in Indonesia.

And we have a smelter here in the southwest copper district at Miami, where we supply concentrate, use acid, and generate cathodes that we use in our wire rod business.

So we really are on that.

Now with respect to Japan, 2 smelters were temporarily affected.

Everyone needs to tip their hats to the Japanese ingenuity and work ethic for how quickly they are recovering from their situation, and they are recovering.

It's had an impact, short term.

The smelter business is affected by buying patterns in China, and investments in smelters continue to be made there.

There are other smelters being talked about around the world.

There's 1 being talked about, about Indonesia.

So it's an evolving situation.

It's not clear-cut.

A lot of it depends on the timing of these development projects that are coming down the pike in the copper business.

But clearly, the TCRCs have moved up temporarily.

We'll be entering into our annual negotiations later this year, and they will be reflective of what the market is at that time.

But there's -- I don't think there's any clear-cut answer that we can say specifically to your question.

Thank you very much.

Thanks, Chuck.

Richard Garchitorena with Credit Suisse.

Great.

Thank you and good morning.

Good morning, Richard.

So my first question is just quickly -- so it looks like you have 300 million of restarts at Miami and Chino due by 2012.

I was wondering how we should think about the ramp-up through that, because it looks like if you look at full-year guidance, it's only 100 million pounds versus '11, and I'm assuming that the 200 million additional in 2013 is related to that.

Well, first of all, when you look at these projects and than at our aggregate guidance numbers, you also get into factors such as the timing of where we are in the pit at Grasberg and other mine plan changes.

So, Kathleen, do you want to comment?

Yes.

No, that's really the difference.

We've got the ramp-up of Miami to 100 million pounds, and then the details of our expected ramp-up at Chino are included in the lease.

But we've also got a slide that you should look at alongside of that in the reference materials on slide 30 that shows the variations in Grasberg production as well.

So it's a combination of changes at Grasberg and also this ramp-up in North America.

Thank you.

And then my other follow-up, it looks like you had $60 million in environmental costs this quarter.

Can you just give a little color on where that was spent and if that is expected going forward?

Thank you.

A large portion of that was a adjustment to an environmental reserve.

So the largest portion of that $40 million-plus was the -- was an adjustment to an environmental reserve which is a non-recurring item.

The balance of it relates to ongoing shutdown costs that we have.

But that's a line item, a new line item we have in the income statement where we're separately stating what the cost of the historic obligations, including changes in the reserves that we have on our books.

And Richard, I will just add that while Kathleen is right in that this specific instance is a non-recurring deal as we look at this, this is an important part of our business.

When we acquired Phelps Dodge, we stepped into a situation where historical operations had been conducted by Phelps and by Cypress and by AmEx, and it's an ongoing management issue for us to deal with these in a responsible way to deal with regulations.

We try to get issues settled and behind us.

But It is part of our business that everybody ought to understand and something that we will continue to work on, and there will be issues that come up from time to time.

Some of these things had to do with operations that haven't been active since the early 1900s or the mid 1900s.

And anyway, we have a resources and a great team that works to deal with those, and overall, since 4 years now we've been working on it, I've been very pleased with how we've been able to manage it.

But they do involve costs.

Thank you.

Sal Tharani with Goldman Sachs & Company.

Thank you.

Richard, on El Abra, I just want to understand how your talks are going with your partners, Codelco, for the possible large sulfide deposit you have found.

Because Codelco has been under some scrutiny because of labor union issues, the Lower House has created a committee, and also, there's a new mining minister in Chile.

Have you seen any changes in your dealings with Codelco recently?

No, we -- let me answer the general question first.

We have great relationships with Codelco, and our partnership has never been stronger, in terms of the way we work.

They are a minority owner, most of you know that, but they're a significant minority owner in El Abra, and we are talking with them about the possibility of doing something jointly with their adjacent operations.

The new mines minister is a very well-regarded engineering expert in the country, and our people and the Codelco people tell me they're very pleased about the prospects of working with him.

We had a great relationship with Martin Golvern, and so we're pleased with that.

We're looking at alternatives of what to do about whether it makes sense to do something with -- jointly with Codelco, but there's also alternatives that we are looking at where we would do this on our own.

So it's not decided yet, it's ongoing considerations, but there's a couple of paths that we're currently evaluating.

Great.

One more thing on -- in Grasberg or Indonesia, you mentioned biannual contract negotiations.

Are there -- are these contracts for 6 months only in Indonesia?

Every other year.

Okay.

Thank you.

We get a contract, and it's for 2 years.

Thanks.

Thank you, Sal.

John Tumazos with John Tumazos Very Independent Research.

Congratulations on doing such a great job of running the operations and generating cash.

My question involves when you go to spend it.

I was at a mine last week where 4,500 day underground project at an existing site was quoted at $0.75 billion.

And that's in Canada.

Could you update on your oversight of CapEx, given the forcefulness of some engineering firms and vendors to try to charge a lot of money?

And if you have any maximum number of projects or CapEx dollars that you would spend where you get to the point where you maybe -- it's tough to spend it well, and how much is the concept for 360,000 tons a day at Cerro Verde?

John, it's a -- the question you asked is a big issue for the industry right now, because -- and it's not just copper projects, gold projects, but across the board in resources.

As you know, there's tremendous expansion projects going on in the iron ore business and other resources, coal projects, so this -- if you would have asked us in the spring of 2008 what was the biggest issue facing the industry, we'd talk about people availability and supplier availability and so forth, and that's going to be a huge issue as we go forward.

The benefit we have now is we have a very large organization that's very experienced in managing these projects.

And we have -- we're adding to those resources.

Freeport is an attractive place for people to work.

We pay our people well and give them great career opportunities.

So we're planning for that.

We're very comfortable with Cerro Verde because we're -- in large part, we're replicating at a bigger scale something we've already done, and our operating team there is heavily involved with it.

In terms of projects, we only do projects -- we're not about growing production just to grow production.

We're looking for shareholder returns.

And that's the limiting factor that we have is, what are the best projects we can do to provide the greatest returns for our shareholders?

Jim Bob, do you want to comment on this investment?

I think you've covered it.

John, you sort of answered your own question.

The fact is, if you're going to develop these properties, as prices go up, the grade of the ore becomes more important, and that's why people came up with the lease process to begin with.

And probably put pressure on prices, people went to the lease pad and got very innovative.

Talking about cost and prices, when you lived through the era that we did of $1 copper, $1.05, $1.06 copper as long-term prices, we're in a new stratosphere with this $4.40 -- $4.20 copper, and when you look at the gold prices -- gold prices, I can remember gold selling at $250 an ounce.

So you look at gold going over $1,600 an ounce, so the number of people that are trying to get in the business now are going to overspend, because they try to do things with staffs that don't have the experience that we have here in Freeport.

The answer is, that's what this whole management and resource management is about, is being able to judge which ore bodies can be developed and which ones can be done without getting in and spending so much money that if prices drop, that you find yourself operating at a loss.

Thanks, Jim Bob.

Thanks, John.

Brian MacArthur with UBS Securities.

Good morning.

I just wanted to follow up on Cerro Verde.

Now you have the feasibility study and you've been good in giving us cash cost guidance for Climax and number guidance in Grasberg.

Can I just confirm that the expansion, leaving out any discussion about changed royalties and everything which you may work through, that cash costs would be ballpark towards -- versus the current operations?

Brian, they will initially.

As we go out, we would have had a higher cost anyway as we get to lower grades.

But initially we'll have similar cost structure to what we have in the current operation, and longer term, the cost will be in the $1, $1.50 range.

Right.

So bottom line, near term you all start the lower grade with higher volume to keep it even and eventually just the grade falls off far enough and it runs up.

That's basically how it works?

Right.

And second question, totally different topic, there have been more rhetoric out of Indonesia again about raw material exports not being allowed out of the country.

I assume under your cow you're protected, but could you just go through that?

Is that a situation like what we went through years ago, and we talked about this and you got involved in Gresik or just any color where that stands under the 2009 loss?

Yes.

Sure, Brian.

We'll come back and add some to Kathleen's, but let me talk about the Indonesian situation.

It's a different situation now than with the Gresik smelter.

In the Gresik smelter, when we signed our new contract of work in 1991, there was a provision in there that we committed to work to have a smelter built in Indonesia, subject to its economic feasibility.

And we followed through on that commitment, ultimately developed a partnership with Mitsubishi and other Japanese investors.

We took an equity interest, we supported the smelter with concentrate supplies, and we fulfilled our obligation to the Indonesian government at that time.

Now, our contract gives us the right to market our concentrate in the world markets, and Indonesia has passed a law that they're working to see how they can implement that would restrict exports of raw materials requiring in-country processing.

Our contract, which the Indonesian government officials have said would be honored, would exempt us from that requirement.

Now having said that, we will work cooperatively with the government and with others.

We're committed to encouraging economic development within the country.

And developing a new smelter anywhere in the world today is economically challenging, and it will be challenging in Indonesia, but we're going work cooperatively with the government and the terms of our contract of work.

We are confident we will prevail in terms of the legal requirements that we're subject to.

So it may be that ultimately you reinvest part of a smelter again if that makes sense on an economic basis, and that it also will give you more negotiating power as you get more at Cerro Verde.

All that would get factored in, or is it a stand-alone decision?

To date there are other investors who are talking about investing in the smelter in Indonesia, and we're talking with them about -- are prepared to talk with them about commercial supply relationships.

We have existing contracts that we'll work with, but to date, our discussions are our considerations.

Discussions really is too strong a word for it.

Have been more from a supplier standpoint as opposed to an investor standpoint.

Great, thanks very much.

That helps clarify that a lot.

Okay, Brian.

And I will just say, as an add-on to Kathleen's comments about the situation in Cerro Verde, a comment when you look at these expansion projects that people are talking about throughout the industry, and like Cerro Verde, we talk about tripling mill throughput and so forth.

Underlying that is a situation that if you don't invest, you are going to see declines from grades depleting resources, higher costs, and so forth.

So I've seen some analysis that picks up the production and treats it all as incremental, but underlying that is an inherent decline in the resource base because of the nature of ore resources.

This is Jim Bob.

Let me comment, Brian, on the smelter situation.

Back when we did the smelter in Indonesia, they would match up the fertilizer plant that was in -- that they had in (inaudible).

If you don't have a fertilizer plant, to take that sulfur, it can have a huge impact on your feasibility.

So if people throw around the term, build more smelters, it's a lot more complicated than people realize.

The smelter -- there are smelters around the world today that are operating at a loss that didn't have government subsidy.

So it's -- hopefully, when people get around the table and start understanding what it takes to justify the economics of a smelter, it's a lot more complicated than they go into these conversations with, but it's not something that people are going to sit down and do overnight.

That's a good point, Jim Bob.

And I'll just emphasize, nobody has approached us about subsidizing smelters.

Okay.

Great, thank you very much.

Aleem Ladak with Desjardins Securities.

Hi.

Good morning, everyone.

Question regarding the molybdenum, the Climax restart.

Was there any particular -- was there anything that prompted you in particular to restart the Climax mine over the last quarter?

It's the timing.

This mine is located 11,000, 12,000 feet on top of the Continental Divide.

It got a heck of a lot of snow this year.

Average snowfall is 400 inches.

So you sort of tee it up to make timing decisions on things like this driven by the seasonal situation.

So the question of making this decision now or, it would have to be delayed for at least 6 months.

And so we had a lot of discussions, and as we talked about a year ago, we had decided to go ahead and spend capital to prepare ourselves for it.

And based on our overall read of the market, we concluded now was the time to take a -- I wanted to use the word measured step towards start-up.

So it did have something to do with the present state of the molybdenum market then, right?

No question.

I think that was the driving force.

If we had not had some confidence in the market -- and again, it's -- molybdenum market is much smaller than copper markets, of course.

This is a big project in relation to the overall market.

We're a big producer of byproduct moly.

We have the Henderson mine.

All of this fits in together.

So it was a complicated analysis and one of those decisions that is based on pluses and minuses, and a great plus here is the resource that we have and the resources that we have in our Company.

Okay.

Thanks very much.

Okay.

Thanks, Aleem.

Isabel Darrigrandi with Celfin Capital.

Good morning.

I have a follow-up question regarding Cerro Verde.

You currently have a tax stability agreement in place which exempts Cerro Verde from paying royalties.

I believe this agreement expires in 2013.

In the past, you expressed the intention of negotiating a new tax stability agreement in relation with the large-scale expansion.

I was wondering if you continue to -- if you intend to negotiate a new agreement, given the current political situation, and whether or not a new tax stability agreement is necessary for the project to continue to be economically viable.

Well, the tax environment will have a big impact on the viability of our project and other projects in Peru.

So the tax situation is very important, taxes and royalties and however the government extracts value out of the operations.

And the way we look at it is, is the overall sharing of benefit between the government and the project.

So that's very important.

We have been engaged in discussions about a new stability agreement, those who have not been concluded, and we expect those will continue with the new administration.

And how that proceeds is -- has some uncertainties now, because we'll have to see what the new administration's view is and position is in negotiating agreements, as well what is their position is going to be on the overall tax and royalty structure for operations that are not subject to stability agreements.

There have been some very encouraging public comments that Humala has made, that they're going to be supportive of development, including consideration of stability agreements.

But we're at a position right now where this unfolding, and we'll have to monitor where this goes as we have these future discussions.

Humala has said that they will honor past stability agreements.

And overall, Peru will want to maintain its competitiveness as companies consider where to invest, and it's got resources.

It needs mining development to continue its progress for alleviating poverty and adding to the economic well-being of the country.

Okay, thank you.

Can I have one follow-up on Cerro Verde?

Sure.

Do you expect there to be a ramp-up in production before the construction is completed in 2016 of the mill expansion?

We're already now benefiting from the de-bottlenecking project that we did, and that our current level of productive capacity is where we're going to be until we invest in the next expansion.

Perfect, thank you.

Thank you.

Oscar Cabrera with Bank of America.

Hi, Richard and everyone.

Thank you for taking this second question.

Just following up on Brian's question on the smelter, when you look at your projects in North America, things like Ajo and Lone Star, the grade there is below 0.5, and Grasberg is a great asset.

Just wondering, how are you thinking about in terms of extending the life of the open pit in Grasberg?

Would that be economically feasible about your -- you're using, I believe, $2 a pound in copper prices.

If you use $2.50, would that make sense, or does North America have better economics?

Listen, those are independent.

Those are totally independent, Oscar.

Where I thought you were going with the North American situation is another business issue we haven't talked about on this call.

But with the potential expansions that we have of sulfide projects in North America, we have an issue about smelter capacity here.

Unfortunately, there were 2 great smelters in southwest US that were dismantled during the downturn of the late '90s, early 2000s, and we're going to be running up against smelter capacity as we look at all these opportunities in North America.

We may have to ship concentrate internationally.

But that's one set of issues, and we will deal with that in the context of our opportunities here in North America.

With Grasberg, that will be looked at independently, and the issue about whether to extend the open pit or go underground is going to be an economic analysis that will -- we'll say, is it more economic to extend the pit, which would involve having to move more waste to get down to the pit, versus beginning to ramp up underground to get that ramp-up started and take advantage of that over the long term.

Full capacity cost underground, as I mentioned earlier, are at least consistent with open pit mining and at levels of input cost and other costs could well be lower on a unit basis than open pit mining.

And so we're -- our current indications are that we'll complete mining the pit in 2016.

We'll have the underground infrastructure completed.

We can't start caving until we're out of the pit.

We're going to be prepared to start caving at that point, and we'll continue to analyze the economics of whether to extend the life of the pit for some period of time afterwards.

But at the present time, our plans are to begin -- to begin caving at that time period.

Now, I'm going to say something that you all have heard me say many times over the years.

We don't focus on a single price.

We'll do this under a scenario of prices, and that depends on circumstances and outlook at any point in time.

So we'll evaluate what opportunities higher prices gives us, and we'll look over our shoulders and say how will we manage it if the world changes and we have to deal with low prices.

So it's not a -- we're not smart enough to pick a single price to drive these decisions off of.

And this is Jim Bob again.

When you talk about underground and open pit, you have to remember what the terrain factors are.

People have missed the point.

In Grasberg, for instance, open pit you had all these trucks, and you've got fog and you've got rainfall.

You don't have any fog in the underground, and you don't have trucks moving around, because as Richard just said, you're not mining waste, you're just dropping the ore with this block cave.

There's a lot of factors to be considered.

But let me emphasize again, for those of you that haven't been to the Grasberg, if you go up there and see that open pit operating with the big trucks moving around in that rain and fog and moving all that waste, it wouldn't take you long to figure out that you might want to be underground.

Thanks, everybody, for the great color.

Appreciate it.

Okay.

Oscar, thank you for your questions, and we appreciate everybody's interest and questions.

We're available for follow-up, so if you have further needs for information after reviewing the data, David Joint is available to coordinate the calls.

We look forward to talking with you as we progress through 2011, and again, thank you for participating today.

Ladies and gentlemen, that concludes our call for today.

Thank you for your participation.

You may now disconnect.