Freeport-McMoRan Inc. (NYSE:FCX) Q4 2023 Earnings Call Transcript

Freeport-McMoRan Inc. (NYSE:FCX) Q4 2023 Earnings Call Transcript January 24, 2024

Freeport-McMoRan Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session [Operator Instructions]. I would now like to turn the conference over to Ms. Kathleen Quirk, President. Please go ahead, ma’am.

Kathleen Quirk: Thank you, and good morning. Welcome to Freeport-McMoRan conference call. Earlier this morning, we reported our fourth quarter and full year 2023 operating and financial results. And a copy of today’s press release and supplemental schedules and slides are available on our Web site at fcx.com. Our conference call today is being broadcast live on the Internet and anyone may listen to the call by accessing our website homepage 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 the call include non-GAAP measures and forward-looking statements and that actual results may differ materially.

I would like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. Also on the call with me today are Richard Adkerson, our Chairman and CEO; Maree Robertson, our Chief Financial Officer; Josh Olmsted, our COO of Americas; Mark Johnson, Operating Officer for Indonesia; Mike Kendrick, who runs our molybdenum business; and Steve Higgins, our Chief Administrative Officer. We’ll start the call with some opening comments from Richard and then we will go through the slide presentation materials and then open up the call for your questions. So I’ll turn it over to Richard. Richard, go ahead.

Richard Adkerson: Okay. Good morning, everyone. As you can see, our first quarter was really a sound quarter and outstanding in several respects in terms of our operations. It was really led by PT-FI during the whole year of 2023. We began our ramp up in 2019 of the underground and now we are fully operationally, and the team has been setting records consistently out there and have just outperformed for the full year and faced some really challenges, which is just part of that business. But I’m very proud of our PT-FI team at job site in Jakarta. We are making great progress and fulfilling our 2018 commitment to the government to invest in downstreaming and the copper concentrate business. In December, I was there for the inauguration of the expansion of the older smelter, PT Smelting with President Joko Widodo and that was a good event.

And then with our new smelter at Manyar in Eastern Java, we reached an important 90% milestone at the end of the year and we’re progressing for physical completion of the smelter and ramping it up on schedule in 2024. A couple of words about the markets. It continues to be the micro versus macro story. Notably, in 2023, the macro factors strengthened notably. 2023 had long been forecasted to be a year of surplus because of new mines coming on stream, but it ended up being a small deficit. And at the same time, there was stronger than expected demand for copper in the United States and in China despite all the issues with China’s property business other sectors created a notable growth for copper in China. Then there were the supply shortfalls throughout the industry for some significant mines and these for range of factors that are kind of common to our business.

The copper business, mining business is a tough business, but it was political issues in some countries, community issues and then operating issues. As a result of all that, inventories of copper around the world are at historically low levels and the inventory levels are really inconsistent with the current copper price. The copper price clearly being driven by macroeconomic factors. The currency, the strong US dollar, carryover effects of inflations, government fiscal policies, and there are concerns about economies in China and Europe. But if the macro outlook — and I’ll just say when the macro outlook improves, watch out for the copper price. Looking ahead, the world’s going to need significantly more copper in the future for a variety of factors.

The world’s just becoming increasingly electrified and that’s what copper is used for. And it’s at a time when the industry is simply not investing to grow production that the outlook indicates that will be required for economic, operational and resource nationalism, a series of factors, but the facts are there’s an outlook for strong demand and supply challenges. That’s why I’m so personally confident about where Freeport is positioned and pleased with it. We have high volume existing production that’s sustainable. We have large sustainable reserves and resources. We have growth opportunities that we will pursue prudently from this really exciting leaching initiative that Kathleen will be talking about and from brownfield expansions of our existing orebodies.

Before turning over to Kathleen, I just want to send a note of condolences to our friends at Rio Tinto. You may have seen the news, but they had a plane to go down in Canada heading to their diamond operations there. Rio has been a special part of Freeport’s history. Of course, they were our partners for many years at Grasberg. I have worked with six, seven, eight CEOs over my career. Some of my closest colleagues have been with that company. And the toughest part of being a CEO is to lose people and I’m just so sad to hear this news and the whole Freeport family’s heart goes out to our friends at Rio. With that Kathleen, I will turn over to you.

Kathleen Quirk: Okay. Thank you, Richard. And I will be covering the presentation materials starting with Slide 3, our achievements for 2023 are summarized here. Our sharp focus on executing our plans in an effective, safe and responsible manner, managing the controllable drivers and navigating challenges successfully, all translated into solid operating results over the year. A big highlight for the year was the outstanding progress in Indonesia where we grew production levels for the fourth year in a row. We posted several new operating records and we continue to enhance values for this large scale, low cost and long life resource. We were also successful in reaching several milestones during the year, including reaching our target run rate for incremental leach production in the Americas, enhancing optionality in the Americas for our brownfield growth projects and reaching our targeted 90% completion milestone for the Indonesian smelter project by the end of 2023.

As a leader in the industry, we were one of the first companies to have all of our operating sites certified under the copper and molybdenum marks, and this demonstrates our performance and commitment to responsible mining practices. We ended the year 2023 in a strong financial position, a positive outlook and as we work together to enhance long term value for shareholders. On Slide 4, we summarize the key results for 2023 compared with historical levels. After growing our volumes from 2020 to 2021 and 2022, we were able to same production of copper in 2023 despite a challenging environment for copper supplies Richard discussed, and we reported another year of growth in gold production. Our unit net cash costs for 2023 were above the 2022 level as expected but they came in very close to our original guidance for the year.

We are continuing to actively manage cost and profitability initiatives to address cost inflation, and we will be working on that as we go forward. For the year 2023, we generate strong EBITDA of $8.8 billion and operating cash flows of over $5 billion. We are continuing to carefully manage not only our operating costs but also capital expenditures with a priority on spending on projects to sustain production, improve efficiencies and enhance optionality for future development options with attractive rates of return. During 2023, we returned $860 million to shareholders, bringing the total shareholder returns to $3.8 billion since we implemented our performance based payout framework in 2021. We ended the year with net debt of approximately $800 million and that excludes the smelter related debt, which is being financed separately.

I’m going to move to Slide 5 and talk about the fourth quarter. During the fourth quarter, our sales were 3% above our estimates going into the quarter. Our gold production was also very strong. But our shipments of gold in the fourth quarter was slightly below the previous estimates and that reflected timing in these shipments when we made in the first quarter. Unit net cash costs averaged $1.52 per pound in the fourth quarter that was better than our guidance of $1.58 per pound and slightly below the year ago period. Notably, unit net cost, cash costs in Indonesia were zero in the fourth quarter, zero cents per pound, meaning our gold credits completely offset the production cost for copper. Average copper realizations in the fourth quarter were $3.81 per pound and we generated $2.3 billion in EBITDA and operating cash flows of $1.3 billion.

We go around the world and talk a little bit about our various operations in the fourth quarter. In the US, we made progress in increasing our mining rates, that’s been a big focus during the quarter with a 9% increase over the year ago quarter. We have a continued focus on improving our asset efficiencies and workforce experience levels. These are important initiatives as we seek to increase productivities to combat lower ore grades. Our innovative leach initiatives met expectations and also helped to mitigate the impact of lower ore grades in the US. Labor market conditions in the US continue to be tight. We’re taking steps to expand housing options in our remote locations for recruiting and retention, and we’re also continuing to pursue technology solutions to enhance productivity.

Conversion of the bad debt truck fleet to fully autonomous is advancing and we’re targeting to commence the transition in the second half of next year. In South America, our ore milled was sustained above 400,000 metric tons per day and our ore stacking rates increased at El Abra. No recoveries at Cerro Verde in the fourth quarter of 2023 were below the year ago level because of the material types that we’re mining in the fourth quarter. This is continuing for mining phases in early 2024 and we’re working to optimize performance. As Richard discussed, the fourth quarter performance in Indonesia was exceptional. Underground ore mined averaged over 214,000 tons per day and that was 8% higher than the year ago period. Combined with strong grades and recoveries, our copper and gold production in the fourth quarter was over 20% higher than last year’s fourth quarter.

We completed the installation of a new SAG mill at PT-FI in December and that’ll provide additional opportunities for us going forward. And the team is just doing outstanding work, sustaining and optimizing value from this large resource position. We thought it’d be good to look back in history of how the underground transition has gone, Slide 6 covers this. We show the history of the progression of the transition. As Richard mentioned, we stopped mining from the surface in the Grasberg open pit at the end of 2019 and transitioned to fully underground operations beginning in 2020. We have a long history in Indonesia, spanning over 56 years and a great track record for building value over many years for all stakeholders. We’re extremely proud of the team’s execution on this transition.

We now have the world’s largest underground mining complex and it’s been developed in a modern efficient operation. The Grasberg is the world’s second largest copper mine and one of the largest gold mines, even though gold is a byproduct. High grades of both copper and gold make it one of the lowest cost operations in the world as well. This took a lot of planning. We began planning for this underground area over 25 years ago and commenced development activities in 2004. And as you can see from the graph, the project is performing exceptionally well and generating strong margins and cash flows. As we look forward, we are continuing to make investments in this resource to enhance value and sustain long term performance. We are working on the extension of our operating rights beyond 2041 and increasingly confident about securing our long term rights, and that would extend lives of our resources and open a whole new set of opportunities for this district.

Richard touched on the smelter progress and this is really important for us in terms of securing long term rights. We reached two important milestones on these initiatives in 2023. The projects include a new greenfield smelter in East Java and expansion of our nearby existing smelter, which was developed in the late 1990s. Richard mentioned we celebrated in December the completion of the expansion project with the Indonesian Government and our Japanese partner. And we also reached a really important milestone on progress of the greenfield project with completion progress achieving a target we set with the government of over 90% by the end of December. We posted a video this morning on our Web site that shows the Greenfield smelter project. You can see all the progress that’s been made and you can see the sheer size and scale of this impressive facility, and I hope you will have a chance to look at it.

Both projects have been executed very efficiently in the context of a challenging market for major project development. The internal team that we have working on this project together with our contractor have done an outstanding job containing costs and maintaining schedules. We are working to complete the construction by the end of May of 2024 and to start commissioning and to conduct the ramp-up period over the balance of 2024. This is a big deal for us. It’s not very frequent that you see new smelters starting up, and we have done a lot of planning going into the start up process. Our teams are well prepared and really highly motivated to achieve a safe, efficient and timely start-up in 2024. Turning to the US and the Americas where we’ve got an important leach initiative ongoing.

We achieved our targeted run rate where we were targeting approximately 200 million pounds of copper per year by the end of 2023. This is an exciting and innovative initiative involving new operating practices being applied to our traditional leach operations and really working to get more out of our massive stockpiles that contain material that has been placed in prior years. Remember as we talked about on prior calls, the cost of this, the incremental cost of production, is low from both an operating and capital perspective, because we’re targeting material where the material has already been mined and we’re largely using existing infrastructure to extract the new metal. The first phase of this initiative essentially involves four basic categories of actions.

One, as we talked about previously, we commenced the process to install covers over the stockpiles to increase heat retention and drive higher recoveries. Two, we gained access to areas in the stockpiles that have not previously had the benefit of leach solution initiative, we call leach everywhere. Three, we started using drilling techniques to specifically target areas within the stockpile where solution was lacking. And importantly, the fourth area is developing more sophisticated models using data analytics to optimize the application of solutions to improve performance, and using this data as a valuable tool in guiding work in all the areas of initiatives in this important program. As we look at where the impacts came from, you can see most of the incremental production was from our Morenci mine.

That mine has a very long history of leaching operations. We have a massive set of stockpiles there and a very large opportunity set at Morenci. As we go to Phase 2 of the project where we are working to essentially double the initial target from 200 million pounds to 400 million pounds, we really are looking at just scaling these practices further. And by continuing to scale the operating practices, we think we can double the initial target over the next two to three years. And as we continue to work to sustain the production, we can add to our reserve position, and that’s a real focus of ours to capitalize the progress into long term reserve additions. The first and second phase of this initiatives is really operationally driven using existing technologies.

The third phase, which is also very exciting, is really the work that we and others are doing to advance the leaching process using different additives and different techniques, and this is more of an R&D effort but it’s being advanced. We’re commencing a large scale testing activity to evaluate the response to new additives. And we’re also evaluating opportunities to get more heat retention in our stockpiles, and heat really is an enabler of more copper production and higher recoveries. In aggregate, these initiatives have the potential to reach 800 million pounds per annum and that’s equivalent to a large scale copper mine. And notably, it’s got very low capital intensity and you have seen how much new copper mines cost. This is a very low capital intensity, low incremental operating costs and a low carbon footprint.

The value potential here is very attractive, particularly for a company like Freeport to take advantage of given our large quantities of suitable materials that we previously mined. Richard touched on copper markets earlier and we have some information on Slide 9. Physical markets have continued to tighten, inventories have declined and demand is growing. Despite the weak sentiment over the last several quarters on the Chinese economy and property sector, the reality is that China’s copper consumption was strong throughout 2023 and this reflected the intensity of copper used in energy infrastructure, renewables and electric vehicles. In the US, our customers continue to report solid demand for copper with growth in several sectors. At the same time, supply disruption increased meaningfully in recent months.

In total, near term supplies of copper had been reduced by over 700,000 tons in a very short period of time. The market was previously expecting that 2024 would be a small surplus market and turning to deficit beginning in 2025 timeframe and continuing for some time. With the recent supply disruptions and continued demand growth, the deficit market has been advanced into 2024, setting up for tight market conditions in the near term. While the fundamentals have become significantly more positive, macro conditions tied to US dollar strength and sentiment about China have influenced copper price movements. Richard mentioned we believe the fundamentals of the market will lead to significantly higher copper prices in the future and that’s supported by anticipated strong growth in demand associated with secular trends and the global economy’s requirements for copper.

Also, the realities of the cost and time frames required for new supply development is an important factor when we look at the fundamental outlook for copper. Turning to how Freeport is positioning to try to grow production in response to this market demand. On Slide 10, we really look at the sizable reserve position of copper and even larger resource position that Freeport has that supports a pipeline for future growth options. Within the portfolio, we look for opportunities to get more out of what we have through innovation and operating efficiencies. We look for investments and projects so we have large resource positions and where we have established track records and opportunities to leverage the existing infrastructure, our people and capabilities, all with the drive focused on increasing value.

We categorized on Slide 10 our near term, medium term and longer term development options. And we have outlined identified projects totaling about 1.7 billion pounds of copper in the Americas. And we have also highlighted on the slide the ongoing development of the Kucing Liar project in Indonesia, which is expected to support long term production profiles in the Grasberg District. The opportunities that are shown on the slide in the two to three year category they center around scaling our leach initiatives and achieving incremental production from our operational improvement projects. Together the potential from these opportunities total 400 million pounds of incremental copper per annum and do not require significant investment or long lead times.

We discussed earlier the leach projects but we’re also dedicating significant resources to enhancing productivity and asset efficiencies, rebuilding the experience of our workforce given the large number of new hires in recent years and utilizing new technologies and automation to restore and improve on productivity metrics that weakened somewhat during the pandemic. As we indicated, we completed a feasibility study late in the year 2023 to evaluate a project to more than double the size of our Bagdad operation in Northwest Arizona. The reserves at Bagdad are — span for decades and they support expansion of infrastructure at the site to bring value forward. The incremental capital costs to build a new concentrator and support infrastructure for significantly higher mining and milling rates is on the order of $3.5 billion.

And an expanded operation would not only substantially increase copper production but would produce economies of scale and reduce unit costs. The project does not require major permitting and is relatively straightforward. But given the tight labor market conditions and general market factors, we’re not making a decision right now on the timing of the project. We’ll continue to evaluate the timing of when we would go forward, but we are taking steps now to enhance optionality for the future by making some investments in the autonomous haulage for our mining operations, making some investments in housing and also advancing investments in the tailings infrastructure that will put us in a position and we make the decision we could get the project online within a few years.

In Chile, at El Abra, we’ve talked about this. Our resource is very large. We have a major opportunity to install a new concentrator on the order of magnitude size of the concentrator we added at Cerro Verde in 2015. We’ll continue to work to retest the economics and updating our project capital costs in light of recent capital cost experience of other large projects. And in parallel, we’re starting work in preparation for environmental impact statement that would give us the ability to advance the project and provide optionality for future development. We mentioned the Kucing Liar development project in the Grasberg District, which we’ve initiated development on. This is a multiyear development project and it’s proceeding on schedule and we expect to commence production by 2030, ramping up to over 500 million pounds of copper and over 500,000 ounces of gold.

We’re also conducting additional exploration in the Grasberg District where we have identified potential. We’ve got a big potential below our Deep MLZ orebody, and we expect to have additional opportunities in the future at Grasberg. We have a major opportunity in the US at the Safford Lone Star District. We’ve identified a significant resource there. This year, we’re going to work to complete metallurgical testing and mine planning, and start a pre-feasibility study to assess future development options there. We continue to see this district as one that has big potential and potentially being a cornerstone asset in the US adjacent to the Morenci operations. In Indonesia, we’re focused on this extension of our rights beyond 2041 because that would open up substantial opportunity for reserve and resource expansion and a continuation of the large scale mining in one of the world’s largest and highest grade copper and gold mine districts.

We are in a really strong position to continue our leadership role in supplying copper to a world with growing requirements. But we are going to continue to be disciplined in our approach and focused on executing projects where we can create value for shareholders. We have a lot of history in developing big projects, we included a slide on Page 11 that you can take a look at. A key strength of our company is the ability to execute projects successfully. This does not come easy. It requires a focused hands-on approach. And we have got a business model of pairing internal resources with trusted contractors and that has served us well. We have listed several projects that we have led over the years and we have developed very complex projects around the world.

We are going to continue to approach future projects with the same level of preparedness, rigor and a focus on execution. As we look at 2024, turning to Slide 12, we have got our focus areas listed here. And first and foremost, we remain committed to safe and reliable execution of our operating plans across the global business. It seems like a simple thing but this involves discipline and hard work day in and day out. We discussed our focus on enhancing performance in the US through our Leach initiatives and productivity. This is particularly important to mitigate low grades and to manage costs, which have experienced higher inflation in recent years. We are going to have another big year in Indonesia. A key priority for us is to complete the smelter and ramp-up safely and efficiently and to finalize an agreement for extension of our long term operating rights.

We are also very focused on enhancing optionality, definition and the value of our embedded growth options. On Slide 13, as usual, we show a three year outlook for sales volumes of copper, gold and molybdenum. For 2024, the copper sales volumes are slightly reduced less than 2% below our prior estimate and are now expected to be similar to 2023 levels. The gold sales are 10% higher than our prior estimate and higher than they were in 2023, higher sales in Indonesia for the year of 2024 offset by slightly lower sales from the Americas. In 2025, our sales estimates are similar to the prior estimates and we have added 2026 estimates, which you can see are slightly above the 2025 levels. For 2024, we currently estimate our consolidated unit costs to approximate $1.60 per pound.

We have got some details in the reference materials, I believe, on Page 30 that you can look at the composition of those costs, but $1.60 very similar to what we had in 2023. On Slide 14, we put together our projected volumes and cost projections and we model the results for our EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These models use the average of 2025 and 2026 and our current volume estimates and our cost estimates and holding gold flat at roughly current levels of $2,000 per ounce and molybdenum flat at $19 per pound. And you can see here on the charts that annual EBITDA in these periods would range from $10 billion per annum at $4 copper to over $14 billion per year at $5 copper and operating cash flows under these price scenarios would range from $7 billion to over $10 billion.

And we’ve got sensitivities to the various commodities on the right hand side of the chart. We’re really well positioned with long line preserves, large scale production. We not only have current exposure to copper but all of our future projects and growth opportunities are well positioned to benefit from future metals intensive growth, and this will give us the ability to generate returns on projects and enhance cash returns under our performance based payout framework. Turning to the capital expenditures, on Slide 15. We show our current forecast for 2024 and 2025, which also show where we ended up for 2023, which total of $3.1 billion and that was slightly lower than what we’ve guided to in October of $3.2 billion. And capital for 2024 is currently forecast to approximate $3.6 billion compared with the $3.9 billion previously.

The 2025 estimates that are new here are currently estimated to total $3.8 billion that includes $1.2 billion in discretionary growth projects, which totaled $2.4 billion over the 2024 and 2025 years. This category reflects the capital investments we’re making in new projects to generate returns that under our financial policy are funded with 50% of available cash that’s not distributed. They’re value enhancing projects that are detailed in the reference materials on Slide 33. We’re going to continue to be very disciplined around capital expenditures, carefully managing those. You saw we adjusted the capital expenditures down for 2024. And as we go forward, we’ll continue to look at opportunities to do things, to sustain our business and to do things on a low capital intensity basis.

And finally, before we take your questions, we — just on Slide 16, we reiterate our financial policies and those are prioritized, centered on a strong balance sheet, cash returns to shareholders, and investments in value enhancing growth projects. Balance sheet is solid. We’ve got strong credit metrics and a lot of flexibility within our debt targets to execute on our projects. You may have seen that Moody’s upgraded our credit rating in December and that just demonstrates our strong financial profile. Indicated on the slide, we’ve distributed almost $4 billion to shareholders through dividends and share purchases since the payout framework was implemented in the second half of 2021, and we have an attractive future long term portfolio that will enable us to continue to build value, long term value for shareholders.

The global team, as we go forward, is really highly focused on our strategy of being foremost in copper. And we’re driven to continue pursuing long term value in the business and executing our plans responsibly, safely and efficiently. And I want to thank everybody for their attention, and we’ll now take your questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Alex Hacking with Citi.

Alex Hacking: Richard, I guess my question is around Bagdad and the technical study. Now I was a little surprised by how high the CapEx was $3.5 billion or incremental 100,000 tons, that’s about $35,000 a ton. I mean, in your view, is that the new normal for a concentrate project or are there particular factors the fact that are raising the CapEx above historical levels?

Kathleen Quirk: I think it is somewhat of a new normal for the cost of a concentrator and related mining infrastructure. When you’re dividing on the cost per ton, you’re looking at how many pounds of copper are going to come out of that concentrator. And our US mines are characterized by relatively low ore grades, and Bagdad has relatively low copper ore grades but also has molybdenum kicker. So molybdenum would add something like 10 million pounds of molybdenum with an expansion. So that will be another benefit. But really, what we need to do is focus on — it does bring down our overall cost per pound. So that’s a big plus for us. When you look at an investment in the US, it may be to develop a relatively low grade mine. But something important to point out is that we don’t have the tax burden in the US that you have in the international location.

So I think our projects in the US, while they’re low grade, when you cut through all the economics and you look at the ability for us to execute the projects and look at the risk associated with them are different than looking at a project in a different location. So there’s some pluses or minuses that go into the bottom line. But we started this work on Bagdad some time ago and we’ve updated all of the capital costs in line with where current capital costs are. And so I think a reality of the market is that the incentive price to develop new copper, even if it’s brownfield, is much higher than it has been in the past. And that’s another reason why we believe that the markets that they need these copper units are going to have to adjust to the incentive prices required to get these projects going because we don’t want to front run the market.

We want to be prepared, we want to be — have options to go forward as soon as we can. But we don’t want to be in a position where we’re investing in making major capital commitments before the market prices are telling us already.

Richard Adkerson: Alex, let me just add very briefly that Kathleen makes a really good point about these relative economics. No royalties in the US. US tax rate is much lower — federal tax rates much lower than outside the US. We have a net operating loss carryforward. Community support is strong in the US and we have no minority interest there. So looking at global benchmarks needs to be adjusted for the site specific factors that we have in the US, and they’re very positive.

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

Carlos De Alba: Question is on cost. I just want to see if you can provide a little bit more color. The guidance for the first quarter of net unit cash cost of $1.55 per pound, looked very, very good relative to consensus stations and our own estimate. However, for the full year, the guidance came at $1.60 and that is a little bit higher than the market — than again, consensus and our model suggests. So what are you expecting, what the viability in this, were you surprised at the beginning of the year but then maybe throughout the rest of the quarters is increasing, what is driving that? And to what extent this number for the year is conservative?

Kathleen Quirk: In terms of the first quarter, we do have some gold that was not shipped in the fourth quarter that will be shipped in the first quarter. And so the relative gold-to-copper ratio impacts the first quarter and makes that less than what we expect the average to be for the full year. I don’t know what — Carlos, what you had in there for export duties, but we’re assuming in Indonesia that those are continuing. We are continuing to discuss with the government of Indonesia the applicability of those duties. And I think the more that we make progress on the smelter the better our case there is. But that’s something we factored into the estimate but we are continuing to have that discussion. So if we are successful in reducing those duties that would be a benefit.

Carlos De Alba: And just to clarify then Kathleen. The cash cost guidance for the year of $1.60 includes the duties in Indonesia, concentrate exports remain throughout the entire of the year, right, the full year?

Kathleen Quirk: Our export — it only applies to export volumes. And so as we go through the year, the exports will decline because we’ll be ramping up the smelter. So our goal for 2024 is to get the full ramp up completed. And so that’s not something that will continue long term the duties once we get the smelter up and running. But it will start to decline over the course of the second half as we ramp up and we produce more domestically.

Operator: Your next question comes from the line of Christopher LaFemina with Jefferies.