Freeport-McMoran gives company update and hands out community awards 120722

: Category: Front Page News Front Page News; Published: 07 December 2022 07 December 2022

Photos and article by Mary Alice Murphy

Freeport-McMoRan Tyrone Mine General Manager Eric Bower began the meeting and ceremony by highlighting items from the third quarter of fiscal year 22. He explained that the awards session replaced the usual Community Partnership Panel meeting.

He noted that not only are copper and gold sales up 4 percent and 20 percent above July 2022 guidance, and 3 percent and 19 percent above third quarter of FY21, but also net costs for copper are 5 percent above July 2022 guidance.

"But our adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) stands at $1.5 billion," Bower said. "We also retired $1.1 billion in debt through open-market transactions, including, $0.4 billion in 3Q22, which translates to $50 million in annual interest cost savings. With $4 billion in cash flow, we put $2.4 billion in capital investment back into the business."

He also talked about current copper market conditions, with the price dropping to $3.50 a pound, but recently rising to $3.85. "We have long-term favorable conditions because physical demand remains strong, inventories are low by historical standards, with ongoing supply disruptions and social challenges in Latin America. Also, secular growth in metals demand is required for clean energy technology. With future investment in new projects low, and renewable energy mandates that can't be done without copper, the outlook is expected to result in large supply deficits. But a pound of copper from Chino is exactly the same as a pound of copper from Morenci or from South America."

"A lot of people are also anticipating that something bad will happen," Bower said. "It takes $4.25 as the incentive price for going out and investing in new copper production projects.

"Freeport-McMoRan is very good at leaching copper," he continued. "We are able to produce leached copper at a lower cost and lower footprint, as well as with lower water use."

It is estimated that 38 billion pounds of copper in leach stockpiles is uncoverable by traditional leach methods. "But we continue to develop new initiatives and technologies to leach as much as we can. The copper is never 100 percent recoverable, but we can leach out and recover as much as 73 percent of the copper. We have 8 to 9 billion pounds in stockpiles just in New Mexico. We estimate sales of more than 4 billion pounds of copper this year, as well as 1.8 million ounces of gold and 76 million pounds of molybdenum."

Bower noted that the production is stable at a bit more than 4 billion pounds of copper a year and adding in gold and molybdenum. "We're always looking to increase production, but just holding it flat has been a huge accomplishment. Every mine in the world, talking about lithium, cobalt, copper, rare earths, needed for renewable energy, are not finding new high-grade resources. Just to hold our production flat, I can't tell you how much investment in innovation we are putting into the effort. Most mines in the world are headed on a downhill slope. We have to get a higher rate out of lower grade copper. And, of course, a lot of that is depending on the price."

"We are selling about 1 billion pounds of copper a year," he continued. "But we're selling it at a lower price than a year ago. There is positive motion up, but our input costs are way up. Acid, diesel, all the parts we need to run our incredibly capital-intensive business are going through the roof. It's no different from what you guys are experiencing. Sooner or later, something's got to give. Either copper prices increase, or input costs drop. The good news is our revenues remain fairly strong.

"Freeport is committed to a low carbon future," Bower said. "Our commitment comes from wanting to do the right thing, for our business, our neighbors, our community. Low carbon renewable energy requires copper. Right now, Tyrone is testing the world's largest hybrid loader, a new Komatsu. The unit, as advertised, should use 40 percent less diesel and move more tons. If you look at a ton of carbon per pound of copper, it moves to reduce that ratio to make it even better. We are testing it right here in New Mexico, and hopefully it will go around the world to produce more low-carbon copper."

On the operations update, he said that Tyrone is hyper-focused on three things:

Executing its plan to go after new leaching technologies, which makes a huge impact on operational costs;
• Controlling costs; and
• Staying focused.

Bower noted that the life of Tyrone is through 2027 and may be extended through other projects. "We have 350 employees and 30-40 contractors, with a lot of them drilling looking for that next bit of copper. And now, because Chino Mine General Manager Randy Ellison could not be here, due to a last-minute issue, I want to report they are working on a 3R strategy – restart in 2021, redesign this year and reset the culture, and ramp up by 2024. They spent $200 million on rebuilding, with some of the changes readily visible. Some you can't see. They've done a massive amount of work in the mill. Their manpower is up to about 680 and up to 700 by the end of the year. They, just like everyone, are struggling to hire. We are almost up to our pre-Covid 1500 employees, including contractors. They are still running only one slag mill. They do run the two mills occasionally, but they're going slow to go fast. By 2025, it's 'run, baby, run.'"

He said Freeport continues to collaborate with the Mining District. "We've had a successful year at Chino working with the three mayors from Hurley, Bayard and Santa Clara. We donated 400 acre-feet of water rights to Hurley and Santa Clara. We gave up to $1 million in funds to improve the wastewater treatment plant and in economic development, we are working with Western New Mexico University and the County Commission on putting in a vocational school. We want to donate a piece of land. If we can get the skills into students born here, they will stick and stay in a job for 30 years."

Bower invited the mayors to speak. Hurley Mayor Ed Stevens had left because he was not feeling well. Santa Clara Mayor Richard Bauch thanked Freeport for helping fund work at the wastewater plant and donating the water rights. "We have a lot of demand for water. We've had trouble delivering water to outlying areas. The concept of the Regional Water Plan is to link the Tri-City area to Silver City. That way, Santa Clara can get water from Bayard and Bayard from Santa Clara, as well as between the municipalities in the unincorporated areas. I know Bayard appreciates the matching funds for the wastewater plan, which needs updating and improving. The matching funds keep us from having to pass increased costs to our residents."

Bayard Mayor Chon Fierro said: "Mayor Bauch said about everything. On behalf of our city council, we thank Freeport for all the help they have given the Tri-City area, including Hurley, Bayard and Santa Clara."

Bower also presented the 2021 economic impact of the mines, which was developed by Arizona State University. According to the report, the direct impact of the mines in Grant County was $112.9 million and the indirect impact was $36.8 million totaling nearly $150 million. Freeport-McMoRan's operations for the entire state of New Mexico had a direct impact of $215.8 million and indirect impact of $150.6 million for a total of $366.4 million.

"We are looking forward to continue our economic impact on local communities into the future," Bower said.

He answered questions. Emily Gojkovich of the Southwest New Mexico Council of Governments asked if the piles in Arenas Valley and on Highway 90 would be leached.

Bower said those were tailings and not eligible for leaching. "The piles for leaching sit around the open pits."

Priscilla Lucero, SWNMCOG executive director, asked about the vocational school. "Is there any discussion around what trades will be offered or is too early?"

Bower replied: "Yes and no. We are looking for industrial electricians and welders, but also under consideration are plumbing and HVAC, for instance. We haven't decided the details. Also under consideration are diesel diagnostic mechanics."

Lee Gruber of the Arts and Culture District asked what happens "when we run out of copper?"

"A lot of materials have substitutes, but nothing conducts electricity as well as copper," Bower replied. "Copper is not replaceable, but two-thirds of the copper that has been mined is still in use. It is totally recyclable. We will shift from easy copper to recyclable copper. The projections over the next 10 years are massive deficits in the copper that will be needed."

He referred to the new loader at Tyrone. "It hard to get used to new equipment the first couple of months. But so far on the loader our experience is spectacular. We don't yet have the statistics on how much less diesel we are using, but we will have the data. It's a different touch for the drivers running it. So far, it's been very positive."

Bower left for a mine leadership meeting that was taking place at the same time in the same building, the Grant County Business and Conference Center.

Laura Phelps, Freeport Strategic Community Development Manager, stepped in to hand out the Freeport Community Foundation grant awards.

"We received $450,000 to hand out," Phelps said. "The awards were made yesterday. We set aside a budget and a committee of local leaders decides who receives the funding."

She showed a list of the recipients on the screen.

Cobre Schools, represented by Sandra Montoya of Snell Middle School said they received funding to expand the CTE (career technical education) at Snell. "We have been implementing welding for nine weeks, for example. We provide exploratory science, with a different topic every nine weeks. Mr. Michael Young and I are using the money to buy equipment, such as welding jackets, glasses and cutters, as well as building the curriculum for the year. Getting students on CTE and doing hands on project brings fewer discipline problems and keeps them interested and in school. We have a lot of females taking welding this year. We are so appreciative of this money. When I did my interview, I'm not sure if I was crying. I was principal at Snell and for the past 20 years, I've been in CTE, social work and counseling. We are bringing the CTE class to the high school, too. Mrs. Benavidez was my vocational professor at Western. This money WILL keep students in school."

The National Center for Frontier Communities, represented by Ben Rasmussen, received $50,000 to build out an agricultural hub, he said. "It will impact the food system. We work with 36 growers. We want to build out a curriculum at a local farm."

The following award went to a science education initiative, represented by Allison Heneghan. "We started out doing STEM (science, technology, engineering and mathematics), but we struggled to get resources. We provide training and collaborate with the state. We started the program in 2020, but we just had our first training in July. We do a lot of work with Cobre Schools, some at Aldo Leopold Charter School and we want to do more at Silver Schools. We want to support the teachers in the fields. We have the intention to do a hands-on museum in conjunction with Future Forge."

Jennifer Metzler of The Commons received the grant award for the facility, as director Dave Chandler was unavailable to attend. "We are so thankful for this funding, so we can further our work. We work with the Food Hub and the food bank in Albuquerque. With this funding we will be able to add schools, so we can provide more nutrition to the students. We are in the Mining District schools now. We were providing snack packs, but with more funds, we can provide better nutrition to more students."

Silver City Town Manager Alex Brown accepted an award that he said would go toward the goal of $500,000 for the proposed Recreation Center. "We will use this money to create a project at the Recreation Center and it will be dedicated to Freeport-McMoRan. We hope construction will be complete by the end of 2024. The center will be located in that empty land behind the small store at the corner of Silver Street and 32nd Street. We will begin redoing 32nd Street next year, in addition to the Rec Center. Don't go that way. It's going to be a mess for a while."

Shelby Hallmark, area resident, asked if any of the funding would go toward a swimming pool. Brown said no, but at the next Town Council meeting, the councilors will award design funding for a pool.

Santa Clara Clerk-Treasurer Sheila Hudman accepted the award for the Village of Santa Clara. "We very much thank Freeport. They have helped us so much with several projects. The first was the Mercado, which because it's not very central doesn't get as much traffic. Our goal is to relocate it. The next project was the Splash Park and Viola Stone Park. Too many buildings in Santa Clara are dilapidated or vacant." She showed a map of the Mercado, with green space and said ARPA (American Rescue Plan Act) funding would place it next to Viola Stone Park. "It will have a Farmer's Market. We are working with the National Frontier Communities. It's a group effort. We are also working on a walking trail from the bridge along the creek to Viola Stone Park. We requested $50,000 and got an added $10,000 from Freeport to put an arch over the Cameron Street Bridge. People take wedding and graduation photos there, so, an arch will make it more attractive. We'll also put in a railing."

Phelps said she had used a little bit of duplicity in getting some of the community award winners to the event, especially the mayors of the Mining District.

"We've been meeting at least once a month with the mayors," Phelps said. "I've seen the amount of care you have for your communities." She handed each mayor a copper splash with colorful enamel forming each into a bowl. The mayors each thanked her, and Fierro said: "I also want to thank Randy (Ellison)."

"And the final awards are our employee awards for those who go above and beyond in the community," Phelps said. "Eric really wanted to be here to hand these out. We'll see if he can break away from the conference." He couldn't, because he was in the middle of speaking. "We recognize these employees for what they do on a volunteer basis in the community on their own time," Phelps said.

Phelps announced that José Carrasco and his wife, Parnian Azhdari, were named employee of the year. Phelps said they would helped judge the entries for state awards and did a career presentation. "They spent last weekend judging the student entries and projects to determine who will receive a $5,000 scholarship that we give out. They are also members of the Society for Mining, Metallurgy and Exploration. In addition, they spent a week at Cobre Schools, working with the students, using a grant they applied for. We really appreciate the work you've done for our community and representing Freeport. They also helped Cobre get food to give to families for Thanksgiving. When I left, José and Parnian were still there taking more food to more families. You have a phenomenal way of looking out for your community and giving of yourselves."

Azhdari was out of town, so Carrasco accepted the splash and enamel bowls for both.

The ceremony concluded.

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Freeport-McMoran gives company update and hands out community awards 120722

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