FCX
#Good morning, everyone
I'll refer you first to slide 3, where we have a picture of the cover of this year's annual report, the title is Driven by Value, which highlights our resolve to deliver value to shareholders
Last year, our annual report was entitled Prove Our Mettle, and in 2016 we did successfully address our excessive debt level going into the year and we're in the homestretch of reaching a target that we set at the beginning of 2016, that was a two year target to cut our debt in half
We have a clear path to doing that now, and our focus is now generating long-term shareholder value
We strengthened our balance sheet and our liquidity
We executed our operating plans
We successfully completed the major development project at Cerro Verde, which was a significant accomplishment for our company and part of this long-term value proposition that we have before us
We refocused our business to be a leader in the global copper industry
We set out with the intent of reducing our debt but leaving ourselves a set of assets that would provide the basis for future profitability and profitable growth
The asset valuations that we were able to achieve in our property sales in a very tough market were attractive
And recent market developments reinforce our optimism about the long-term fundamentals for the copper markets and reinforce our focus on what we're doing
So we are – going into this year, we're focused on Indonesia
I'll be talking about that
That's clearly a challenge for us, has been for some time, and I want to make sure I address all of your questions about it and let you know what we're doing about facing that challenge
With respect to copper markets, page 5, beginning in second half of 2016, we saw copper prices rebound to higher levels and many in the industry and observers of the industry expected
That reflected improved market fundamentals, driven by Chinese demand, improvement in North America and Europe and supply side issues returned to focus
We'd had a period of time before the current period of where supply side disruptions had been less than the historical experiences and we had several situations involving important mines including our Grasberg mine, but also Escondida, the world's largest copper mine, which faced a lengthy labor strike, and these disruptions are a feature of our business and they will be issues that the industry will face going forward
Underlying that is a real absence now of major new projects for the industry
After the recovery from the 2008, 2009 recession, a number of projects were initiated, most of those have now been completed, and people in the industry, including ourselves, have deferred spending on new projects because of uncertainties in the global marketplace
Adding all of that together, you end up seeing a near-term situations where the market is balanced at best, and over time, without new projects coming on stream, and the falling grades of existing producing mines, a significant require – for new copper
Wood Mackenzie estimated that 5 million tons of new projects will be required in the near-term future – medium-term future at least
These new projects require greater than $3 a pound for copper to make them economic
I'll just note that the top 10 producing mines today only produce 5 million tons a year
So that puts parameters around the extent of this shortfall
Projects require 6, 7 to 10 year lead times
The new greenfield projects are particularly scarce, and so we have a looming significant deficit in this business and the question is the timing for that deficit, which will be dependent on events in China and the global marketplace
Now, where we are situated is that our company has significant strengths in facing a market that's going to require new copper
We'll talk about our business in two basic segments now
One is our mining operations and resources in the Americas, in North and South America, and we'll address Indonesia separately
But looking at the Americas, we have a set of mines that have significant current production and long-term growth with long-term established proved and probable reserves and incremental resources of real significance
We have a lot of flexibility in the way we manage our operations and also in the way that we approach future development
All of these mines are operated by our company and that gives us significant synergies in the way we manage the business and develop the resources
The investment opportunities that we see are competitive in looking at the marketplace
We have a flexible and skilled workforce
, we have no unions
We have accesses to abundant sources of energy
Again, energy cost in the U.S
have dropped dramatically in recent years with the shale oil and gas development
We can leverage our existing infrastructure
These future development projects will have a relatively low risk associated with them
So we get strong cash flow generators
In the U.S
, we have a very large $12 billion approximately NOL to shelter us from future income taxes
And so on this chart on page 6, you can see the very significant reserves that we have available to us and also the significant generation of cash flow that we have from our properties with very low capital requirements because our assets today are fully developed
These opportunities that we have before us are significant sulfide projects that's shown on slide 7. We are doing planning activities
We won't commit capital to these projects until we have clarity on the global economy and direction, but we're preparing ourselves to take steps
They're listed in alphabetical order here
The first project that we will start on is the Lone Star resource that's adjacent to our existing producing Safford mine
We're planning a project to mine an oxide cover over a very significant sulfide resource at Lone Star
That will allow us to extend the production facilities at Safford at the same time we're in effect stripping for the – to expose the sulfide opportunity which would require significantly more capital
All these are projects that I believe will be required by the industry over time
They're in our inventory, and how we approach them will depend on market conditions
The next major project is likely to be either Bagdad or El Abra
The Bagdad has the benefits of the factors about the U.S
competitives that I mentioned earlier
El Abra has turned out to be a very significant resource, and we are addressing it with our partner CODELCO
And Chino is a opportunity that we're developing and we're getting more information on as very old mine in New Mexico
And Morenci and Sierrita are long-term projects for us
So we have internal development projects for a very long time horizon in the future
Now turning to our important asset in Indonesia, the Grasberg mine in Papua, it's been a difficult year for us
In January, the Government of Indonesia issued new mining regulations that have caused us significant concerns
The impact of these mining regulations would be to require us to give up our contract work in return for our right to export
The government through the 2009 mining law and these new regulations say that you could only export if you have a license, a special license called an IUPK
And the regulations said to get the IUPK, you had to give up the contract
We weren't willing to do that and we advised the government immediately after that gross regulations were issued that we would not be willing to do that, and we entered into a series of discussions trying to find a way to open up a opportunity to have discussions, negotiations with the government to resolve this dispute
By mid-February, we had reached an impasse, and at that point, we began actions to adjust our operations, our capital spending to reflect a business that could only shift domestically
And on February 17, we issued a formal notification under the dispute resolution mechanisms of our contract of a series of actions that the government has taken to breach our Contract of Work
That triggered a 120-day notice period, which extends to mid-June
After June, we as well as the government would have the right to submit this dispute to an arbitration process that's specified by the contract
We continued discussions with the government and by the end of March, the government through its Energy and Mineral Resources Ministry amended certain of the regulations that were issued in January to enable us to retain our COW to return to exports and to receive a temporary IUPK that would provide through October 10 an ability to have negotiations, continued export and leave our COW in place
We, last week, signed a memorandum of understanding confirming all of this and exports are now, we're now loading ships to return to exports and we will immediately begin negotiations with the government and each of us, the government as well as our company, have expressed a commitment to reaching agreement on the long-term solution
Those discussions will involve some very important issues
They will involve our objective of getting assurance of our ability to operate beyond 2021 to 2041 as provided by our contract on terms that provide stability and assurance on legal matters and on fiscal matters
The government wants to talk with us about divestment
Their regulations in January provide for divestment of 51%
Our contract has no divestment obligations
We have communicated that any divestment would have to be at fair market value
We've previously indicated that we would agree to divesting from the current 9.36% up to 30% and so we will have discussions with the government on the divestment percentage, the process, and valuation
In addition, the government regulations require in-country processing of copper concentrates
We developed Indonesia's, with our partners developed Indonesia's only copper smelter in the mid-1990s, the PT Smelting facility at Gresik, a large world-class copper smelter
It currently processes about 40% of our copper concentrate production, the remainder is exported and we will have discussions with the government about developing new smelter facility
So all of these things will be addressed as a package and we will approach this in good faith
I'm convinced the government will too and the objective will be to find a mutual agreement that each others can accept
We call it a win-win objective and that's what we're going into to achieve and that process starts right now
What we did in the first quarter? We began a reduction in our workforce
We have, going into the quarter, roughly 32,000 workers
That includes employees and contractors
That includes people involved in operations, logistic support and capital projects
To-date, we have reduced that workforce for about 10%
We've implemented efficiency programs for cost and capital spending
We slowed investments in the Grasberg underground by about a third
We're spending currently about $40 million a month on the Grasberg Block Cave
And we're prepared to suspend that if we have to
Doing that has some long-term consequences that are negative for all of the stakeholders, because it would delay – the resource remains there, but it would delay the ramp-up period
And that involves cost and economic consequences for everybody
It would affect the workers, because if we totally suspend that, we've got about 5,000 workers that would be out of work
It affects the local Papuan communities, because in the Mimika Regency, we represent over 90% of the GNP
It affects a large number of Indonesian suppliers, not only in Papua, but throughout the country
The government has lost almost $500 million in taxes and royalties for the three months or so that the exports were suspended during the first quarter of 2017. And, of course, it affects Freeport and our partner, Rio Tinto
With all this going on, though, because of our efforts to constrain spending and capital spending, we generated positive cash flow at PT-FI during the first quarter
So, we have an ability to do that going forward, even if we're suspended from exporting, but it's in all of our interest to get this long-term solution
And as I said, we're approaching it with an objective and with confidence that that will be achieved, but it will be complicated discussions that start right now
Looking at the Grasberg Block Cave, this is a remarkable opportunity for us
The Grasberg district has been one of the mining industry's great mining discoveries, operations, development in the history of mining
But just focusing on the extension of the resource that we've been mining and are mining from the open pit to its extension at depths where we mine in this massive block-cave operations, it is a tremendous resource
It's got 964 million tons of over 1% copper and with 0.78 grams per ton of gold
The reserves themselves and the copper metal that we produce, for example, are about 50% larger than out of Morenci and then in addition, you have this enormous gold component
To date, we've spent about $3 billion on the development of the Grasberg Block Cave and the common infrastructure to allow its production
We're just over halfway through the initial development for that resource
This transformation is a state-of-the-art underground development and it's a source of pride not only for our company, but for our workforce and for the country of Indonesia
High-grade, low life, low cost and it's an important part of our future and we are working to find a way to make it, so that all of us benefit from it, including the government
Under our contract, the government of Indonesia has a very attractive current proposition for participating in the operations
Our company just celebrated the 50th year of its doing business in Indonesia
Since 1992, when we signed – after signing this current contract, we've contributed $60 billion to the national GNP (sic) [GDP] (24:51)
By far the largest private employer in Papua and one of the largest taxpayers in all of Indonesia
We've contributed voluntarily, this is not an obligation, but 1% of our revenues to the local community through our Freeport Partnership Fund for Community Development
Over the past 11 years, that's generally almost $700 million of voluntary contributions to the local community
If we look at the contract, the government receives a majority of the cash benefits from the operations, more than any other government in the world receives from mining operations
Over the last 10 years, the government has got 62% of the direct financial benefits of this business and that doesn't include the multiplier indirect effects on the Indonesian economy
And when we look at the existing contract, future taxes and royalties and dividends through 2041, the term of our contract, are expected to exceed $40 billion
So, this is a big asset not only for our company, but for the government and particularly important for the province of Papua
So, turning to our outlook, we've adjusted our 2017 projections
We've had to take into account the suspension of exports in Indonesia, it's had an impact
In Peru at Cerro Verde, we've had to face an incredible weather situation
This is one of the driest places in the world and they've had three, four, five times annual rainfall and it's caused a lot of damage, injuries, deaths, and damage to the infrastructure throughout the country and we had a strike, which did not have a material impact on first quarter production, but it affected our mining rate and will have an impact on productions for the year
So, we've dropped our outlook for 2017 from 4.1 billion to 3.9 billion pounds
The gold reflects the situation in Indonesia at 1.9 million ounces
Molybdenum at 93 million pounds is roughly what we've guided towards previously
Our expected site production and delivery cost at $155 is up slightly
Our after by-product net unit cost at $1.08, it was previously $1.06. Provided we're able to operate throughout the year in a normal fashion in Indonesia at $2.50 copper, we are looking at $4 billion of operating cash flows for the year, each $0.10 would be a delta of $275 million
Our capital expenditures have been reduced from $1.8 billion to $1.6 billion
And this is $700 million on sustaining capital in the Americas and some in Indonesia, but $900 million on the major projects, including $700 million in Indonesia, which is down $200 million from our previous guidance
You can see our outlook on slide 13 for 2016, 2017 and 2018, as well as our gold and molybdenum outlook
And on slide 14, we show our EBITDA as an average of 2017 and 2018. At copper prices ranging from $2.50 to $3, EBITDA goes during that period from $5.6 billion to $7.4 billion over that price range, and operating cash flows would vary from $3.4 billion to $4.7 billion, from $2.50 to $3. Our sensitivities for copper, molybdenum and gold and currencies is shown on page 15 to help you with your modeling
Capital expenditures on page 16 show that what we incurred in 2016, which included $1.2 billion of oil and gas and then looking forward, spending that would be incurred with continued Grasberg underground development and continuation of the current positive market conditions that we have
The big issue in this is assessing the Grasberg blockade, and it is totally dependent on our progress we make in our discussions with Indonesia
And if we are successful, as we are working to achieve, then we would continue that project, because it's important to all the stakeholders
If not, we have prepared contingency plans to defer that project and that would have a significant impact on capital spending and employment, and also future revenues
Page 17 shows the progress we made with our balance sheet that I've referred to in my initial comments
The net debt going into 2016 was over $20 billion, going into 2017 it was down to $12 billion, and as we look forward to the end of the year, you can see it drops below $10 billion depending on prices
Our objective is to achieve further debt reduction to get our balance sheet to a position that as market conditions improve in the future, we can then look at resources to invest in growth projects at that time depending on market conditions, and we look forward to the time with this set of assets to be able to return to the Freeport tradition of returning cash to shareholders through dividends and potentially stock buybacks
Our near-term debt situation is very manageable
You can see we reduced gross debt by $500 million during the year
We have over $4 billion of cash and our maturity schedule is attractive and we have access to capital
So, we're continuing to look to opportunities to improve our long-term liquidity situation by managing our debt schedules
So, we are very pleased with the progress
We've got a lot of work to do and we're going to prove our mettle again this year by addressing the issues that we have
We went through all this that we've experienced over the last three years
We've maintained an industry-leader copper position, couldn't be more prouder of our team for the way they operate and develop the business
As I've said many times, we can do any copper project anywhere in the world
And we've got this long-lived, geographically diverse portfolio of assets, and we're financially stronger today after what we did last year and we're going to be focused on maintaining financial strength and flexibility as we go forward
So, with that, <UNK>, let's open the line for questions
Question-and-Answer Session
Well, there is a – in general, that's true
There is a ramp-up that we have to go through
And we also have to coordinate shipments with our customers who had to make other arrangements for supply when we were shut down from exports
But we do have a series of ships, ones having loading completed as we speak, to – we had close to 100,000 tons of copper concentrate at our port site and storage facilities
These ships are 20,000 tons, 25,000 tons
And so we'll have a series of ships to reduce that inventory
We're beginning to ramp up
We have plans to ramp up our mine rate and to return our mill to full production
Now, there is labor issues that we are facing in Indonesia at job site
The leader of the union that represents PT-FI's employees, which is about 12,000 of our 30-plus thousand workforce, our employees, is undergoing a trial for corruption allegations in Timika and there have been demonstrations by workers in support of their leaders
There was an incident with the police in which some rubber bullets were fired and some people were injured in the last three days
That has resulted in absenteeism at our workplace
And then overlying that are concerns by the union of our plans to – that we put in place to reduce employment, and they're concerned as we are about the long-term impact of that
And so we are engaged with the union in an effort to get them to return to work and we're getting support from the government and from the local police
During all this quarter, the social situation and security situation at job site, which was a concern when we suspend operations, has been relatively peaceful, but we do have this current unusual situation with the demonstrations and the absenteeism
All of our projections are predicated on getting that resolved and getting people back to work
So <UNK>, our long-term plan for several years had been to complete mining the pit in 2016, in early 2016. And now with the issues we faced over the last five years, in terms of the issues with the government and the strikes and so forth, that has been pushed out to 2018. The ramp-up of the Grasberg Block Cave is a six-year plus event
So the more this thing is delayed, the longer that ramp-up occurs, and that's what I was saying, it's so important that we reach an agreement with the government so that we can move forward, complete mining the resources and the pit
We haven't lost any resources throughout all of these deferrals
But it's an – economically, the sooner we can begin completing the Grasberg Block Cave development, begin ramping it up, the better off we all are
No CapEx are included
Our plans are to finance this on a project basis
There would be other partners involved in our plans, and we would get project type financing for it, which requires that we have a contract for PT-FI's operations, because that's the source of the plot for the smelter
$2.5 billion, there is working capital requirements and so forth, so it would be somewhere between $2.5 billion and $3 billion, depending on that
We've done a lot of preliminary engineering work with the Japanese construction firm that designed our initial smelter
We've done site studies and site analysis, but we have not entered into contracts on the timing of spending new capital and that's dependent on reaching this long-term agreement with the government
And the government has agreed on the MoU that we signed in 2014, has recognized that there would have to be certain financial incentives provided by the government because of the poor economics of this investment
Thanks, <UNK>
My direct discussions with senior government officials
I mean, I have been in continual conversation with people and they've made public decision out
The Indonesia is a country that has a democracy, it has freedom of press, and for those of you who read the media in Indonesia, you know that there are a lot of comments made by many different people
Some informed, some less so, but in terms of my direct discussions with the government officials, we have committed with them to approach this in a good fair basis to reach a resolution
And in fact, we are beginning those discussions immediately and I'll be spending a good bit of time in Jakarta in those engagements
There was a visit to Jakarta last week by Vice President, Michael Pence on his tour of countries in Asia
He met with the President and spoke with him about our situation and it was a positive conversation according to the reports that I've received
We have had tremendous support from others in the U.S
government in the State Department, the Commerce Department and in business groups that deal with Indonesia, U.S
bilateral relationships
So, it's in everyone's interest at the end of the day
It's been a complicated situation politically in Indonesia, but that's the basis for my comments
Well, having said all that, we're not underestimating the challenges, because these are issues where we have significant disagreements on
Now, we have triggered the 120-day notice required by the contract and that notice period continues to run
And so after mid-June, we and the government would each have the ability to commence arbitration proceedings
We hope not to do that
And – but we have that, as a right of ours under the contract, that process requires a significant amount of time, procedurally to put in place
So that is, let me see, some of this running in parallel, it's a fallback that each of us will assess after mid-June to see where we are in the discussions, and whether or not to proceed with arbitration is my hope that we do not have to take that step, but if we have to, we'll be prepared to do it
You potentially could see in 2017.
I mean, it's a step, the next major step we would have would be to suspend the Grasberg Block Cave spending, which we're spending roughly $40 million a month on, and that involves a set of workers, principally contractors of about 5,000 people
So, we are continuing that
We had plans to suspend it
Those plans were averted by this recent agreement that we reached with the government for this temporary IUPK and so all of that is – we still have those plans ready to execute if we have to
Very little in that timeframe
That's right
And as I said, let's say, roughly six-year plus ramp-up
So, we are about just over half way through the initial development
We'd be mining the open pit into 2018. We can't start that ramp-up until mining in the pit is completed because it's directly underneath the pit and you have subsidence, so we have to complete the pit and then begin the ramp-up of production and that goes out for six-plus years from whenever we start
So it's not much impact on production during that timeframe you referenced
There is the capital that would be spent, which we'll have to adjust that capital if we have to live within lower cash flows, but not being able to export
No, this is all net to PT-FI, and let me just – I think everybody understands this
While we operate broadly with Indonesia under the name PT-FI, the operation is a joint venture between Freeport subsidiary PT-FI and a Rio Tinto subsidiary in Indonesia, and all the numbers that we show financially in our presentation are Freeport's subsidiary numbers, and currently that subsidiary is owned 9.36% by the government with the remainder owned by FCX
So all of that just reflects PT-FI's net interest
Last year in January, when we filed the valuation of PT-FI with the government that showed a $16 billion valuation at that time
That was strictly PT-FI Freeport's net interest and excluded any values for the Rio Tinto or the values for Rio Tinto's interest in the joint venture
That's correct
Right now that was originally and this was an agreement that was signed in 1995. And it was structured around that all reserves at 12/31/94 will be retained by Freeport PT-FI and they were scheduled to be produced by 2021, and Rio Tinto was scheduled to come in for 40% beyond 2021. Well, because of the delays and strikes and export suspensions, that 2021 date now goes out to roughly 2023.
So Rio Tinto's 40% kicks in
In 2023, sometime during the year 2023 and, of course, that's going to be dependent on our resolving all these issues
I mean, they are very attractive
The rate of return, and when you say it shifts over, I mean we still own 60% of this business and I mentioned just how large the resource is
So I haven't seen every economic analysis for future development in our industry, but my sense is this is perhaps – this is probably the most attractive rate of return investment in the mining industry today
And, <UNK>, I understand all this has been a moving target and change and what we would plan to do as we – when we complete our long-term agreement with the government is have a face-to-face session with analysts and investors and walk through this in some detail so that we make sure that there is a clear understanding of the value of this business
And we haven't done that to date, because we've been so focused on trying to resolve the issue with the government and all of these values are dependent on getting that resolved
Thanks for your questions, <UNK>
So, Chris, the way this works is, capital expenditures are divided on the basis of whether they're replacement capital or expansion capital
The Grasberg Block Cave is deemed to be replacement capital
And so Rio Tinto share of those costs are relatively small
They pay the same percentage of that, that they would pay as determined by their share of revenues and how much operating costs they pay, and that has been relatively small to date
The Deep MLZ project is a growth project, and they pay 40% of that
And we years ago entered into an agreement that the common infrastructure that's used to develop both of those resources, and ultimately the Kucing Liar resource is shared 50:50. So they are making some capital commitments, and they've made those consistently all along
The bulk of the capital is funded by Freeport under the current situation
And I will say, we have an excellent working relationship with Rio Tinto, and have had from the start
They're engaged in what we do
We're transparent about everything, they have the input
There is one contract that's shared by Freeport and Rio Tinto and they have the right to approve any changes to that contract that has an adverse impact on their company, so it's important that we are aligned and to date we are aligned
We're all concerned – we are both concerned about the future and recognize the importance, particularly important for Rio Tinto because without getting this extension, they actually have no value to speak of in the business
And the agreement has a kind of do-right provision and over the years each of us have approached it in that standpoint
It's a complicated agreement
Doesn't spend any time, and wish you've done it different way back in the mid-1990s, but we are where we are and they are very good partners
And we feel a very strong responsibility to represent their interest in the right way and we'll do that
It'll vary somewhat, but it's roughly $200 million a year
Red Conger runs our operations in the Americas
And I don't want to drag this out too long, but that's been a strength of our business
I mean, we go back years – through the years as Phelps Dodge was the leader in SX/EW, but it was also active in developing mills over time, at Candelaria for example
And PT-FI was a real leader in developing large-scale SAG mills and then high-pressure grinding rolls
And we've taken that experience and brought it forward to the expansion project that we had in Morenci where we had a new mill design, the recent expansion at Cerro Verde with new mill technology
And now we want to keep building on that and working with our suppliers and contractors, as Kathleen said, to have these opportunities with much improved economics and energy efficiency and so forth
Well, I'd say yes to both questions
The Minister of Energy and Mines is taking the lead and has been authorized by the President to represent the government
So, he is the point person in these negotiations, and he's a guy with a good business background and we can talk with each other in a very straightforward, candid way
The Minister of Finance is also involved in a significant way
But there's – in a country like Indonesia, there are divergent views and so our challenge will be to find a way to reach an agreement that is acceptable to the Minister and to the President and works for us
No, it's six months
I mean, this temporary IUPK lasts until October and so we need to get a long-term resolution during that timeframe
Yes
Yes, and the MoU makes that clear
The issue is, we would then fall back with their regulations, which would restrict our rights to export, but the timeframe – and this was a – we had suggested this back in January – was to give us a period of time to negotiate a long-term solution and during that period allow us to export and allow our contract – recognize that our contract stays in place, and that's what the MoU does, and this MoU will be filed publicly
The MoU doesn't address arbitration, but the notice period has been initiated and that will run through the end of June
And under the terms of the contract which remains in place, either party has the right to move to arbitration after mid-June
And we manage our business on the basis of metal output as opposed to mill rates
I mean, and the mill rates will vary, as Mark says, depending on the nature of the rock and we are in really high-grade material now, so we need to
And that again is the quality of the ore
we had over 92% on copper
And that's very much driven by the high-grade portion of the Grasberg, which we'll be mining consistently to the end of the pit
What you have to take into account is that we sell a significant portion of our molybdenum output in a chemical form as opposed to looking the quoted price is for molybdenum metal and the chemical product is a much higher valued product
This is – we're able to do this as a result of investments that were made over many years
And then we enter into supply contracts to refiners and others who use this chemical-grade molybdenum and its realizations are significantly higher than metallic molybdenum
It's a really good point and that's what has led us to be reluctant to turn it off, because this is a highly skilled group of workers that are involved in this block-cave development
And if we demobilize that group, then we would be faced with a period of time to remobilize them and get them back to work
And it's not a matter of weeks, but it's a significant operational issue for us to disperse that team and there are other major block-cave operations going on around the world
And then to bring them back together would be a period of time measured in months rather than weeks
Well, I was just down in Chile at the Cesco Group and saw a number of my associates in the industry
And we were all talking about that versus a correlation between copper prices and labor problems
And so, as the copper prices increase, that's heightened the aspirations of labor for better deals, and then I always say that labor problems are contagious disease that once someone experienced one, they tend to happen in other places and we've certainly seen that with Escondida, ours, the Southern Copper situation and unions are talking everywhere about the situation
Yeah
There was some impact in Cerro Verde from the weather and the strike situation
The principal impact of that's going to be longer term than I mentioned because we kept our mill basically running during the quarter, but our mine rate was – in the month of March, we have about half of what it has been in the first two months
Now, we returned that to that level, but that's going to have some ongoing impact
The rest of it, John, is just normal issues you face in running a business like ours
Well, that was in the – that was the subject to one of the new regulations that was adopted in January, and that regulation is still in place
And that's going to be one of the issues under discussion as we enter into these negotiations
And the more significant issue we're working on to manage is the abandonment costs that we faced as a result of this business
So, that's something that's getting a lot of attention, and we're continuing to unwind some commitments on cost that is a carry-over for certain facilities and office space and so forth, but we've made a lot of progress with that
Evan, the worst thing I could do is, get out in front of the negotiations and discussions in answering a question like that
As I mentioned, the issue of divestment is on the table
And that's going to cover the range of issues, including the percentage of the investment, the process for divesting, the valuation for divesting and the carry-on issues related to operatorship and governance of PT-FI
So, I think, at this point, the only thing I can say is that those are on the table
Our broad objectives, as we go into the negotiations, are going to be to protect the value of this asset for our shareholders and to find a way to reduce the risk that's overhanging the situation now and provide a stability for the long term
And we need to have that stability to warrant these investments
I mean we've been running this business for years and the government has been cooperating with us on it by making investment for production that's to be received beyond 2021. So, we have to get that situation clarified and de-risked
The one thing that we will insist on that any divestment to be made on the basis of the fair value of the assets
That has not happened and with the dramatic change in the cobalt market, that's occurred since we closed our deal with China Moly
That matter is under discussion, so it is – let me just leave it at that
It hasn't happened, it's under discussion
No, we didn't commit to sell it, we committed to give them an opportunity to negotiate with us for it
But we didn't agree – it wasn't a price that was agreed to, and there was no firm commitment on either party to close the transaction
Okay
Thanks, everyone
We look forward to reporting further progress
