費利浦·麥克莫蘭銅金 (FCX) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Fourth Quarter Conference Call. (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 Fourth Quarter Conference Call.

Earlier this morning, we reported our fourth quarter and full year 2020 operating and financial results and a copy of today's press release and our slides are available on our website at fcx.com. Our 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 the conference call. In addition to analysts and investors, the financial press has 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, we'd like to remind everyone that today's press release and certain of our comments on this call will include forward-looking statements, and actual results may differ materially. We'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described on our SEC filings.

On the call today are Richard Adkerson. We also have a number of our senior team with us today: Mark Johnson is here, Josh Olmsted, Mike Kendrick, Rick Coleman and Steve Higgins. I'll start by briefly summarizing the results for the quarter, and then we'll turn the call over to Richard, who will be reviewing our outlook. After our prepared remarks, we'll be taking questions.

Today, FCX reported net income attributable to common stock of $708 million or $0.48 per share in the fourth quarter, and $599 million or $0.41 per share for the year ended 2020. We had a number of special items in the fourth quarter, which are detailed on VII of our press release. Those total net credits of $142 million or $0.10 a share mainly associated with the gain on the sale of assets and partly offset by charges for a litigation settlement and international tax matters.

Our adjusted net income attributable to common stock after these items totaled $566 million or $0.39 per share for the fourth quarter of 2020. Our adjusted earnings before interest, taxes, depreciation and amortization or EBITDA for the fourth quarter approximated $1.9 billion, and we generated $4.2 billion of adjusted EBITDA for the year 2020. A reconciliation of our EBITDA is available on Page 38 of the slide materials.

We had a very strong fourth quarter. Our sales volumes of copper of 866 million pounds were 3% above our October 2020 estimate. And our gold sales of 293,000 ounces were 9% higher than our October 2020 guidance. These primarily reflected higher copper sales from Cerro Verde and in Indonesia and higher gold ore grades in Indonesia. We benefited during the quarter from improved pricing for both copper and gold. The realized price of copper was $3.40 per pound in the fourth quarter, and that was 24% above the year ago quarterly average.

Fourth quarter gold realized price was $1870 per ounce, and that was about 25% above the year ago average. Our unit net cash costs came in at an average of $1.28 per pound of copper, and that was lower than what we had guided to in October. Notably, in the fourth quarter, we generated very strong cash flows, which totaled $1.3 billion in the quarter. And that exceeded our capital spending of just under $400 million during the period. We were -- together with our asset sale proceeds in the fourth quarter, we were successful in reducing our net debt by about $1.6 billion in the fourth quarter alone, and we ended the year with net debt approximating $6.1 billion. We had no borrowings under our revolving credit facility, consolidated cash of $3.7 billion, and we're in a strong position as we look forward to generating increasing cash flows as we go forward.

I'd now like to turn the call over to Richard, who will be referring to our slide materials that you can reference on our website.

Good morning, and thank you all for participating in today's call. It's great to be able to talk to you today about our performance in 2020 and our positive outlook. It's been a head spinning year. When we think back to March and April and all of the challenges we were facing at that point and the world was facing, to have -- be at this point is really head spinning in many ways and remarkable, but it's been quite a year for Freeport. I really hope you and your families and colleagues are staying safe and well. We've all made personal sacrifices. It's been a tough year for us at Freeport. The progress our company has made has really been a God send as we've all been working in ways that are so different than in the past.

We remain focused on working to protect our health and safety of our people. We're supporting the communities where we operate during this crisis. We're really encouraged by the scientific advances with therapeutics and now that vaccines are finally being distributed. But all -- we know all this is going to take time to have the distribution widely placed, and we're all looking forward to returning to normal lives. But for the time being, we're staying diligent with our protocols. And these have really proven to be so effective for us at Freeport.

I'm immensely proud of our Freeport team for their response to the COVID challenge. Navigating through a pandemic like this that none of us have ever seen and with this degree of duration has been difficult for everyone and all the communities around us. Our team has demonstrated real resilience, confidence and drive throughout all of this, come together to address the situation proactively while we've maintained focus on continuing to protect and enhance our business, and that's worked for the benefit of all stakeholders.

On Slide 3, we show the highlights for 2020, a year of extraordinary accomplishment for Freeport. We laid a strong foundation for future growth and cash flows and profitabilities, which is exactly what we set out to do and had a strategy to do. And to have been able to achieve what we did in the face of COVID is nothing short of remarkable.

Earlier in 2020, we announced in April, we moved quickly to develop new operating protocols to maintain our business's continuity. We totally redesigned our operating plans from what we had announced this time a year ago to safeguard our business, protect our liquidity and to be responsive to the really heightened uncertainty that we were facing and everyone's facing.

At Freeport, all hands were on deck to build an optimal plan. Each of our operating teams around the globe played an important role in developing and then executing these aggressive plans. We just had a tremendous buy-in by everyone, and that enabled us to execute the plans so well. A big positive from this process that our team's collaboration, which has always been a strength of our organization, is now more strong than it's ever been. Employee engagement, commitment, energy and morale at a very high level. We effectively executed the revised plans, had a big focus on cost and capital management. And then significantly, we advanced the largest block caving operation in the world at our Grasberg mine in Indonesia. You'll see we met our key milestones for this massive multiyear, multibillion-dollar undertaking. At the same time, we also completed on time and on budget the Lone Star project in Arizona, and this is a potential future keystone asset for our company. The progress we made this year set the foundation for strong cash flows literally for years to come.

We turned the corner during 2020 to begin generating sustainable and substantial free cash flow. Beginning in the third quarter of 2020 and now continuing in the fourth quarter and as we look forward, we've generated and are generating significant free cash flow and that enabled us to reduce our net debt by $2.4 billion in the second half of the year.

Slide 4 highlights key financial metrics by comparing our actual results for 2020 with the plan we presented to you last January prior to the onset of the pandemic. So this is not the revised April plan but the one that we had before we knew what we were facing. In that comparison, our unit net cash cost for 2020 were 15% lower than the January 2020 guidance. EBITDA and operating cash flow improved by over 25%. Capital spending was reduced by 29%. We also generated approximately $550 million in after-tax proceeds from the sale of a noncash flow-producing assets that we disposed of this year.

We ended the year with $2.7 billion lower [net] (added by company after the call) debt than our original January plan. Think about that. Facing COVID, with all the uncertainties, having to make the changes and then coming back to do so much better than we set out to do before COVID was known about. This was accomplished at an average copper price realization of $2.95 for the year, 10% a pound higher than our plan, $0.10 per ounce, just $0.10 and well below the current price. The team did an outstanding job. We're strongly positioned for the future.

In addition to the strong operating and financial performance in 2020, we achieved new milestones in the ESG area. And that's shown on Slide 5. We committed to the Copper Mark. This is a new assurance framework developed by the International Copper Association and our Steve Higgins is now the President of ICA to promote and demonstrate responsible production practices, focusing on meeting the United Nations Sustainability Development Goals. Big step forward. We established climate targets and added transparency with a new climate report, which is now available on our website.

We took a leading role with ICMM, International Council of Metals and Mining, beginning over a year ago when it served as the industry representative in a multi-stakeholder initiative to develop a new tailing standard for the mining industry following the disasters in Brazil and then the subsequent development of implementation guidance for ICMM members. This was a major undertaking by the industry and by our company, which took a lead in the process, and it reflects the importance of managing tailings storage facilities safely and responsibly. After serving 2 terms as Chairman of ICMM more than 10 years ago, I recently accepted a new term as Chairman. ICMM currently has 27 CEO council members from the largest global mining and metals companies, and I'm leading a strategic review of the organization to meet the increasing importance of ESG issues facing our industry.

We advanced our inclusion and diversity initiatives, which is core to our values at Freeport. We invested in our communities and continue to expand organizational resources in this effort. Worker safety is our highest priority, and we showed that with what we did in response to COVID.

Our safety statistics in 2020, measured by interest rates -- incident rates met our targets. Fatality position continues to be a focus of our work safety management. Regrettably, we had 5 fatalities in our operations last year.

On Slide 6, you've heard me say for a long time that the copper price would benefit from its favorable fundamental outlooks. Prices rose significantly in late 2020 in recognition of copper's favorable demand trends and the limited ability of the industry to increase supply. The recent price move is significant, but note that prices are still lower than they were just over 10 years ago -- or almost 10 years ago. Arguably, the fundamental outlook for copper today is better than it was 10 years ago. China is leading the recovery and global stimulus measures in countries around the world are also being positive for growth in copper demand. Freeport is the leading -- is a leading producer of copper, and this commodity is critical to the economy of the future. It's essential to support global growth and in broad scale the economic activity, but it is also essentially strategic for technologies required for the transition to a global, cleaner energy future. That's on the front burner for everyone.

More and more, we are seeing adoption of policies to reduce carbon emissions around the globe. 70% of the world's copper supply is used to deliver electricity. As clean energy initiatives are implemented, the intensity of copper use will increase.

The chart on Slide 7 shows that copper utilization in electric vehicles and in the generation of renewable power is more than 4 times greater per unit than for traditional vehicles and power generation. CRU estimates that copper demand for electrification and renewables will increase significantly over the coming years. In a relatively short time frame, global demand just from these green initiatives could approximate the size of today's U.S. copper market. As demand accelerates, copper supply will continue to struggle to keep up. And this supports a favorable near-term and long-term fundamental outlook.

Its current situation echoes the early 2000s when I became CEO of Freeport at a time when Chinese demand appeared and accelerated in such a dramatic fashion without a supply response, which created the commodity super cycle and sharp increases in copper prices. Very similar to what we're facing today.

Turning to Indonesia on Slide 8. Our PT-FI team is delivering really impressive results. During 2020, we built the momentum for the ramp-up of our massive underground mines. And by the fourth quarter, we have reached nearly 70% of the targeted annual run rates for sales volumes. This is something we were looking forward to beginning in the mid-1990s when we designed the original pit, which is now completed and is something that we've been investing in over the past 15 years. And to see it coming together like it is, is truly gratifying. And Mark Johnson and his team have just done an exceptional job.

Continued growth during 2021 is expected to enable us to reach our full annualized targets by the end of this year. Considering the operating health challenges we faced in Papua, this is notable and striking. The team stayed on schedule, met our objectives. The project is massive and complex. And we did this by designing and maintaining effective COVID protocols in a very large workplace in a very challenging remote location. Our progress with ramp-up has reduced risk for PT-FI's underground mine significantly.

The major risk as we started this was developing the infrastructure. The infrastructure is in place. There's always risk in mining. It's inherent in our business, but the major risk for this underground development are behind us. And we are confident and have a track record of managing the types of risk we'll be facing going forward. We can't make them go away, but we can manage them. And so we're really pleased with where we stand with that process.

We're also continuing discussions currently regarding the new smelter in Indonesia. In early 2020, we requested a delay in agreed time schedule for completing of a construction of the new smelter at a site in Eastern Java near Gresik, which is near the existing PT smelting facility. We haven't been able to progress work there because of COVID issues for the local workforce and international contracts. This is a greenfield smelter with a total cost of about $3 billion. That number continues to be refined and changed. And this project would be debt-financed by PT-FI, the Indonesian entity.

Over the last several months, PT-FI and our partner and majority shareholder in PT-FI, the Indonesian state-owned company MIND ID, have been discussing with the government alternatives to this commitment to build a new smelter, which was reflected in our IUPK mining license granted in December 2018. During the fourth quarter, we advanced discussions with the majority owner of the existing PT smelting facility at Gresik for a 30% expansion to add smelting capacity in Indonesia and partially satisfy our commitment to the government. Commercial and financing discussions for these expansions are being advanced. Engineering is in progress. Initial estimates indicate that this project could be done for $250 million and be done efficiently in the current TCRC environment and it would partially meet our obligation to the government.

Then separately, at the request of the government, PT-FI is currently engaged in discussion with a third party regarding the potential for the development of a new greenfield smelter at an alternate location away from Eastern Java. This project would be in lieu of PT-FI's constructing the new greenfield smelter that I mentioned above.

The third party -- a third party would lead the development for this smelter and arrange its financing. PT-FI would commit to be a supplier of concentrate for the project, and the partners and the government are working expeditiously to reach a decision on the path forward.

On Slide 10, we show our 2021 priorities for our ongoing efforts in creating values for our company. We built -- we were building on the progress of 2020 by focusing on the execution of plans to grow production volumes, manage costs and capital spending efficiently. We're expanding our recent innovation efforts, applying technology and innovating -- innovative management processes in our operations around the world. And all of this, while we manage and are sensitive to our responsibilities to workers, communities, governments and other stakeholders.

We look forward to resuming cash returns to shareholders during 2021, and we'll be in a position to do that, and we will be in discussions with our Board on taking actions. We will be in a period now and far -- for the long term of harvesting cash flows now that we are completing the major long-term investment program in Indonesia. And we're discussing with the Board a financial policy that would allow and enable a near-term resumption of the dividend and then, over time, a performance-based shareholder return policy. Significantly, we have recommenced work we suspended early in 2020 to evaluate and advance future organic growth opportunities from our large portfolio of undeveloped reserves and mineral resources, and we look forward to doing that.

The efforts of 2020, we worked with our team over many years now, has enabled us to increase margins and cash flow substantially for 2021 below and beyond. At $3.50 copper, we're on a path to nearly double EBITDA from 2020 levels. Copper sales for 2021 are projected to increase 20% over 2020. Gold volumes are projected to increase by over 50%. Our unit net cash costs of production will decline. And this is occurring at a time for improved pricing for copper. I recall in an earlier conference call like this, I said an ideal situation for Freeport would be able to be completing the Grasberg expansion at times of good copper prices. And here we are.

The significantly higher cash flows will enable us to maintain a strong balance sheet, build value in our business, return substantial cash flows to shareholders.

As shown on Slide 12, we have a long-lived portfolio of mineral reserves. Reserve life for our proved and probable reserves are over 30 years. We have substantial options for the potential to expand our reserve base from our large inventory of metal resources beyond reported reserves. All of this is associated with brownfield expansions of our existing ore bodies. What this means is that for our company to have long-term success, we are not required to have success in exploration. We hope we do. We're not required to do deals. Strategic opportunities may come to us. But we've got this base already in our portfolio that provides for a sustainable long-term future for Freeport.

Slide 13 highlights the organic projects we are now assessing. During 2020, to conserve cash, we paused work on our expansion projects. We're now reengaged a broad range of opportunities. During 2021, we will be developing a ranking of these projects to guide our thinking on sequencing and long-term planning. We have no plans to increase substantially capital spending on projects in the near term. But in the long term, these growth opportunities will be approached in a measured and disciplined way.

I'll close with Slide 14, which we -- which I have titled the Freeport Edge, which is the term we're using internally around our company. Our management team at Freeport has extensive experience in managing this business. Leadership teams across the company are seasoned, value-oriented and intensely engaged. We have a management structure that is collaborative. We're experienced in working together, and we're decisive. To make a decision, we execute. We recognize our responsibilities we undertake when we're granted hard earned license to operate. And we never cut corners on important issues.

Looking at our team at Freeport, it is a combination of managements with long tenure and experience. We also have a cadre of younger managers who bring new ideas, approaches and energies. We have strategic new hires who bring outside perspectives. We've had 3 senior executives who've retired at the end of their careers over the last 2 years. Internal replacements were promoted and performing effectively. And this just demonstrates the depth of talent in our organization.

Freeport is foremost in copper. Our portfolio of assets is large and high quality. We're an established industry leader, operate mines that are among the largest in the world. Our assets are long-lived and durable with embedded options, reserve, resource growth. We have strong operating franchises in the United States, South America and Indonesia. We're a reliable supplier to the global copper industry, have industry-leading technical capabilities, supported by a strong track record of project execution and business management over many years. We've earned the trust and respect of our partners, our customers, suppliers, financial important markets and most importantly, our workers, communities and host countries where we operate.

Our block caving experience is among the most extensive and long-standing in the history of the global mining industry. We've been operating block caves in Indonesia since the early 1980s. We have an important molybdenum block caving operation in Colorado. And this is critically important as we transition Grasberg to become the largest block caving operation in the world.

I'll close before turning to your questions by thanking our people and recognizing their strength, resiliency and performance. I'm proud to be part of this team, and I look forward to continue to be part of the team and to participate in our future successes. We will build on our accomplishments as we -- as will be depicted on our 2020 annual report to shareholders. We are charging ahead responsibly, reliably and relentlessly.

Thank you for your attention. And operator, let's open the lines for questions.

Richard, I'm just going to make a few comments, and then we can take the questions. I'll be brief.

Continuing with the slide presentation on Slide 16. We provide some additional details on the quarter and our operating plans. We're continuing in the U.S. to ramp up production from the new Lone Star mine. And in January of this year, we commenced a restart of the Chino mine, which we had previously announced. In South America, we're continuing to operate Cerro Verde at a reduced rate of roughly 360,000 tonnes per day. We did a little more than that in the fourth quarter. And our team is prepared to increase rates to a level of 400,000 tonnes, which is about where we were -- tonnes per day, which was about where we were pre-COVID after the COVID restrictions are lifted. At El Abra, we've incorporated in our latest plans an increase in operating rates, which will provide additional volumes beginning in 2022. And as we've talked about at Grasberg, we made excellent progress in the fourth quarter and are continuing to execute the ramp-up plan to achieve the targeted metal run rates by the end of this year.

Slide 17, we present the outlook for 2021. The guidance is largely in line with our previous estimates. We made some minor revisions to 2021 volumes. These were largely timing in nature to reflect the latest Grasberg mine plans. And we've updated our cost models to incorporate the current pricing for energy currencies and ongoing maintenance programs. We expect to sell just over 3.8 billion pounds of copper in 2021 at an average unit net cash cost of $1.25 per pound. And at $3.50 copper, this would generate about $8 billion of EBITDA and $5.5 billion in operating cash flows for the year 2021, which is nearly double the 2020 levels. And as you'll see, we expect further growth in 2022 and 2023, which is shown on Slide 18, where we provide a 3-year outlook for volumes. After expecting growth of nearly 20% in copper, over 50% for gold in 2021 versus 2020, we're projecting further growth of 13% in copper volumes and over 20% in gold volumes for the year 2022. And these projects have been in development for some time. Most of the capital is behind us, which gives us a runway here of generating growth in cash flows and margins.

The buildup in volumes for 2021 is reflected on Slide 19.

And on Slide 20, we show the significance of the cash flow generation using these volumes and our cost estimates. And we show a range of prices from $3.50 to $4 copper, holding gold flat at $1850 per ounce and molybdenum at $9 per pound. But you can see that the growth in volumes at very low incremental cost results in EBITDA ranging from over $10 billion per annum on average for the years 2022 and 2023 to over $12 billion per year at $4 copper. And operating cash flows, which are net of our taxes and interest costs, would range from $7 billion at $3.50 per pound of copper to over $8.5 billion at $4 copper. And as Richard was mentioning, the $4 copper is still well below historical periods of demand strength.

The cash flows generation are expected to be significantly above our planned capital spending, which will provide substantial free cash flows as we go forward.

On Slide 21 includes our projected capital of $2.3 billion in 2021. That excludes potential spending on the Indonesian smelter, which would be debt-financed and is still under evaluation. We're maintaining our basic capital plans. We're being very disciplined about capital spend. The 2021 capital is roughly, as you'll see, about $100 million higher than the previous forecast, and that incorporates an acceleration of some mining equipment investments to provide capacity assurance for our plans. We're in a strong financial position, as you see. We've entered a period of exceptional free cash flow generation. The long-lived asset base and ongoing cost and capital management will provide the ability to continue to strengthen our balance sheet, provide cash returns to shareholders and build additional values in our asset base.

Regarding financial policy, we're working with our Board on a shareholder return policy that would balance our priorities while providing increasing returns to shareholders based on this performance. It's a very exciting time for Freeport, and we're staying very focused on continuing our momentum.

And now, operator, we'd like to take questions.

Thanks. Kathleen, I apologize for not -- for forgetting your comments. I wasn't trying to cut you out. Okay. Let's have some questions.

(Operator Instructions) The first question comes from the line of Emily Chieng with Goldman Sachs.

Congratulations on a great quarter here. The first question I had is just really around digging into some of the capital allocation strategy plans you had again. Are you able to provide any narrowed timing or key financial metrics or operational targets that you're looking for ahead of thinking about reinstating the dividend or around when we might see some movement on growth projects longer term? Looks like 2021 is still very much a harvest year, but any kind of guidelines on that would be great.

Okay. So with respect to the dividend, we're already there. We just -- we have a -- we'll have Board meetings early this year, and we're going to sit down with the Board about a broader long-term financial policy that I made reference to. And we'll be in a position to recommend to the Board to reinstate the dividend. But there's no need for further financial metrics with that when you look at our improved financial situation when we were paying the dividend before.

The issue with the growth project is one that's requires more work and requires some time in evaluating the market as we go forward. They range in size, but the projects are large ones. We have a significant expansion opportunity in El Abra in Chile with our partner, CODELCO, and it's on the order of the project we did at Cerro Verde several years ago. And we have a series of projects in the U.S. that initially aren't as large, although down the road, there are some very large ones available.

The U.S. has some advantages. Tax rates are very favorable, and we have a very large loss carryforward. So we don't pay taxes in the U.S. for years to come. We own most of the lands in fees, so there's no royalties. And so when you cut out taxes and royalties in the U.S. versus foreign economics and with a favorable energy situation in the U.S. and community support for workers, there's just a lot of advantages there.

So we had to suspend this work because of the uncertainties of COVID. We're now -- Rick Coleman and his team are digging back into it, and we're going to be doing trade-offs of these individual projects as we go forward in 2021. And we'll be able to report to you about our intentions. We -- we're constantly approached by others in the industry who would like to be our partners in these projects. And so there will be a lot of opportunities there. And it's to say today, we're just resuming the work that we were engaged in previously.

Our next question comes from the line of Chris LaFemina with Jefferies.

Just 2 questions regarding Grasberg. The first is it looks like for the Grasberg Block Cave, you've made a pretty material increase to your annual production guidance from 850 million pounds at average reserve grade to 950 million pounds. And I'm wondering what is driving that increase by 100 million pounds of annual production from the Grasberg Block Cave? That's my first question.

All right. Well, we are -- the Grasberg Block Cave is growing extraordinarily well. I mean it's an ore body that we knew well because it's the same ore body that we mined from the early '90s to December 2019. So we know the ore body. It doesn't have some of the pressure situations that we've had to deal with at the Deep MLZ mine. And so when you just look at the advancement of the block caving operations, the development of drawbells and the way we've operated, we're just ahead of schedule. So it's nothing more than the team being very efficient, being ahead of schedule.

Okay. It has nothing to do with surprise in terms of grades? I mean, I looked at the average grade for the reserve. It's higher than it was the last time you reported results. Is there something different in terms of the mine plan or just some of the drilling that you've done there where you've seen some different results than you expected?

No. Just as you mine an ore body and go forward, it's a dynamic situation and you update mine plans and reserves for the experience in the -- it's just great to see the Grasberg Block Cave having this really positive development mode. I mean, it's special.

Okay. And then secondly, on Indonesia in terms of the smelter. So the options here are number one, you build a new smelter, which I think you'd said in the past should cost up to $3 billion. You'd fund effectively half of that. Obviously, debt-financed through the asset. But half of that, that will be attributable to Freeport. The other option is to expand the Gresik smelter, build the precious metals refinery and have a third party build the smelter. If the third party -- so my first question is in that second scenario, that's $250 million for the smelter expansion, maybe $250 million for a precious metals refinery. So $500 million in total, of which you'd pay about half. Is that correct?

Well, let me pick on a few words that you just said. First of all, Freeport -- FCX, let's call the U.S. company, FCX; the Indonesian entity, PT-FI, okay? We're a shareholder of PT-FI. We own 49% of the shares. We have rights to operate under a shareholders agreement, we being FCX. MIND ID owns 51%. So it's a separate entity. And it is the entity that would construct and finance the smelter. So it's no 50-50 sharing. I mean it is -- it'd be financed in that entity. It's a substantial entity with no external debt. From time to time, there's some borrowings from FCX, but to meet working capital needs. But it's a substantial entity that clearly can debt finance this entity on its own. So that's the way this thing would be approached and financed.

Now we do consolidate that entity because of our operating rights. It's a very positive thing that we do have the ability to do that under the accounting rules because that way, we can report it as part of our global operations. So to the extent that alternative is followed and PT-FI takes the lead in constructing and financing the smelter, the debt that it incurs would be consolidated on our balance sheet, but there wouldn't be obligations of FCX to provide funding for it.

Right. Understood. So -- and so in that scenario, PT-FI would pay $500 million for a precious metal refinery and the expansion of the Gresik smelter whereas in the other scenario where you build a smelter, PT-FI would effectively spend $3 billion, right? So -- and then in a scenario where you just expand the smelter, build the precious metals refinery and have a third party build a second -- the separate smelter, would there be a risk here? Will you be paying materially above market TCRCs to that smelter? Or how should we think about the cost to you of not building the smelter?

So let me go back to one step. By expanding Gresik, we could downsize the greenfield smelter that PT-FI would build, and the $3 billion number would be adjusted to be offset with the additional cost of the expansion. So at this point, it's -- I think it's fair to still consider we may have ways of reducing the capital, and we're working towards those, but to think about both those projects together and the precious metal facilities all being a $3 billion project for PT-FI. Now this new alternative would result in not having to build the greenfield smelter. Another party would come in and do that, arrange it and finance it. So the debt would not be incurred by PT-FI, okay? We're still in the process of negotiating TCRC rates for that. There will be some need for financial support because of the market. But there's an opportunity for us to end up in a much more favorable situation for PT-FI if we're successful in these negotiations. And the government considers it positive because it would be a step in their own government initiatives to develop industry in Indonesia. This would tie into some nickel operations and potentially some downstream battery operations and the like for Indonesia.

So strategically, the government of Indonesia sees it's positive. It could be positive for PT-FI. And so that's the basis for our deal. And now we're in the process of negotiating the terms of that deal.

And Chris, this is Kathleen. We're really running the processes in parallel so that we can compare the economics of each. We're attracted to the third-party model because that was a model that was successful for us in the past when we built the original smelter. And so we'll be evaluating the economics of that option alongside of the original option as well. So we'll -- really, what we're seeking to do is to do this in the best economic fashion as we can. And the benefit of having a third-party doing it is it allows PT-FI to really focus on mine development and upstream, which is what PT-FI is really strong at. So we're still in the early stages of evaluating the 2 alternatives and progressing both of them in parallel to determine which is the best for PT-FI and its shareholders.

Chris, I want to close with one thing. One reminder, I say this every time, but I just want to close with it. If we do go forward with our original commitment, build the smelter, just remember that the negative economics of that smelter are born more than 70% by the government of Indonesia because of taxes, royalties, they're 51% equity ownership in PT-FI. And so in essence, less than 30% of the negative economics of the smelter come back to FCX through its 49% shareholding in PT-FI. Many people are -- seem to be assigning more negative value for FCX to the smelter than the economics really justify currently. And that's why we're so -- and that's why we are aligned with the government in trying to make this as economic as possible.

Our next question comes from the line of Alex Hacking with Citi.

Congrats on all the achievements last year. So my question is around CapEx. If we look back to the beginning of last year, you were going to spend $2.8 billion last year and $2.4 billion this year, ended up spending $2 billion and $2.3 billion. So effectively, $1 billion has been cut out of CapEx over that 2-year period or roughly 20%. No one in the financial markets is complaining about that. But I guess, could you help us understand where that money has gone? Is it deferred in a sense? Or is that money that is respectively not going to be spent? Or does it reflect FX and other effective changes to the price and cost of things? If that question makes sense.

Yes. Part of the capital that we deferred in 2020 was related to the smelter. So that's something, as we've been talking about on this call, as still uncertain. But there was significant capital that we did cut in 2020. And we defer -- we cut mining rates, we deferred some projects, and we're still operating under those conditions. We did bring forward, as I mentioned, we brought back in $100 million of mine equipment, really allowing us to do some rebuilds more quickly than what was in the April plan.

And those would have been in the original plan. So some of it is timing related. And some of it really is just trying to be as efficient as possible with our equipment fleets. And that's one of the benefits that we have by operating all these mines is planning the equipment fleets where they bring the highest value, moving -- we can move equipment from different sites to benefit from just being able to operate them together.

And we're also just really trying to work the assets, use this technology that we have and the organizational improvement initiatives to work the assets harder. And we started that program, what we called Americas' Concentrator, but it is -- it applies not just to milling operations but mining operations and really looking to improve the lives of our equipment, improve entire lives, all those things really add up.

And so yes, there's always tension and pressure of people wanting to invest more in our mine equipment and our mining business, but we're really taking a very disciplined approach and using the learnings that we gained in 2020 and even prior to that to try to drive better capital efficiency in the business.

Your next question comes from the line of Timna Tanners with Bank of America.

I just wanted to ask about 2 things. One is on the cost side. It crept up a little bit, and some people are asking about that. So just wanted to understand, it seems like you made it clear that, that was energy and currency, maybe some other issues. But does that also incorporate some of the cost containment measures that you had? Is that fixed? Or could it change as the year progresses with currency and other efficiencies? That's one question.

And the other question is just to ask about Richard's plans because I know, Richard, you told me you were going to pursue another term like President Trump, and that you're going to watch on the Indonesia progress. And so those are behind us now, and you took on another term with the ICMM. So just wondering if you could give us a few updated thoughts there as well.

Yes. On the first question on -- or do you want to go first, Richard?

No, I was just going to -- and I'll let you give the details, but Timna, you look back over time, some of our costs are correlated to the copper price. We have profit sharing for our workforce in Peru. So the more money we make there, the more our labor cost goes there. We've seen an uptick in energy costs recently from where they were earlier. So just inevitably, as the copper prices rise, we have some increases in unit cost, and we are able to offset those but not completely eliminate them through our cost efficiencies. With Kathleen and -- you go ahead and then -- or maybe you want to answer the second question too, Kathleen.

You know what -- but no, I think you captured it, Richard. The -- we updated our model for all of the current rates in terms of energy. We've seen some energy, some oil price increase. Although the price of oil relative to copper is still very low. We have seen some increases in oil prices, which affects some of our energy costs. We've had some increase in electricity costs. Richard mentioned profit sharing. But we updated our budgets to reflect all of the input costs that vary. But from a bottom line standpoint, we are continuing to drive the benefits that we got in 2020 through these revised plans and really working to hold on to these cost savings. We learned a lot and we always say that necessity is the mother of invention, and we learned a lot during 2020. And so we're a basic cost structure. We're working to preserve, but we do have some variability with input costs. But it's something that we're just continuing to focus on as a main driver is cost and capital efficiency in the business.

It's really important in the Americas because we have such leverage to the copper price, and we really want to maintain as low-cost as possible. We've got programs in place that are working on that every day.

So Timna, since I made that comment about Trump at your conference, we now have an older president than Trump. So maybe that extends my time frame. I -- personally, we've been through such a situation at Freeport really over my 30 years being here but particularly over the last 10 years. And now that we're seeing the positive results of all this work and particularly the recovery we made from 5 years ago. I'm healthy. I want to be part of it. I really enjoy and love the people I work with. We just have this incredible good spirit among our team.

I do have a concern. That's why I made some of the comments on the last slide. Some people look at me and say, Freeport's an old company maybe. But we really -- if you look throughout our organization, we have a lot of young experienced managers with our longer-tenured people. We have great depth. We're showing we can sustain positions. When I do leave the -- we're going to have a sustainable company going forward. We're going to have a sustainable Board. We're working on that now. But -- so anyway, I'm -- been a crazy year for someone who traveled all the time to be working like I've worked, like other people work. But having this success with the company, which is not just a peak thing or an unusual thing, but this is -- you look at the markets, inventories are low. There's elements of copper demand that are new, that are growing. Supplies, I mean, all of this is coming in place. And I think it's going to be -- it was a great year for Freeport. I mean, we went from below $5 a share to be in the eighth best-performing stock in the S&P 500. I mean, how can you envision that? I mean that's a head spinner. But I think there's great things to come, and I want to be here and be part of it because we worked so hard to get that.

I should mention that Jim Bob died recently. He and I -- I met him in my first year out of college as he was starting off at McMoRan, and we were 2 different people, but we established a very good partnership. We brought different skills to bear in building Freeport. And in his later years, jim Bob was focused on his oil and gas concepts. And -- but he was always there. We did have a major disagreement. I mean, there's no way to hide it over the oil and gas deal in 2011. He thought it was a really good deal for the company. I did not. The Board decided to do it, and it caused the significant problems when commodity prices fell. He's been -- he was very sick for a while, but I'm happy to say that in recent years, he and I established in recent times, he and I reestablished a really good personal relationship, and it was a sad day for all of us when he lost his life to COVID.

Your next question will come from the line of Chris Terry with Deutsche Bank.

Richard and Kathleen, hope you're both well. I just wanted to dig into Grasberg a little bit further, given it's so pivotal. Just talk about the December or the fourth quarter development rates and then how you exited the year. And then as you've put your 2021 guidance in place, whether you see those estimates potentially still conservative versus how well you went on the development rates in 2020.

Well, Mark's here, and Mark, I'll say a couple of things, and maybe you can chime in. We have 4 mines, 4 underground mines there. The 2 major ones are the Grasberg Block Cave and the Deep MLZ. And each of those have separate headings. So this is not like a single mine or even 2 major mines, but a collection of mines with a common infrastructure. And as we've developed the access to the ore bodies and expanded those, that gives us a lot of flexibility to deal with operating issues that may come up with particular sections of the mine where we're mining. And there'll be things like that, that will come up, wet muck and so forth. We haven't had much of that yet. But here's where we are. We mentioned just how well Grasberg Block Cave is going, and we're ahead of schedule on that. Grasberg -- the Deep MLZ mine has had the challenges over time with having the seismicity events that are mining related, not natural. And we've implemented a program of using fracking technology to precondition the ore bodies so that we could leave the pressures that cause these. We still face them from time to time, but we've got great procedures for dealing with it.

They're different ore bodies, different settings. The Grasberg Block Cave is ahead. The Deep MLZ is maybe a month or 2 behind. But Mark, talk to us a little bit about your perceptions on how we're dealing with the Deep MLZ.

Yes. Chris, Deep MLZ, as Richard mentioned in the fourth quarter, we were ahead on all the development aspects, the -- where we were on target on drawbelling, undercutting. And where we had some challenges was in the -- in just the material flow. And what I mean from there is taking the material from the extraction level, getting it through the rock breaker or getting it to the grizzlies through the internal ore passes, the 60-meter long ore passes and getting them into the trucks that take it to the crusher.

The problems that we had there was we deal from everything from very, very coarse blocking material to fine sticky material. And we're coming up with methods that I'm confident will address that and allow us to take both the big stuff and the fine stuff and run them through these ore passes. It's something that we saw at the initial stages of DMLZ, and we're working our way through that.

On the GBC, the Grasberg Block Cave, we had a very good year. We were on drawbelling, undercutting. We were ahead on our tonnage rates for the fourth quarter, marginally ahead, and we're in a good position there. We build our second -- we'll complete the second crusher at GBC in April of this year, which will be a major milestone. We continue to develop the rail haulage, and there's a major milestone that we'll achieve in the second quarter to let these trains run in a loop rather than out and back.

And that's going to increase our production from our overall mine system. So both mines are tracking well. And as Richard mentioned, we do have the DOZ. It's a mature mine. But it hit targets -- Big Gossan, our stope mine, was -- we had very good results this last year, last quarter, in particular. So it's -- we've had some pluses and minuses, but overall, we're in a very good position entering this year. And in -- particularly in the GBC, we've hit our peak in our drawbelling in 2020.

And just associated with the mine plan and consistent with our long-range plans, that starts to tail off. We don't need as many drawbells to continue to sustain the ramp-up in production. Deep MLZ, we pretty much stay steady for the next 3 years on drawbelling and undercutting. So the next 2 years is really just doing more of the same of growing these mines. There's no real rate increase in the amount of development. In fact, it's flatter or dropping off. And it's just a matter of continuing to be very consistent in how we've -- going forward as to what we've been able to demonstrate over the last couple of years and particularly in 2020.

Yes. And our volumes will be increasing. I mean, we're 75%, 80% there now, but that will increase and then be long term. And what we try to do with our publicly disclosed guidance is be realistic. We don't try to do anything other than give you our current plans and what they are and we'll do better than that sometimes. And sometimes, we may not.

We also have an undeveloped ore body that we've been doing some work on that could add value for the future, and that's an ore body called the Kucing Liar. It's a ore body with high-grade material, has some pyrite in it. Mark and his team has come up with a revised plan to deal with that. It's about a $5 billion project spread over many years, a number of years in the future, but that's not near term, but it's something that within the time frame of our current IUPK will be something that will sustain and add value for PT-FI.

Appreciate the color. Just one other follow-up on the smelter. In terms of the Gresik ownership being 25% Freeport and 75% Mitsubishi and Nippon, just in terms of the expansion that could take place there, I just wanted to be clear. The JV partners that you have there, they're comfortable doing the expansion on that asset, right?

The -- we've been working with the majority partner there, and they would lead the -- they would lead the development of the project. And we will work out the ownership as we go forward. But the structure that we're talking about is that PT-FI would advance the funds to the smelter company as a loan and potentially convert that into equity after the smelter is completed. But Mitsubishi Materials would lead the project to develop the expansion. They've done multiple expansions there since the smelter was constructed in the mid-90s. They're excellent, excellent operators and very efficient in terms of capital management. So we're working with them to lead the expansion.

And I'll just echo. I was involved with the structure for the original smelter development in the '90s and Mitsubishi has just been an excellent partner. They couldn't have been better. They operate the smelter in a first-class way. The world of smelters has changed so much in those days. At Grasberg, we couldn't find places to place our concentrate. So we had -- we bought a smelter in Spain. We worked to build a smelter in Indonesia. The world has changed. There's such a global excess capacity of smelters, but Mitsubishi has been there through thick and thin and has just done a remarkably good job.

Your next question comes from the line of Orest Wowkodaw with Scotiabank.

Just following up on the Indonesian smelter alternative. Do you anticipate that the ultimate plan is going to be resolved, call it, in the next 6 to 12 months? And then along that, do you anticipate any -- actually, any -- sorry, go ahead, Richard.

The answer to that is yes.

So it's fairly close then?

Well, it needs to be. I mean, we've got this deadline. You know that we've -- we're working with the government to extend the year, but we have to get on with this, the Gresik area smelter, or go part with this other thing, the government's incentive. So it's going to be resolved in clearly within that time frame.

Okay. And do you anticipate under any of these alternatives actually spending capital this year? Or is it more likely going to start, call it, like 2022?

So we'll have a -- we'll have some capital for the PT smelting expansion. It will be advanced as a loan. And they're doing the engineering now. We don't have definitive agreements with them, but we're very close to that. And again, any of the funding, we're planning to raise financing, debt financing. We've got discussions with banks about financing for that. And then on the larger smelter, it really will just depend on which alternative. One would be the third party doing it and we potentially could be a minority equity owner like we were in the PT smelting project. Or the greenfield would involve some spending in 2021 but not significant. But as Richard said, we just -- we need to get the clarity over the next year and over the next several months to make a decision on which path to follow.

Okay. Wonderful.

And again, to be clear, when Kathleen says we, in that context, it's PT-FI.

Right. And then just as a follow-up, is it fair to say that like Freeport is in no rush to begin constructing kind of new copper capacity on a greenfield level that we're going to see more discipline, not just by Freeport but by the industry this time?

Well, we're certainly in no rush. I do think it's a great asset of our company, but we are not -- we are going to continue our focus on getting this project in Indonesia completed, and that's going to be -- and running our Americas business efficiently and increasing volumes when we can and controlling costs and so forth. So there's certainly no rush. In the industry itself, there are some projects that were gone and delayed because of COVID. They -- over time, those are going to be completed. But you just -- you don't see any evidence of a big rush to start investments. And I don't expect that to occur.

Your next question comes from the line of Carlos De Alba with Morgan Stanley.

So a couple of questions, if I may. The first one is maybe, Richard, has the management team come out with some potential proposals for the Board in terms of the shareholders' program that you would like to discuss and hopefully implement? And if so, if you could share some of what you and your team are thinking, that will be great.

And the second question is coming back to the DMLZ. The forecast or I mean the open drawbells blasted that are forecast for the end of 2021 and 2022 came down. So maybe for Mark, is the impact of the challenges that you are seeing with the material flow what explained this reduction in your open drawbells forecast for this year and next year? And also, what is behind the small reduction in copper and gold sales from PT-FI in 2021?

Mark, why don't you answer first, and then I'll come back to the financial policy.

Yes, there's not any issue on the drawbell opening. If there was a reduction, it's very, very minor. We've been very consistent. We ended the fourth quarter with 15 drawbells within the Deep MLZ blasted, and that's going to be relatively our flat rate. There might have been some ones or twos that are different, but it's not anything that was significant in our forecast.

As Richard mentioned, it's more about this -- where we are in the ramping up of the tonnes, and it's more in line. Any changes in the tonnage is more a reflection of this material flow challenge that we're undertaking. But it's just marginally behind. And at the same time, the GBC is marginally ahead. And so the ramp-up rates are very consistent from one forecast to the other. Some slight changes in grades that are nothing significant. It's not drilling results. It's not any changes in reserves. It's simply where we're actually drawing. There's some -- at the end of every quarter, we reflect what we've done, and then we build that into what we're doing forward. So there's really no significant change in our underground plans, both at Deep MLZ and GBC.

The other 2 mines, DOZ and Big Gossan, are both very consistent. In fact, in Big Gossan, we've changed our stope sequencing a bit. That's going to add some metal. So we'll continue to look for opportunities and to reflect our actual production and operation over the previous quarters.

Yes. And just a side comment, these other 2 mines that we have look tiny compared with Grasberg Block Cave and the Deep MLZ. But when you look at underground mines in the industry, those are substantial mines in and of themselves. This copper difference is just a rounding. I mean, it's less than 1%. I mean, so we're right on plan for copper. And the gold things, remember, we had higher goal now, we upgraded our goal for 2022. So every year, there's going to be those kinds of adjustments. We're going to try to produce more gold, which we're able to do in 2020. And then we adjust our plans for that. So we're -- there's nothing here other than we're right on our targets, and everything is going as planned.

The financial policy, I'll go back and say what I've said before. We have ongoing and formal discussions with Board members. We have formal Board members coming up. My anticipation is that there will be a restoration of our dividend and then a financial policy that will give guidance to the market of how we will be dividing cash flows in the future for further debt reduction. Although, quite frankly, we're -- if you look at our cash flows that we talked to you about today and in a $3.50 copper price, we get down to about $3 million of net debt at the end of 2022. So we certainly can support higher level of debts than that. And that means there's plenty of cash to enhance cash returns to shareholders and then have availability of funds and depending on how we structure it for future organic growth projects when we decide to initiate those. So restoration of dividend, a financial policy that will provide for increasing cash returns to shareholders over the long term with funds available for organic growth investments.

Your next question comes from the line of Matthew Murphy with Barclays.

I had a question about some of your innovation initiatives. I guess, this time last year, you were talking about some specific programs with data science, machine learning that you were going to roll out for something like $150 million to $200 million. Should we consider that embedded in this guidance? Or is that a program that's still on pause that might be reinitiated at some point?

We're -- and Josh Olmsted is on. He can talk more about it, but we are continuing those projects. We've brought a number of things in house. We were doing a lot of work externally as well. But we brought a number of those initiatives in-house. We're still progressing with some of the automated models that help predict better mill throughput rates and help develop the right recipe to maximize throughput through the mills. And we're adopting a lot of the data analytics in other areas as well. We're working on adopting the data analytics process in our leach operations as well. So we're continuing, and the team is very actively involved in using technology and digitalization to enhance performance. We're not -- the Cerro Verde increase, we're not doing that now because of the COVID restrictions and expect to continue to look at driving mill rates higher there beginning next year.

But Josh, why don't you just talk a little bit about it because it's really an exciting area that Josh and his team are working on actively every day. And it may not look exactly the same as what we were talking about at the beginning of last year because we've learned a lot, and we're improving it from there. But the bottom line answer to your question is, yes, we have built in a lot of it into these plans, but there's upside from there. Josh, do you want to add anything to that?

Kathleen, let me introduce Josh to the group, okay, just briefly. Beginning September 1, Josh became our Senior Operating Manager for the Americas as Senior Vice President. He's been with the company 28 years, and he's only 50 years old or so. But he has progressively risen in the organization, has senior leadership roles at several of our operating sites in the U.S. and South America. And over the past 4 years, he -- his leadership role has grown as he worked with Red Conger, who retired, and he's just been doing a great job. He's brought an energy to this. He's very teamwork focused. Our other operating managers are coalescing around, and he works very well with our technical group and with our financial and administrative groups. So Josh Olmsted, why don't you follow-up Kathleen's comments?

Thanks, Richard. Appreciate that. Matthew, just as Kathleen indicated, if we look at it a year ago when we were talking about Americas' Concentrator in that $150 million to $200 million investment compared to where we sit today, one of the -- I'm going to call it a benefit. So one of the things that we took advantage of during 2020 was how do we internalize a lot of that stuff and as Kathleen alluded to, we took a lot of those learnings and really embedded them in the operation. And that's what allowed us to be as successful as we were in 2020.

And as we look at 2021 and beyond, we continue to leverage, whether that be data analytics, the AI and how that applies, the tools that are out there, and we look for opportunities. A lot of those things are embedded in the plans today, but I think it's also going to drive additional things as we go forward. That won't require the investments or the dollars that we had thought about previously, just from the fact that we've got it internalized and we're leveraging a lot of the energy, passion and excitement of our workforce and tapping into ideas that are allowing us to add incremental benefits across the organization from an efficiency perspective as well as from a cost perspective.

And so it's really exciting to see the folks at all levels of the organization have the opportunity and take the opportunity to provide ideas that then turn into significant value for us as an organization. And so I just continue to be encouraged with our ability to execute on those things and identify opportunities going forward to leverage data, leverage analytics and put the right information in the right people's hands at the right time to make good decisions.

And back to the point about Freeport operating all the assets, we benefit from all being on the same system. And so this data analytics work that we're doing really can be compared and shared across the company and collaborate and really take the best of each of the operations and apply that to the portfolio. And we're starting to do some work with Mark and his team on different things as well. So as Josh was saying, it's really a -- there's really some synergies here, and the work that we did in 2020 allowed us really to kind of take some of this over on our own and drive it. So more to come on that.

Your next question comes from the line of Lucas Pipes with B. Riley Securities.

Richard, I want to pick up on one of your comments from the prepared remarks regarding how this period is reminding you of the early 2000s. And I think you even mentioned a super cycle. What is your confidence level today that we are on the cusp or maybe already entered a period like this? And then there were a few questions on M&A, organic growth. And obviously, your conclusion on where we are in the cycle and whether this is another super cycle is, of course, really, really important for how you think about these things. So if you could maybe incorporate all these thoughts in the reply, I would really appreciate your comments on this.

So we're working remotely, Lucas. If we were sitting here, as we normally do around our conference desk in Phoenix, Kathleen would be kicking me out off the table because that question is just like giving a monkey a machine gun. 2003, we had gone through a real tough time in copper with the economic issues of the late 1990s, the global recession, the global slowdown.

Copper prices had dropped at one point to below $0.70. And I recall, and it was at a -- Timna, at a Merrill Lynch conference in Ireland, that was my first conference as CEO, it was right before I made CEO. And the price of copper just dipped over $0.70, nobody in the industry thought it could go beyond $1 within the foreseeable future. And everybody was running the business. So what happened? China emerged in a way nobody expected, created a whole new element of demand. Historically, whenever copper prices jumped up, the industry had projects primarily in Latin America to invest in.

And the industry was widely divided and there'd be new investment. Supplies would come on, the business cycle would turn down and copper prices would drop. This time, China added, in 2003, a permanent element of new demand that was beyond the traditional demand from copper that was tied into global industrial production. And there was widespread expectation that the industry would invest and add new supplies. I remember my partnership, Goodyear, got up at that conference and said in price of copper, he hoped that the price wouldn't rise too much because it would create uneconomic investment.

Well, what happened was the industry started looking for new projects then and geologically, they weren't there, and there were all these other barriers to investment. So we had higher prices without a supply response. That led us to do the Phelps Dodge deal in 2007. We're -- our market cap in 2003 was $6 billion. It was $12 billion at the Phelps Dodge deal. We did a $38 billion business combination, the biggest in the industry, lived through the financial crisis and then emerged in 2011 as a company with a $60 billion market cap and no debt.

So what do we like here? The reason that I feel this is an echo is that we still have a world that's being burdened by the economic slowdown with COVID. While there had been recoveries in pockets of the economy, there's been stimulus by governments, and China has recovered much faster than we heard about earlier, think about a world where we had a slowdown to the extent we did in 2020 and copper inventories are at levels that we hadn't seen since the mid-2000s.

And so here we are, and we just talked about how there's not a huge rush to invest in new projects. All the major companies want to grow copper as part of their portfolios. That's been the case since the mid-2000s, and they've been challenged in doing that. Projects today around the world, geologically, are more difficult, less quality than they were, underground, lower grades. You look at Cerro Verde, Cobre Panama. These are big, low-grade projects that require huge investments in infrastructure and equipment and mill processing. And then you have these barriers to production that keep some attractive projects around the world from going forward.

You have political issues in countries that -- in Africa, it's challenged. Latin America is having political issues. Indonesia's been what it's been. So I do feel that if the world's global economy recovers in a reasonable way, not an extreme way, and we have this big move towards -- look at all the stats that are coming about for electric vehicles in the United States. I mean, think about what General Motors is doing and what China is doing.

You think about the change in the global perception about climate change in the United States, forest fires, hurricanes. I mean, this is something that's going to have to be addressed. And when it is addressed, it's going to require tremendous amounts of infrastructure spending, extraordinary amounts. And in all of those elements of spending, there's an element of copper of significance into it. So that's why I feel like we are echoing 2003 today.

I think we have time for one more question, operator. And for those of you who didn't get questions in, we'll follow up with you.

Our final question will come from the line of Curt Woodworth with Credit Suisse.

Yes, in terms of the super cycle or things like that in the past, they have been also opportunities for monetization or potentially useful in terms of bringing in JV partners at very accretive terms potentially to develop assets. So to your point, Richard, on Grasberg being derisked, having little net debt by the end of '22, you'd be -- you'd have the wherewithal to develop maybe multiple projects. I'm just curious kind of how you think about potentially growing the business from a capital-efficient basis going forward. Because obviously, in the past, when we do get into these super cycles, I think one of the issues in the mining industry has been lack of seeing that cash come back to shareholders. So I'm just curious kind of how you balance that going forward.

One point, I'll just jump in before Richard comments, we already have growth. I mean, if you look at our outlook and Richard touched on this before, not only do we have growth in 2021 but also in 2022. So we've got that. We've got to execute on that plan, and that's going to give us a lot of cash flow to be in a position to get some returns back to shareholders after this big investment program.

So again, yes. I look over the shoulder. If you look back at Freeport, when copper prices began rising in 2003, 2004, we returned tremendous amounts of cash to investors out of Grasberg. We were like a royalty trust or an MLP or something. Then after Phelps Dodge, we delevered very quickly, and we start returning to paying dividends again. And we were well positioned in 2011 to continue to do that. The Board decided to invest in oil and gas and took it away. So here we are, coming back from the situation that we are now. We don't need a commodities boom to generate lots of cash to return to shareholders.

At $3.50 copper, you see what the numbers are. I think copper could go much higher than $3.50. I can't guarantee it, but in my gut, and Timna, that's one of the reasons I want to keep working. I think it's going to be really a special time. And when that happens, we will be able to really return cash to shareholders in a substantial way. This question of investing, I mean, right now, money is so cheap, you wouldn't want to bring in a joint venture partner. That may not stay that way forever, but financing is incredibly cheap and available.

And I wish Phelps Dodge hadn't given up the interest in Morenci or the interest in Cerro Verde. So if we got good projects, we'll look at the most efficient way to finance it. That could well be -- could be partners because lots of people want to be our partners. And then others may have projects that we have the opportunity to join in on. There could be opportunities in the M&A market. But all of that is part of this really bright future that I see for Freeport. The vision right now is focused on getting 2021 to be as successful as 2020 was.

And when that happens, when that happens, and we got long-term run rates at Grasberg, Josh and his team has fine-tuned our business in the Americas. We got this Lone Star project, don't overlook that. That could be a new Morenci down the road. This is just a company that's really well situated to generate cash, not have to do anything to have a sustainable future but having the world open to us to do lots of different things. It's really, really exciting.

All right. Thank you all for participating. We look forward to reporting our progress in 2021. And take care of yourselves, your families, the people around you. We're not over the hump yet on COVID, but just hang in there. This life is going to get better. Thanks for participating.

Ladies and gentlemen, that concludes our call for today. Thank you for your participation. You may now disconnect.