Carlos de Alba: Yes, good morning, Kathleen and Richard. So the question I have is really on the discussion on the Indonesian funding, the Indonesian projects funding. Just to revisit, the smelter is now being paid by proceeds from the PT-FI senior notes and the revolving credit line. I just wanted to check if that is something that will continue as it is right now, and what about the funding for the other CapEx projects, KL, and other expansion of the Crusher and the new SAG mill there. Is that going to also be paid by these senior nodes and the internal cash regeneration? Or do you expect your non-controlling partners to contribute cash for those projects? And then maybe associated with this is how should we think about the dividends paid to non-controlling interest going forward?
Kathleen Quirk: With respect to your question on the first topic, the Smelter project is being debt financed. And so we raised $3 billion in financing last year in long-term bond financing at the PT-FI level. So the economics of that, even though it’s consolidated on FCX’s financial statements, the economics essentially are borne by PT-FI shareholders. And we have a revolving credit facility as well to supplement that. So the Smelter, and that’s why we look at it separately, it doesn’t impact the cash flow we have at the FCX level that’s available for distribution because it’s being funded through these proceeds. With respect to other capital projects at PT-FI, those are funded internally at the PT-FI level. So when we look at the projects we’re doing to complete the new SAG mill, when we look at the copper cleaner project, all of the capital projects at PT-FI, those are funded with that subsidiary’s internally generated cash flows, which is very significant.
And so, yes, as you increase capital there, it does reduce the dividends that come out of PT-FI. But these are really good projects that PT-FI has the ability to fund with its cash flows and distribute substantial amounts to its shareholders. In terms of the dividends there, that’s really a function of what the performance of the business is. We have a policy, a dividend policy at the PT-FI level where all of the available cash flow is distributed to shareholders and FCX gets 49% of that and MIND ID gets 51%. But that’s the policy that we’re following and expect to continue to follow.
Carlos de Alba: All right. Thank you, Kathleen.
Operator: Your next question will come from the line of Bill Peterson with JPMorgan. Please go ahead.
Bill Peterson: Yes. Hi. Good morning and thanks for taking the question. And nice job on execution given all the challenges out there. My first question is actually a bigger picture question tying to an earlier question. So, if you take into account this broader inflationary environment, increased project financing cost, I guess where does pricing need to be and how sustained does that need to be for Freeport and maybe even industry if you want to comment on that, but specifically for Freeport to support projects such as Baghdad expansion or El-Abra as examples?
Kathleen Quirk: Well, we’re updating our capital costs now for El-Abra. Previously when we ran the economics several years ago, it’s been a few years ago before the pandemic when we outlined the potential for the project, today’s price would have worked fine. It would have been a good return. But there were other factors that led us to put the project on hold. In today’s world, we need to retest those economics. I mean, just look at the recent project in Chile of how much that cost increased and it’s a huge, multi-billion dollar impact. And that impacts our thinking and that impacts economics. So, we don’t think we know the economics we ran previously don’t apply currently. And so, we’ve been doing some work, we’ve been doing some additional work on the resource and we’ve got some positive things that have developed since then that will help the economics, but this capital cost inflation is a real issue and it’s something that we need to keep in mind.
On the Baghdad project, this is a project that with El-Abra, these are new reserves. So with El-Abra, it would allow us to produce reserves currently in the ground where we don’t currently have infrastructure that can produce those reserves. At El-Abra, I mean at Baghdad, it’s a different analysis. At Baghdad, we can produce those reserves over 80 years or we can double our processing capacity and produce those reserves over a shorter period of time. And so you have to look at the capital cost and how that interplays with it being an acceleration of production rather than new production. So we’re looking, we’re completing the feasibility study. The costs we believe are going to come in higher than what we expected them to and so that will have an impact on us.
The other thing that will have an impact on our decision will be the availability of labor and whether we can execute that project efficiently. We’re doing some things now to create options. We got the autonomous plans to put in autonomous haulage at Baghdad. It’s our first mine in the U.S. that will do that and that’s exciting for us and that creates options for us in the future. And we’re doing some work, some early works to give us options there. But the numbers don’t work. I think if you ask people in the industry, what it takes, people are going to tell you it’s over $4 to develop new projects. But every project is different and that’s why when we look at this leach opportunity, the potential to add 800 million pounds of copper with very low capital costs is very compelling and so we’re going to be looking for opportunities in the near term during this uncertainty to expand our production but it’s going to be through innovation, automation rather than high capital intensity.
And we’ll continue to test that and that will continue to evolve but that’s the current thinking is that right now the copper price is not enough to support a major investment in a big expansion or a greenfield project.
Bill Peterson: Well understood and thanks for that color. I guess just on the second question on working capital, so how should we think about the cadence of working capital through the balance of the year given exports have now resumed in Indonesia? Are you still expecting a slight use for the year?
Kathleen Quirk: Yes, it’s a use but we expect some of that will turn in the fourth quarter. Some of what we had in terms of the inventories and receivables will turn but we are expecting a use for the year.
Bill Peterson: Okay, terrific. Thank you.
