Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Second Quarter Earnings 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, Executive Vice President and Chief Financial Officer. Please go ahead, ma'am.

Thank you and good morning. Welcome to the Freeport-McMoRan second quarter 2014 earnings conference call. Our results were released earlier this morning and a copy of the press release and slides for today's call are available on our website 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 would like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements and actual results may differ materially. I’d like to refer everyone to the cautionary language included in our press release and presentation materials, and to the risk factors described in our Form 10-K and subsequent SEC filings. On the call today are, Jim Bob Moffett, our Chairman of the Board; Richard Adkerson, President and Chief Executive Officer; Jim Flores, President and Chief Executive Officer of Freeport-McMoRan Oil & Gas and we have got other senior members of our team here with us today. I will start by briefly summarizing our financial results and then turn the call over to Richard who will review our recent performance and outlook. Today, FCX reported net income attributable to common stock of $482 million or $0.46 per share for the second quarter of 2014. The next income attributable to common stock during the second quarter 2014, included charges totaling $130 million or $0.12 per share comprised of $58 million for environmental obligations and related litigation charges, $58 million for deferred taxes recorded in…

Good morning, everyone. As Kathleen talked about results for the second quarter reflects strong performance from our mining operations in the Americas and Africa, and from our oil and gas business. It does reflect the impact of the restricted sales from Indonesia, because of this export situation and I will be talking more about that. Our outlook at the first quarter earning release was based on assumption of resuming production in the May and the export restrictions lasted throughout the quarter. We did make good progress on our growth projects. At Morenci, we are commissioning of our new mill started in May and we are in ramp up process for that. The major construction project at Cerro Verde is progressing well towards the 2016 start-up. Jim, will be talking about the Lucius development, the operator Anadarko expects first oil in the second half of this year and the Highlander project, onshore in South Louisiana is advancing towards completion activity is also in the second half of this year. We completed the sale of the Eagle Ford asset and the acquisition of the deepwater Gulf of Mexico interest that enhanced our position for the focus area of our growth in oil and gas business for the future. We are actively in the process of pursuing additional asset sales transactions, all part of our goal of targeting a major debt reduction by 2016 -- by the end of 2016. As a matter of information, we have changed the name of our company to Freeport-McMoRan from Freeport-McMoRan Copper & Gold to reflect expanded scope of our business. Our ticker symbol remains FCX. The financial highlights that Kathleen reviewed are included on page four. The major difference from the data that we presented to you earlier has to do with the Indonesian restricted production…

Thank you, Rich, and good morning, everyone. The oil and gas business continues to click alone quite nicely that with strong crude market, I think everybody has paid attention to the political unrest around the world and it’s helped (indiscernible) not the near-term but the long-term tail of the crude oil market and so, it helps our transaction business but also for standpoint our realizations continued to hold up very well mainly in the Gulf of Mexico. When we talk about sale of 60 million barrels, 5% above our investment and Kathleen said as, due to strong performance in the Gulf of Mexico and also our Eagle Ford with a $58 barrel margin and 50% of that comes from the Gulf of Mexico $73 BOE margins. The results today do include our Eagle Ford production because actually we sold at the right end of the second quarter. So third quarter going forward we will not have the Eagle Ford in it but we will have additional resources from the Gulf of Mexico and it continues to replace those reserves that we sold to $3.1 billon. Talking about that transaction on page 12, we sold to Encana it here, as we fully acquired. We rotate it. It’s about $900 million of deepwater Gulf of Mexico interest. We consolidate more interest in the Lucius oil development, that’s operated by Anadarko that we have significant interest and gives us just about quarter interest in that development. And this is on schedule for the second half of this year September, October start-up as far as we always bringing that nice oil reserve on production. Our Heidelberg oil development is a new entry for us. Anadarko also operate 12.5% interest in Heidelberg. It’s another significant Miocene play just west of our Holstein. It’s very integrated…

Okay. Thanks Jim. We’re updating our outlook. It reflects the -- from our previous outlook the delay in getting restarted at Grasberg. This is based on a resumption of exports, returning to normal operations in August and shows sales outlook for our company as a whole of 4.1 billion pounds of copper, 1.3 million ounces of gold, 98 million pounds of molybdenum. By the way the price of molybdenum is up over 30% this year and oil equivalents of 58.4 million barrels equivalents. That’s lower than previous because of the Eagle Ford sale. And as Jim said, we’ve got investment activities to look for future growth in that area. We are now projecting at -- for the year, unit cost of a $1.50 a pound, that’s $1300 of gold and $12 of molybdenum and $20 of barrel equivalent for oil. Operating cash flow is at 325 copper for the second half would be at $6.8 billion and capital expenditures now are looking to come in at $7.6 billion. Our sales profile looking forward shows the significant growth for copper as we complete our expansion projects and see the effects of those expansions projects plus the year 2016 reflects in essence the final activities in the Grasberg open pit where we’ll have very high grades of copper and you will note the planned gold sales for that year are exceptionally high. Note also at the bottom right, the growth in oil and gas sales as these expansion projects, Jim just talked about coming on stream. Quarterly outlook is presented on Page 19. Again based on restart at Grasberg in August and having a very strong second -- particularly the fourth quarter is for copper and for gold that’s our detail that would result on that basis of an improvement in our…

(Operator Instructions) Our first question will come from the line of Jorge Beristain with Deutsche Bank. Please go ahead.

Good morning everybody. Yes, Jorge here from DB. Just wanted to follow up a little bit on the comments Richard, maybe, that were made at the start on the presentation 5 where you had mentioned that there was a possibility of selling other assets and then just picking up as well on Jim Flores’ comments about potentially even shrinking your oil and gas footprint further from potentially selling things in the $5 billion range and then rebuying stuff in hundreds of millions of dollar range. So just kind of wanted to understand from a balance sheet perspective, how is Freeport feeling right now? Do you feel that on a go-forward basis, you’re going to have to really do some asset sales to really make those to $12 billion net debt -- sorry debt target three years out. Just trying to understand really what’s driving the divestiture landscape a little bit. There has been some rumours on Candelaria and now there is some talk of further oil and gas asset sales. So just trying to understand how you’re feeling on your balance sheet right now?

Well, we are facing the fact that we’ve had lower copper prices than we had going into the acquisition of oil and gas deal. We had the deferrals at Grasberg. I mean that’s just part of the nature of our business. We have issues that we face and those create headwinds to reaching that. We don’t know what copper prices are going to be in 2015 and 2016, and we are not going to bet our business on predicting prices. The way we’ve been looking at assets to sell, and I think Eagle Ford is a great example of this. This was a very good asset. There was a very strong market of bars owning to invest in that as many companies are transitioning from a natural gas orientation to all orientation. We are looking at other assets where good assets but assets that don’t have the growth profiles that our other assets have, and seeing if there is aggressive buyers who will step up and pay good prices for them, as we then focus on our assets that have good growth potential. As a future of our oil and gas business, the strategy there is built around the deepwater Gulf of Mexico and our gas exploration play, our deep gas exploration play. So we are continuing to do that. We are assessing the market, working with interested buyers. And if we can find transactions that in effect advance our ability to repay debt or derisk the ability to repay debt, as we don’t know how things are going to unfold in 2015-2016. We will act to take place with that. These things require actions. We look at assets and test the market at times and decide those assets even as it makes sense to sell those assets when we look at their underlying cash flows. So this is a dynamic process. We are focused on debt reduction. And if we find assets that don’t undermine our ability to grow in the future and where we have buyers that will pay reasonable prices in relation to cash flows they generate, we will execute those transactions.

Jorge, this is Jim. I would just echo what Rich talked about, the all of the above balance sheet management is the mantra across all sectors of the business. And with our large CapEx budget, we could manufacture more as we’re going to do in the Gulf -- as we are doing in the Gulf of Mexico and so forth. And the fact of the matter of selling onto our oil assets, there is a premium market right now. The MLP market is very hot. Debt markets are very low. Oil prices are significantly strong. Even in the near term or long term, we can get representative value for those assets and then replicate those assets in an area in the Gulf of Mexico deepwater very quickly an area where we have higher margins the strength. It’s a bad test to arbitrage that complements or accelerates our corporate objective of reducing the leverage companywide. At the same point in time, we are still hitting the same targets of about 200,000 to 225,000 BOE a day in 2017. And that’s selling and then drilling our development wells to bring it forward. So by meeting those objectives operationally and bringing that cash flow forward out of those assets sales to accelerate the financial standing of the company, I think what is kind of highlight is all the resources we captured joining our platforms and lease sales and so forth. And everybody is going to get used to growing production in the Gulf of Mexico and monetization of production elsewhere in the company that will go towards the balance sheet repair. And I think that’s what Richard talked about earlier. That’s a two-edge sword. That’s very difficult to do, grow business rapidly and pay down debt at the same time, but we are in a position to do it, take advantage of the price and so on. So it’s just more of a -- it’s a strategic initiative than a defensive. It’s been just to be a more aggressive and trying to get our balance sheet very, very strong and be in good shape to take advantage if any opportunity comes after 2017.

And we have great set of assets that allow us to do that.

And thanks. And Jim since you brought it up, the CapEx did increase for Freeport and it was mostly on the oil side about a $400 million increase for 2014. I was wondering if you could talk about, is that sort of accelerating growth in the Gulf of Mexico? Could you flesh out what that incremental growth CapEx is, especially just after a recent assets sale there?

Yes. Number one, we added some CapEx from the Heidelberg development which we acquired interest there that obviously went in our portfolio before. But the main driver that is that due to the stricter terms on some of the lease expansion and delays that the federal authorities put out here, we had to go ahead and move some rigs and try to get completions on our Blackbeard West and some of the Inboard Lower Tertiary/Cretaceous completion. So that was a more regulatory driven acceleration of that activity and we hope -- we surely hope it leads higher production rates and volumes. So it is to accelerate completion activity in ultra-deep. So in short term, either way.

Got it. Thank you.

Your next question will come from the line of Michael Gambardella with JPMorgan. Please go ahead.

Yes. Good morning. The question on Indonesia. In terms of the new agreement that’s a Memorandum of Understanding that you have agreement to but waiting to sign. It seems like the government is undoing a lot of the terms of the Contract of Work and replacing it with what you call this license agreements. Will they also -- will your tax rate now revert back to the statutory rate? Under the Contract of Work, you are paying a 35% tax rate, which was in place when you signed the agreement in the 90s. And now I believe that’s the rate or the rate is 25% in Indonesia. Will your corporate tax rate drop as these other royalties go up?

Mike, let me -- I am going to go back over some things that I said earlier and just to make sure we got to stay set, with this MoU the basic terms of our Contract of Work are not being changed. And both our rights and obligations and the government’s rights and obligations for the basic contract are not being changed now and we’ve agreed to enter into a series of negotiations as to how to bridge this gap between our viewing the world with the eyes of our contract and the government viewing the world with the eyes of their mining law and related regulations, and that’s the work to be done. The only three things that are currently actions that will be taken as a result of this MoU are the agreement to pay royalties, the agreement to pay these duties for a limited period of time, and the agreement to make this escrow deposit. So the tax rate will remain the same. The government’s expectation is that the tax rate would remain the same going forward. And in fact under their licensing regulations for the formal license that would apply to us if we were under licenses to situation, there is a current 35% tax rate. So these things that we are doing now are in reality Mike concessions that we are making and our business judgment is that those concessions are warranted in terms of resolving the current impasse we have on the export bans. So it is a compromise to create a bridge for us so that we can return to normal operations, so that we maintain goodwill with the government to help us reach a resolution that it protects our shareholders interest in the long run and that’s our reasoning for doing it. But all the other terms for the contract are not being changed with this MoU.

Okay. And another question just taking a few steps forward from here, in regards to the construction of a new smelter in Indonesia. Is it your expectation that Rio Tinto would be responsible for funding 40% or some percent of the CapEx to build the smelters since they will be achieving the -- receiving the benefit of it in the future?

The structure of the ownership interest and how we deal with the smelters is yet to be finalized. Rio Tinto does have an interest in the operation as you mentioned in the long run, so they will certainly be at the table on this. We will also -- we’ve had interest expressed by strategic partners about participating both in Indonesia and outside of Indonesia, and then the government we have noted in this MoU the discussion about financial incentives that the government would be able to talk about. So that is a work-in-progress like much of this MoU. The first step is the agreement to get us to work. Then we got a lot of work to do in terms of the long-term situation, including the smelter. And the reality Mike is the Commission that managed the elections just announced the results of the vote. There is going to be a transition of a new government that will come into place at the end of October. And so as we go forward, we are going to have a period of time of dealing with the existing administration and then dealing with a new government that has a five-year term. So that’s another factor that will come into play, as we begin these negotiations on how to go forward.

Okay. The last question on this and it’s going to be a tough one to answer. But you have a contract with the government that suppose to supersede any changes in law in the country and the government comes in with the new mining law and basically changes part of the game. What’s to stop the government from doing that again in a couple of years?

Well, we are going to have an arrangement. We’ve been dealing with -- you asked a tough question, we’ve been dealing with real tough questions here for 2.5 years. And so this is not an easy answer, but if you read what we’ve said in our release carefully, and in the MoU we’ve carefully crafted an acknowledgment and understanding that however we come out of this, we are going to have to have a basis for assured operations on fiscal and legal terms that protect our shareholder interest. So we will have those legal protections and then the business judgment will come out as to how do you deal with that going forward. And experience has taught us that the best way to do that if it’s achievable is to find a way to deal with it in a way that reaches common acceptability. Indonesia needs foreign investment. Their economy has performed very well over the last 10 years. They have a very large internal economy that’s growing. They become a member of the G20. The country has changed so much over the past 25 years I have been going there. And yet, they have a very large young population. And to put people to work, they don’t have an internal saving rate as large enough to create investments, to create jobs that whoever presence is going to be have to have. So at the end of the day, they are going to need foreign investments. It’s an emerging country and emerging democracy. They don’t do everything as in the way that more developed country, more mature countries do, but there is going to be some imperatives for them to put people to work. It is a true democracy and so whoever is President, whoever is running the government is…

This is Jim Bob. There’s restructuring going on in the industry. People that have the concentrate want to have the smelters on there soil. So all this concentrate has been banned for export, mean that the smelters around the world are going to have reality. They are going to have develop smelters in the country where their concentrate is. That’s what this whole export controversy’s about. It’s going to another country and that’s why the strategic partners build this smelter, going to be coming because you can't take in and cut off as much concentrate, it has to stay on soil that is produced. So if you take that into consideration and realize it as we are in these negotiations which is the government. Not only there are other changes in the social structure of Indonesia, but there is a definite change of policy around the world. So the traditional market has concentrate been smelted in other countries. It’s going to change quickly. So, we’re in the middle of that. We’re in the middle of the social development in Indonesia. But understand that we built this bridge with this MoU. To get in and take on the step that like what the tax rates are going to be and what kind of long-term agreement we have to have with the lease reserve in front of us. And we’re converting this mine to an underground mine and the governments are well aware that we found the resource. We know where the traditional ore bodies are and so we have a long-term credibility with this government. And we will come up with something, especially with this restructuring of the whole market, when you talk about the refinery smelter requirements. But you’re going to see that around the world. There’s going to be a lot of statements in that when they control asset, but if you look at the world and see people who have tried get too aggressive with their control of asset, look at what’s going on in Venezuela today. Headlines that you’re seeing, we’ve got headlines yesterday, chaos in Venezuela as a result of the political decisions that were made. So we have work through this. We’ve been talking to this people a long time. And we have this partnership that was iced by our discovery of the Grasberg 88. And the government needs as to continue to have run that over. The government need us to build technical facilities. We’re going to be building the largest underground mine in the world. So we have the latest global basis, when you’re over there negotiated. So the contract is a big plus for us and that’s why we can negotiate differently and think that they don’t have it.

Thank you for those comments, Jim Bob.

Your next question will come from the line of Sal Tharani with Goldman Sachs. Please go ahead.

Good morning.

Morning Sal.

Can you tell us again, what's the relationship between the expansion of COW torque and the MOU? Are they dependent on each other, or are they exclusively independent of each other?

Well, they’re not interdependent on each other that MOU is a bridge to further negotiations on the contract of work and the rights to operate beyond, including the rights to operate beyond 2021. The MoU has two components to it. One is a current agreement to take three actions that are described earlier. And then it sets up for further process for the renegotiation, extended negotiation, foreign extension and so forth. So, it does not. It’s a first step and it was first step resolve this export situation and then lead into the further negotiations.

So would you be willing to -- so your terms would be that MOU, sorry, COW extension should stay, as is, where which is sort of post-MOU agreement, which is higher royalty and so forth, that it extends that those conditions just remain the same for the next 20 years for the extension? Is that where you would stand?

Well, I think is a practical matter. With this agreement, we are agreeing to these new royalty rates for the life of mine. And you saw that chart that we had on page where we show the benefits to the government of Indonesia. Page 6, you can see that royalties are relatively small part of what we pay to the government. And yet it’s a lightning rod issue, meaning, publicly in Indonesia, many people think of Grasberg as a gold mine. We pay a 1% royalty on gold. It is an amount of money. But is not major in relation to our total financial situation. So, this represents for the royalty I think, what our royalty rates going to be for the life of mine. When you get to this export duty, that’s a short-term situation leading to the smelter development and that remains to be negotiated. So that’s the duties, the deposits, that’s all part of the smelter picture. That’s got to be a hot bucket target. The purpose of this mining law in large part had to do with the nickel industry and the bauxite industry, where Indonesia is a major global supplier. And what Indonesia was doing, was mining raw ores, shipping them to Japan and China for further processing and for aluminum and nickel, the major part of the value is created downstream. And they have prohibited those and put a lot of small businesses and other size businesses in Indonesia, out of business. And politically, people view copper, even though it's economically different to be in the similar situated. So that's the problem we’ve been dealing with. In a country, Indonesia is not alone like this, where you have resource nationalism to think about penalizing Indonesian companies and giving different situation for foreign investors like Freeport, is politically tough deal to swallow and that’s what we’ve been dealing with.

And last thing for me is, Rio Tinto obviously has -- is going to be a major part of this Indonesian mine, starting 2021. I'm just wondering, are they involved in these negotiations and will they be part of it, and would they have a say in it or is it, you are dictating the terms?

We’re certainly not dictating the terms. We have a participation agreement with Rio Tinto. We’ve had a great partnership. It’s started in 1995. They have rights under their participation agreement. We have been negotiating with the government directly having discussions with them. There are many issues that we’re going to have to work with together as we go forward. But we have a joint venture, it has participation agreement. They have rights under that and we will work with them consistent with their rights. But you're right, they are going to be a significant participant in the operations going forward.

Hi. This is Jim Bob again. In 1988 we had the blessing find the largest ore body in the world. You look at the copper, gold, silver, paying on copper prices and gold prices. So to find the 100-year live mine in the middle of New Guinea, up at 13,000 feet, which is quite a challenge. In fact that you have evolving world and all the market forces it work from the day we found the mine, trying to get out there and get that copper down from 13,000 feet. The remote area that has no infrastructure and no current employment base. We look at everything, aspects of this from the day we found the property. But the blessing is that it was the key measure and gave us an opportunity to build our business to what it is today. So the challenge of how you deal with the current year of mine in an ever changing world, we have to keep that in perspective. But the good news is we have richest ore body in the world and that rich ore gives us gold and silver byproduct, especially with what happened to the price of gold and price of copper since we found the mine. Price of copper was $100 for all those years as we found the mine. So talk about negotiations in looking forward and operations till 2041. We have to look back and say, we are blessed with the fact that we’ve got something as probably when we producing till 2061. So that’s what you have to do keep the mine on a pricing side having that kind of asset and we’ve manage through to this just like we manage through all the other challenges.

Thank you very much.

Your next question will come from the line of Tony Rizzuto with Cowen & Company. Please go ahead. Tony Rizzuto - Cowen & Company: Hi. Good morning, everyone. As I was listening to your comments, Richard and Jim Bob, about the sensitivities there. It seems like there's some similarities with what you all are dealing with in Indonesia, with what Rio's dealing in Mongolia and seems like the government kind of has an edge because the projects are further along, a lot of the value is underground? And I'm wondering, how should we -- should we be unnerved by statements coming out of the press in Indonesia that the CAL extension discussions would not begin until 2019? And is that just, that's not true? And first of all, can you make me feel more comfortable about that, as you're going through this process and clearly you're making concessions here? Is that what's the guarantee that you will be able to take that next step here, number one?

All right. Let me, first of all, just make a comment about this two-year situation. That is the result of a regulation that was adopted by the government. It’s not a provision in the 2009 mining law. But the government considered -- the government that we have been dealing with considers that regulation to be important. And so that’s been one of the barriers that we have had to get a completion of discussion on the contract extension. We have spent a lot of time advising the government that we cannot wait until 2019 to understand our rights to operate beyond 2021. And the terms of those operations between now and 2019, our plans call for us to spend $8 billion of capital in developing the underground mine and then we have this smelter situation to deal with. So there is important provision of this MoU is that we are going to -- we both agreed to deal with this issue over the next six months. So from the government standpoint, they have been looking at this regulation, our standpoint says our CAL makes us not applicable to that and the MoU says, okay, we are going to work this out. We didn’t reach on it now. We are going to work this out over the next six months. Tony Rizzuto - Cowen & Company: Okay.

MoU, Tony, is a bridge. What that does is, it opposed to waiting until 2019, that was the mechanism, that’s why we made the concessions so that we force both ourselves and the government to come to the table and realize. The good news is, we’ve gotten that forward to be producing way in beyond 2040, we won’t. But having this smelter issue come up, this mining law versus the CAL and the license. That’s exactly what we try to do. To get this MoU move this negotiation period from 2019 to today. So everybody can understand the reality. We can be spend all those money underground. Our money on the smelter without having some financial assurance, doesn’t do any good to build the smelter, if you don’t build this underground mine, it actually not available to the smelter. So this is a very complex situation. But as I said earlier, this mine is so rich and so big, again raise this kind of problems that we have in the negotiation. That’s what the MoU does and it starts the negotiation there to solve this problem in 2021. Tony Rizzuto - Cowen & Company: Thank you. And I guess that, I guess, my next question would be, I know you guys have been over there a lot and I just assuming a lot of your efforts these days? But have you been in direct conversation with the new President Jokowi or members of his team, the team elect there at this point and what can you tell us about his certainly understanding of the seriousness of this matters and his willingness now to meet you guys and his team at the table here as we go forward?

Well, Tony, we stayed out of the political process leading up to the election, it was a very hotly contested election. The elections tend to be and it’s split parties, it split people and government, and we always in the position of not trying to influence election or get involve with them. We work with whatever government, people of the country elect and so we stayed out of the political process. The Vice President under Jokowi was former Vice President under first term of SPY and we have known him for a long time. He is business man. We had past relationships with people involved on both side of the election. Jokowi has made some positive comments recently about working to resolve the mining issue and we are going to be prepare to work with them as their transition goes from the current administration to his administration. Our hopes are that we will be able to engage with his transition team, his leadership team and working with the current government to help us began this process before they have come into office at the end of October. Tony Rizzuto - Cowen & Company: Okay. Thanks for that Richard and Jim Bob. And I guess the final question I have is, I haven’t heard any mention today of possibly to a sell-down provision and I -- is that, I know in the past you have talked about you would be open to possibly divesting a stake that was previously owned by some Indonesian interest, but has that come up, is that something that is likely to be part of a future contract or business license arrangement and what can you say about that?

Yeah. It is one of the items, there were six strategic items that we have agreed to discuss in terms of the renegotiation our contract of work. This divestment issue is one of those and we have tentatively agreed on the process of divestment that would involve increasing Indonesian ownership interest overtime to 30% from the current 9.36%. That would involve giving initially the government an opportunity to acquire interest we have talked about having a listing on the Indonesian Exchange, which we view positively and the government views positively. Any divestment would be at fair value and but that is not something that is committed to under this or are the final agreement hasn’t been reached under this Memorandum of Understanding. But that would be part of the amended CAL and but the current contemplation is that there would be divestment of fair value overtime to raise Indonesian ownership interest to 30%. Tony Rizzuto - Cowen & Company: Thank you, Richard. Thank you, Jim Bob. Jim Bob, I am sorry, you were going to say something too?

What I am saying is in the making out here is government understands the huge expenditure, first of all, underground and it actually talking in the government about a regulation that will come out and says that people will have underground, big underground mines. We have been shared the 30%. So there is a lot of people, thinking about lot of different things, mine open pit versus underground, major expenditures for getting underground and getting those. So again there is a bridge with this MoU. We always have this under table and try to get them understood. Tony Rizzuto - Cowen & Company: Thank you so much gentlemen. If I may sneak in one final question, I am sorry about this, I just want to ask Jim a question, and I noticed, I didn’t hear anybody talk about this, but and I am sorry, if you -- if this is redundant? But the Davy Jones well test 2, I see that it was not a success? Can you make any further comments on that, just update us there?

Well, it wasn’t the commercial success. We have work. We have perforated log section of resistant log section plus also section of the log that was suspect. We produced lot of salt water and some gas out of it. The only comment really that makes any sense, these are wildcat completion. We are learning from each on, the equipment worked flawlessly and so forth. We are merely took all the equipment we could and especially the tubing string and all the long we got out of Davy Jones No. 2 and moved expeditiously over to Highlander. And Highlander test is really going to be one of the definitive commercial moments in this whole play. So from the technical standpoint and engineering standpoint, we learned a lot, it was, I would say, everything was successful, safe and so forth. But from the commercial standpoint it was a failure. We are in the process of P&A in the No. 1 well, but we are unable to get the flow, I am going to take that equipment on No. 1 well and perforate the lower to tertiary Wolfcamp zone No. 2 well before year-end. That -- those operations plus the operations of Blackbeard West and Blackbeard East, we are -- as I said, were regulatory commitment from the standpoint and we are going to learn out of these things hope to establish the production there but all eyes on Highlander at this point, Tony. Tony Rizzuto - Cowen & Company: And what’s the timing of that, Jim, Highlander, what should we be looking forward over there?

Highlander, my engineers are saying September, so I am telling you October, how is that. Tony Rizzuto - Cowen & Company: Okay. All right. Fair enough. Thank you, gentlemen. Thanks everybody.

Thanks. Tony Rizzuto - Cowen & Company: Kathleen too thank you.

Your next question will come from the line of Ralph Profiti with Credit Suisse. Please go ahead.

Good morning. Thank you for taking my question. Most of them have been asked. If I can ask just one more relating to PT-FI in the state of the operation for when it’s ready to go back to 100% because for the better part of eight months, Richard, the workforce has been largely kept in place. I was wondering would it be safe to say that you have say eight months of advance stripping and equipment maintenance in place. And to what degree could we see this as a positive impact in 2015 when you think about things like production strip ratio and mining costs, if everything goes to plan?

You made a good point Ralph. We have been -- kept our workforce productive during this time and we have been able to mine some waste and low-grade materials that we would have had to mine in the future. We’ve done a lot of maintenance work. We’ve kept the DOZ mine operating in a way so that we’ve kept the caving operation going in the effective way. And so we’ve really had a period of time despite this lower sales of having safe productive operations from our workforce and that will benefit us going forward. As I said we also have a substantial amount of concentrated inventory, that we don’t have to work into the market place. Concentrated market is pretty well supplied already. It will take some time to do that. But we will be able to have very positive operations beginning immediately upon our authorization to export.

And by this renewed guidance, would it be safe to say that timing to get back to that would be a matter of weeks?

Yes, Ralph, this is Kathleen. We’re projecting in the guidance that you’ve seen that we will start up operations in August. There will be a period of ramp up for the mill and a period of time to get ship scheduled to come in. But as Richard said we should get up to the capacity pretty quickly.

As an example of that Ralph, our second quarter unit operating costs for PT Freeport Indonesia was $2.66 per pound, $1.53 in the first quarter. And if we return to normal operations, for the year, it will be down to $0.96 per pound. So that just shows you how we can recover from this.

That’s great. Thank you very much.

Thanks.

Your next question will come from the line of Oscar Cabrera with Bank of America. Please go ahead.

Thank you. Good morning everyone. Just want to get back to, after you purchased the oil and gas assets from DXP and McMoRan. There was this notion of sales sustaining assets, meaning cash flow was from -- the oil and gas operations will be basically sustaining the development CapEx for oil and gas operations. We didn’t tend to sell assets in oil and gas. Should we think about differently about that i.e. mining operations providing the free cash flow to -- for the development of oil and gas?

I’ll take this question because when you sell the Eagle Ford cash flow that was about $600 million a year of free cash flow of business declining. But it was there and you said that some additional asset size we’re talking about basically we’re going to observe the short, the CapEx, the efficiency of variance between the cash flow and the CapEx level through the asset sales. So we really -- we're going to -- the amount of asset sales that we’re going to sell or bridge negative cash flow in ‘14 and ‘15 on into a flat to positive year at ‘16 and then ‘16 oil will be self sustaining. So within the oil and gas, including the asset sales, we’ll observe any negative cash flow.

We’re consistent with that approach Oscar. Nothing has changed, it’s just the CapEx where we’ve funded from cash flow and asset sales of oil and gas assets.

On that too -- but with the additional sales as you mentioned between $4 billion and $5 billion, I’m assuming that’s probably on the -- if its onshore California and that’s where the vast majority of the free cash flow is coming. Would that still be the case?

Yes.

That will be the case. Remember this, those type of assets have zero tax basis. So the IDCs during the spending of ‘14 and ‘15 really helps for the tax basis offset and any kind of property acquisitions, smaller property as in iconic changes. There is a tax on product there that it benefits to have the negative cash flow on that year to offset the tax burden just by selling those properties.

Okay. That’s helpful. Thank you. And then if I may on Indonesia, this statement in the press release that talks about the MoU and Freeport paying over reduced export duties, that would decline the smelter development progress. Can you give us an idea of what level of reduced export duties you are looking at because 2016 your mine plant for Grasberg, we still have significant increases in both copper production and gold production that would be impacted by an export tax.

Yes, the process for completing the MoU will include the Ministry of Finance adopting new reduced export duties that will be declining rather than the current regulations which provides for escalating export duties. Currently, the export duty starts at 25% going to 60%. We expect and you know, it hasn’t been adopted yet but we’d expect the export duties to be initially below 10% and then they would decline based on progress with the smelter. Progress with the smelter would involve getting agreement on the long-term lives to operate. Our goal would be to work to get to zero export duty by 2016.

Okay. Great. That’s helpful. And then if I may, I’ll be quick with this one. Can you just remind me of your agreement with Rio Tinto with the divestment of 30% in Grasberg? How would that impact the 40% in case in production from the asset?

Well we’re talking about the divestment of shares in PT-FI. And that’s what -- that's all we’re talking about here. PT-FI would continue to own 60% in the joint venture with Rio Tinto.

And in terms of production does that affect the share production, Richard?

No, it’s PT-FIs what we’re talking about.

Thank you very much.

Thank you.

Your next question will come from the line of Joan Lappin with Gramercy Capital.

Good morning everybody. Jim, would you talk about, I assume, it’s your domain about the Gulf Coast Royalty Trust because even that was an important part of the complete transaction a year ago. And when -- what of the properties that remain viable, are going to come online and when that will influence that and also I would appreciate it, I guess, it’s a variation on the previous questioner. On Slide 27, where you show your -- well 26 and 27 sort of fit together and you’re showing your important areas going forward. I assume the big green, the biggest green dot shows the most oil in these new -- in the new areas that you have just expanded your position in and whatever and then my last part related to that as you’ve shown us these different rigs that you will be using. Can you tell us how the cost of those relate to the drillship or whatever compared to the very expensive rigs that we were using in the shallow water ultra-deep gas project?

Okay, Joan, good morning. The Gulf Coast Royalty Trust, I’m going to point you toward Kathleen Quirk and also you promised me a trip to Houston to go over all this in person and you haven’t shown us yet. So I’ll take this as our meeting there. And the aspect of the Royalty Trust is not really driving the aspects at Freeport. I mean, Freeport was being commercial. Decisions based on good engineering data in July, that’s in the plan. The inboard lower tertiary that has grown beyond the Gulf Coast Royalty Trust footprint. But the most significant potential production asset we have today the Highlander project is in the Gulf Coast Royalty Trust. I would focus a 100% on that and if we come up with some significant production in Blackbeard West, Blackbeard East or Davy Jones 2 in the meantime then that’s a bonus. What was depicted on Page 26 is -- and 27 is our producing assets, our major operating producing assets. And I emphasize producing because we have not produced any gas or oil out of the lower Tertiary/Cretaceous play. It’s a frontier exploration play. On top of that, to your rig question and so forth, the different operations onshore versus deepwater, they don’t really relate as -- the jack-up market is pretty much right now but we continue to work with our partner willing to provide the premium equipment and it’s worked out -- worked out fine. These are lot of integral operations. You got to have the top wide equipments. So as far as the rig costs are about flat where they were.

Jim, as far as the royalty trust, rig was discovery in the (indiscernible) area and that prospects that were reflected by (indiscernible) and because of the mainland prospect which is a parallel structures just in the East. So I guess those have tremendous potential in the (indiscernible). So those various bottom shales represent several structures, 25,000 maybe and you have Highlander which was -- we are focusing on that which led to the cretaceous discovery and you have the (indiscernible) area mostly in addition to the (indiscernible).

Thank you, Bob. And Chevron operates Lineham Creek, that’s why I have omitted it, because I was focused on our operations and the Lineham Creek completion is scheduled for midyear ’15. And once again Joan I issue that invitation for you to come down to Houston and get up to speed on all the specifics. Thanks.

I accept.

Our next question will come from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Good morning and thank you for taking my question and for the presentation. I am a shareholder, and I am very happy, and I am impressed at the good moves that the company has made to pick up the Apache assets, the 20 new leases in the Gulf of Mexico, the reservoir joint venture in Europe, the (indiscernible) joint venture just announced, and other new opportunities that you may consider. I am concerned that some other people might be worried the company is obstructed by debt or distracted by Indonesia. And I'm very pleased at the progress you're making in new endeavors, in spite of all of the distractions. Please explain in a little more detail how you're slowing down the less productive activities, and reallocating -- things change dynamically, you get a good drilling result at one property, you have a roadblock at another. Tell us a little more how you are being disciplined with the weaker projects to make more room for more of the good new opportunities, please?

Well, John, we have a great team. Rich here and just last week, we met with 50 or so of his managers in the Americas and reviewed every one of our projects there. Those guys are interested in what’s going on in Indonesia, but they are not involved. They are playing different positions, and everyone is focused. We had our African team there too. Everyone’s focused on their own business, and we sit down. We went through every one of our minds as to the operations they had done so far this year. What we are looking forward going forward? What were our growth opportunities? We have a separate group, that’s working on going through our mining reserves and resources in assessing how we focused on the next stage of operations. That was a same process that we went through that came up with the Tenke expansion, the Morenci expansion and the Cerro Verde expansion. Jim and his team are very interested in what’s going on in Indonesia, but they are really focused on running their assets well and looking for growth opportunities and divestiture opportunities, divestment opportunities and so forth. Jim Bob works closely with [Rick Lodale] (ph) our exploration, both our Brownfield and Greenfield exploration. So ultimately we step back from that and say where is our business judgment for the greatest opportunity to put the development resources on? And they bring in our development team to focus on that. Dave Thornton and his team has been running our molybdenum business very well. Of course we did the expansion at Climax. We monitored that market, managed production to meet the demands of the marketplace. So while as investors of course you’re going to focus on the things that are currently most important from a corporate standpoint. Underneath that we’ve got out great team, that’s working on the rest of the business. And what I like about our company as opposed to when I look at the way larger companies they are running mining business and then the oil and gas business is, because we’ve got such a great team, it frees. When we do have a problem like we have in Indonesia or Africa, we can put senior management to work and working with our guys on that team and the rest of our business does just fine. So we’ve come a long way, you’ve been watching us for a long time and where we started to, where we have ended up now, and I couldn’t be more pleased with the people we have and where our team works together to prioritize and deal with the broad scope of our business.

John, this is Jim Bob. Just a quick comparison. If we go back 10 years, this export problem related to the Grasberg mine, how would you like to have been dealing with the issues that we’ve dealt with in the last five year? The strike and the accident and the export ban, if we have been three, four like copper and gold with single is the best asset in the world. So when you look at the press release today that we’ve got all these in our Greenfield prospect for instance in the Congo. I just reviewed that recently (indiscernible) kilometers of ore at the surface that we are going to tie them together and using projections and drilling some deeper. We have a chance to have again another world class ore body. When you think about the (indiscernible) used our deeper sulfide ore exploration drilling that reserves, we found the equivalent amount of copper and gold equals another Grasberg just by drilling the Brownfield projects. So we are blessed with not only some of the biggest world class mines in the world, but we are blessed with the prospects that are becoming world class mines because of our brownfield exploration effort.

Thanks, John.

Thank you.

Your next question will come from the line of Paretosh Misra with Morgan Stanley. Please go ahead.

Thanks. Hi, everyone. So I have a follow-up question on your potential sale of stake at Grasberg. In case of a direct sale to the government, is it possible that you may have to provide financing for the sale of that stake?

Not for a direct sale to the government. What I am talking there is the central government and that’s the way their regulations work. We have in the past -- we’ve actually undertaken efforts to have a stake in the shares of PTFI owned by the province of Papua. We believe that could potentially be positive and we would consider providing some financing for that piece of the transaction. We tried to accomplish this several years ago and just wasn’t able to get there. We would be really focused on making sure that any sale like that would be for the benefit of the province and the people of the province and not some third party investor, but that would be something that we would be considering as we go forward.

Got it. So I guess if there's financing, it would be only for that chunk, 8% or 9%. And currently you're looking at only either IPO or sale to the central government?

Well, the 8% or 9%, the percentage that we would be talking about is not defined yet. 8% or 9% is a very large amount of money for an asset of this size, so that’s uncertain as to where the -- any percentage that would come about and the process would be the central government under the way Indonesia works would have the first call. They had a call -- they had an opportunity to buy this interest that we reacquired from an Indonesia organization in the 2001 timeframe, and the government opted not to do it. Then we have the potential to do with some of the province, then beyond that, and the listing the IPO in the Jakarta exchange. And beyond that then there would be an opportunity for potentially other Indonesian nationals to invest. So it’s a process that’s yet to be worked out, it could be a combination of all of these. The important thing is that our shareholders would get fair value out of it and it would take time to execute all of these.

Great. Thanks, Richard.

Next question will come from the line of Brian MacArthur with UBS. Please go ahead.

Hi. Good morning. I have two questions. Just to be clear on the MOU, the day you sign it, imminently, whatever that means, the 115 goes into effect, the higher royalties go into effect, but then do the -- whatever the reduced export taxes on the concentrates go into effect, so if they were to be 10% going down to a lower number by 2016, that you will actually have certainty the day you start exporting on what those taxes are going to be, or is that something that still has to be negotiated in that six months comment you made about the MOU?

No, Brain, that would be defined and known and in effect upon signing of the MOU.

Okay. So when you re-export, that will all be laid out, so you have a clear runway for what you're paying?

As soon as we sign the MOU, we would advice the market of what its terms are and what would be effective immediately and so we will do that.

Okay. Then my second question is, sort of putting this all together, and you've been very good over the years about giving forecasts of EBITDA and cash flow at various prices every quarter. With all the moving parts now, you give guidance for ’15, ‘16. We assume the resumption of exports in August from Grasberg, but in that, as Ralph brought up, you probably have better costs in 2015 than we used to, just because you pre-strip. You obviously have a tax now on the smelter, going forward. We've obviously sold Eagle Ford and adjusted that. Can I assume the stuff on page 21 now, given all those pluses and minuses, because it looks like it has changed a little bit, include all of those assumptions? Or is it pre- the MOU, if I want to think of that way, because there's a lot of moving parts here?

It does not include the impact of the MOU. Yet, it does conclude the Eagle Ford and the acquisition of the Apache interest and so forth. But it does not include the MOU since that has not yet been -- it said has not been signed.

And would it have the benefit, fair to go back to Ralph's point, because I think it's a good one that you would have some better cost structure in ‘15 and ‘16 than you did before, all else being equal, because you have done that all extra maintenance and pre-strip?

Well, this does reflect our current mine plan. Now we review that continually. And as you know Brian, over the years we’re always looking for ways of incrementally improving it. And the guys will be looking at the ways of accessing higher grade material and with the pre-stripping the opportunities for that are much better than they have in the past. We’re talking with our guys for example about having access to some very high gold grades in the pit that we might be able to access earlier than later.

But Brain, the projections that are in the cash flow model are consistent with the mine plan for PTFI in the back on page 29.

Right. And just on that, I noticed gold's up again in ’17, I assume that's just flow back from the delay and everything this year, and it looks like maybe that can come back forward, things like that is what you're talking about?

Right.

That’s right.

Okay. Great. Thank you very much.

We’ll have the chance for optimization and we’ll keep you informed as we proceed with that. For everyone, we had a -- wait, we do have a couple of more. I’m sorry. David is pointing out. Appreciate it. So operator, do you want to -- I think, see who else is on our list.

Yes. Our next question will come from the line of Brian Yu with Citi. Please go ahead.

Great. Thanks for your endurance with this long call, Rich and team. On the duties where you said it starts less than 10 and it goes down to zero, does this apply to both the copper and gold, or just copper? And is there a portion of it that gets credited towards the smelter build?

It is own copper concentrates. So that would include the copper and gold. I mean, we don’t sell copper and gold separately. We sell copper concentrate, which has gold and silver in it and we get paid for that concentrate based on the prices of copper, gold and silver metals, but we don't actually sell those metal separately. That’s sold to the smelting company and -- but we get paid for it. So it is going to be only own exports and on concentrates, which will include all the metals in the concentrate. No, there is no credit on the smelters, that’s a separate deal. But the way this thing works from a cost standpoint, is we only pay the export duty prior to the smelter, coming onstream. Once the smelter is build then we can reach agreement on building and so forth, the export duty goes away.

Okay. And when it goes to 0%, or planned to go to 0% in 2016, that would coincide with the start up of the smelter effectively?

No, not with the start-up of the smelter. These smelters are substantial industrial facilities and it takes time to build it. The scale down in the duty as contemplated by the MoU will be made on the basis of progress toward building this smelter. Progress is currently contemplated to be measured on the basis of cost expended and committed and the objective would be to say once you reach a point of no return, once you spin enough so that the government is satisfied that you’re going to complete it then the duties goes away. Their view, the governments view and they’ve been vocal about this was that the duty was not designed to raise money for the government but is to provide an incentive for the companies to build the smelter.

Okay. And what percentage in spend committed would 0% export duty tied to, is that like 50%, 75%?

I think its best given the current stage of what we are. It is not that are very hot. Its not the majority of the cost is what we’re talking about. Its something less than that. But given that this thing is -- has not been singed yet. Although, we believe the terms to discuss with the government wants that are going to be adopted but it still has to be signed. I think, Brian, its best at this point, not to get that specific with what the terms are.

Okay. Appreciate it. Thank you.

Your final question will come from the line of Mitesh Thakkar with FBR Capital Market. Please go ahead.

Good morning, gentlemen and thank you for squeezing me in. Just on the oil and gas side? I understand, when in May you guys announced the acquisition of additional interest in Lucius. Your working interest was supposed to go up to 35%, but it looks like now it is at 25%. Can you explain on a little bit, give us some incremental color around that?

Yeah. In the oil and gas transaction, the existing holders of the Lucius interest, additional partners have a preference for right of purchase to any sale that goes on within Lucius. And so we contracted to buy the Apache 10% interest. Two parties, the original partners exercise their pref rights, which cause us to exercise our pref right. So we got a reduced interest where Exxon and Impact, Japanese company, both liked the price we were paying for Lucius and exercise their right to get their percentage and it reduced our interest to the 5.1% versus the 10%, so that’s the reduction. And therefore instead of it being a $1.4 billion acquisition, it was $900 million.

Okay. Great. And just on Indonesia, the 2015 copper and gold guidance came down a hair and I was just wondering, if you are doing all the pre-stripping today, shouldn't it actually go up instead of going down or is the benefit just on the cost side?

No. There was some minor changes we made to the start-up of the Deep MLZ in 2015, which affected the volumes in a modest way. The open pit really didn't change significantly from what we had previously. But we will project in a couple of months delay from what we had before for the Deep MLZ and that’s the impact you’re seeing.

And that impact has nothing to do with the negotiations going on right now in the quarter?

Correct.

No. During this whole period we’ve been proceeding with the development of our underground resources, including the Deep MLZ and the Grasberg Block Cave. And so this is just an issue related to the completion of the Deep MLZ mine and it slipped roughly a quarter.

Okay. Great. Thank you very much guys and thank you for being kind with the time.

Okay. Well, appreciated everybody’s attention and being kind with your time. We had a lot to talk about and we will have a lot to talk about as we go forward. And we look forward to that if you have any follow-up questions, please direct them to David and we’ll get them answered. Thanks a lot.

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