Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan First 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, everyone. Welcome to the Freeport-McMoRan first quarter 2016 earnings conference call. Our results 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 call today is being broadcast live on the Internet, and anyone may listen to the conference call by accessing our website homepage and clicking on the webcast link for the 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 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 2015 Form 10-K and subsequent SEC filings. On the call today are Richard Adkerson, Chief Executive Officer; we also got Red Conger here, and Mark Johnson. I'll start by briefly summarizing the financial results and then turn the call over to Richard, who will be referring to our presentation materials on our website. As usual, after our remarks, we'll open up the call for Q&A. Today, FCX reported a net loss attributable to common stock of $4.2 billion, $3.35 per share for first quarter of 2016. The loss included net charges totaling $4 billion or $3.19 per share primarily for the reduction of carrying value of oil and gas properties, idle rig costs and other items. After adjusting for the net special items the first quarter adjusted net loss attributable to common stock totaled $197 million or $0.16 per share.…

Good morning, everyone and thank you for joining us on our first quarter earnings call. It's been a very active and encouraging quarter for us here at Freeport. We are just mailing out our annual report and the theme of it’s “Proving our Mettle” that’s the ability to face a demanding situation in a spirited and resilient way. And I can tell you our team here couldn’t be approaching its work in a more positive way from that standpoint. I’m very proud of all that our team is doing. We have a clearly defined strategy that our Board has set and we are really focused on executing it now. We experienced strong operating results in the face of weak commodity prices and we made a lot of progress in achieving our strategic and financial objectives during this quarter. Our reported earnings were in line with our plans, actually a bit higher because we had somewhat higher copper prices during the quarter. We did have a significant additional impairment charge, which was substantially all in our oil and gas business and we have taken recent steps to restructure that business to reduce costs and that is progressing well. We got a really good operating team there and some good assets and we are focused on attacking cost aggressively and have begun to do that. We are continuing to look for opportunities to sell or monetize assets in the oil and gas business, but we are now working with – and this is a tough market, admittedly a tough market to try to do that. But we are working with our operating team on new plans to preserve and enhance value of our assets for the future. With our mining business, we are performing well. The Cerro Verde startup is proceeding exceptionally…

[Operator Instructions] The first question does come from the line of Anthony Rizzuto with Cowen & Company. Please go ahead.

Thanks very much. Hi, Richard, Kathleen, Red and Mark. It's good to see the progress thus far.

Thanks Tony.

I've got several questions here. The first one on Indonesia and I was interested in the comments about capital spending deferrals. I was wondering if you can comment about that a little bit further. And then also, the mill issue that you experienced during the quarter and you applied a temporary fix to it. Just wondered if you could just talk about that a little bit more and what you're doing there and that type of thing. And I've got a couple other questions about different areas.

Okay, Tony. First of all we have taken steps to reduce capital. Mark Johnson’s here – to reduce capital. We revised some mine plans and we are reducing capital. What we have not done yet is defer the fundamental development of our underground resources. We completed the Deep MLZ, extension of the DOZ mine. That's really a long-term extension from our initial Block Cave development beginning in the early 1980s. This is the most recent major extension on that. That was completed last year and is ramping up. The underground development of the Grasberg Block Cave, which is really beneficial to the asset, beneficial to Government of Indonesia, and of course Freeport for us to continue with that so that when the pit is completed roughly at the end of 2017, we would have that mine ready to begin ramp up. And so we’ve been very reluctant, remain very reluctant to suspend that, but that is drawn into question seriously by not having the regulations amended and getting our contract extended. We obviously are spending that money in expectation and confidence that we will get extended. And the government officials keep saying that, but have not taken the actions that are necessary to document it yet. Roughly 75% or more of the production from the underground is going to be realized after 2021 when our primary term ends, so we’re currently engaged with the government and explain that to them. We also have the issue there with the smelter that we’ve agreed to develop, provided we get our contract extension and we're unable to spend substantial money on advancing this smelter project without having contract extended. So that's the big issues we face, discussions are ongoing as we speak, and our Board is considering what actions we should take. With respect to the mill issue, Mark, why don’t I let you explain that briefly?

Okay. Yes, Tony. In late January, we had a bulk sale in our 38-foot Siemens wrap-around mill. It’s a gearless motor, electric motor that both failed and it’s ended up shorting out of about seven of the coils, there’s about 648 coils that are part of the stater. As you mentioned, we initially were able to bypass that damaged segment and we’re able to run the mill fine, about 5% derated. Since that period, we’ve evaluated the longer term repair and got prepared for it and determine that we should take it down in April, which we did, just over eight days ago. We took the mill down, we’ve got Siemens there to help us, some other contractors, so we’re just eight days into the repair, but it’s going very well. We scheduled about 32 days of downtime for this repair, but we are pretty confident where we sit right now that that will be closer to 24, 25 days. So in addition to repairing the mill, we are going to look at some of the issues and we think we can address any of the issues that might have caused that bolt to fail in the first place. And we’re also obviously taking advantage of this downtime to reduce some opportunity maintenance throughout the plant.

All of these things are reflected in our outlook, in our cost, in our production volumes, and so forth. First time this is happening, 20 years of operation of this mill and it’s happened in other places. And we’re confident getting it fixed on schedule that Mark talked to you about.

Thanks, both. Richard, just a follow-up on Indonesia in terms of the bigger picture with – from a standpoint of the negotiations, the discussions with the government. Is it still the biggest log jam there, is that still the refusal to this point for the government to want to discuss this extension only until two years before the original COW is due to expire?

Well, that is the current regulation. Our legal position is that regulation doesn't apply to our contract, but so far the government has not taken steps to revise that regulation. My observation is that there is a wider recognition of that being a problem not just for Freeport, but for the mining industry in general and the anticipation by many is that that would be addressed in the revision to the mining law and the regulations. So that is a current issue for the government officials. We thought it would have been resolved by now, it has not been and so now the government is working with the DPR to address it that way. That has an uncertain timeframe for getting done and you have to admit uncertain outcomes because of the different political views, so anyway we are continuing to work with them.

Okay, Richard. And then I want to ask a question with regard to the asset sales process. I think you mentioned in your comments, you mentioned something about other opportunities and I didn't quite know what you meant by that?

Let me address this Tony then we are going to – need let others come on and ask question.

Okay, understood.

But all I'm doing is referring back to my original comments in the first quarter – the fourth quarter year-end earnings release that to convey to the market that we’re putting our highest priority in fixing our balance sheet and that we would look for opportunities involving all of our – any of our assets. And so what we've done since then as we focused on transactions that would help us achieve our transactions in a positive way. We are going to work and I believe we will get those transactions completed, but beyond that we have other assets that are not part of our current transactions that we would turn to if we are not successful with this initial round of discussions. I am telling you I believe we will be successful with the initial rounds of discussions, but if for whatever reason we are not, we have other alternatives to turn to it.

Understand Richard. Let’s appreciate that and I'll get back in queue. Thank you.

Well, thanks Tony and I just want to say you got appreciate that these are confidential discussions that take time and due diligence and a lot of issues go into it, but I'm feeling much better today than I did in January.

Thanks Richard.

Your next question comes from the line of Evan Kurt with Morgan Stanley. Please go ahead.

Hi, good morning.

Good morning, Evan.

I had a question on Cerro Verde. I guess there's been some reports out that the water allocation issues with Rio Chile, and it seems like from your guidance that you're managing to move you through this without any sort of issue. I'm just wondering if there's any risk to that?

Well, the reports came about because this El Nino effects have weather consequences throughout areas where we operate and there was a drought period there, the river was affected by because of the upstream downs. And so there was some allocation deals – rains I mean there has been returns of replenishing rains and we’ve worked this out, we don't anticipate that being a problem at all.

Got it. Thanks. And then one question on Heidelberg. Cobalt had put something in their 10-K that I picked up on, something about the appraisal well leading to them, I can't remember the exact language, but concerns that there could be a material downgrade to plan. Is there anything that you can comment on there as far as what you're seeing out of that?

Sure, first of all when you look at these earnings releases of different companies, they acquired their interest in different ways I mean and so their book carrying values are going to differ company to company. The geology at Heidelberg is [indiscernible] analysis is changed some of the locations of the wells are being revised. Our team still has confidence about the resource and this will be handled and so what’s you're seeing now is the effects of some of the initial development wells having to be relocated in terms of where they're being drilled to access the reservoir. Visit with the team last week and they feel confident that it's not a - is not really a detriment to the overall resource that’s available there.

Okay thanks. Just maybe one final one, if I may. At the last half of the year, at the market equity raise, the stock price was actually lower than where it was trading today. I'm just wondering given the rebound in the equity if that's something that you may consider following up on.

Yes, I made a brief reference to that, to the fact that share price is up and the trading in our bonds is really improved over the last six weeks. And so that opens up consideration for other types of capital raises for us. We currently believe that it's beneficial to us - for us to first look to asset sale transactions because we believe that we're going to be able to accomplish those in a positive way and hopefully you know and the market is going to be driven by a lot of factors, that they’ll be well received by the market and that might give us opportunities in the future to do better. So that’s kind of the strategy of what we are looking at.

Got it. Thank you.

And Kathleen’s giving me a note just to remind everybody that the basic source for our mill water at Cerro Verde is not from the river or the dams for the expansion at least, but from this wastewater system that we put in for the city of Arequipa. And the issue that Evan raised was the downstream water was affected by this lower flow through the river and that was what led to it. But our water is coming from the wastewater system for the expansion.

Your next question will come from the line of David Gagliano with BMO Capital Markets. Please go ahead.

Great. Thanks for taking my questions. I just wanted to drill down a bit more on the divestment plans on the mining side. First of all, in Indonesia, what are Freeport's alternatives, if for whatever reason the Indonesian government doesn't agree to Freeport's expectations regarding the fair value of that ownership interest? That's my first question.

Let me answer that, Dave. The ultimate resolution mechanism that we have is international arbitration. That’s a provision that’s in our contract and based on all the legal advice that we've gotten over the years and recently, our position in an arbitration proceeding would be very strong. And because the legal - the contract is available on file with the SEC you can read it straightforward been in place since 1991 and so we believe its ironclad. We are trying to avoid that, it’s such a long-term asset, we are trying to avoid going into a legal proceeding like that but that’s our ultimate fall back. Under our contract we have no obligation to divest that was acknowledged by the government in Indonesian in the mid 1990s and a letter that we have on file and all of our discussions since then where we voluntarily offered to divest to try to be responsive to the new mining law and to the aspirations of the government has always been at fair market value.

Okay. Okay. Is there - just as a follow-up to that, is there any specific deadline or time line that we should be thinking about here for this or it's an open-ended negotiation?

It is not a specific timeline, but we are spending so much money, together with Rio Tinto we’re spending about a $1 billion a year on this underground development, and we simply just can't keep doing that without bringing this issue to a head. And the government wants us to proceed with this smelter and best case for constructing a smelter based on global experience all the smelters that have been built in China is that starting all out today would require us to go to 2019 to build a new smelter and without having contract assurance beyond 2021, we simply can't do that as a practical business matter and that’s the message we’ve been conveying to the government.

Okay. That makes sense. And then just my separate question related to the divestment plans, just regarding the comments about discussions on additional transactions, which of the mining assets specifically are actually currently being negotiated for sale or JV, et cetera, aside from Grasberg. Obviously not looking for anything other than just the assets that are currently under negotiation.

Dave, because these discussions involve multiple parties and we have multiple alternatives to consider I just don't think it's an answer I should publicly state right now. And I know all of you want to have more details, we want to get this thing done, we have a real sense of urgency for it. I’d just comment to you the processes is one that involves a great deal going into it in terms of negotiating the details of the transaction and people conducting due diligence. These mining assets are complicated, complicated assets. We’ve got great assets and lots of support to values. So all I can tell you is I feel real good about where we are. Now, I wish I could share more details, but I simply can’t.

Okay. I appreciate the position you're in. All right, thanks very much.

All right. Thank you.

Your next question comes from the line of Matthew Korn with Barclays. Please go ahead.

Hey, good morning everyone. Thank you for taking my question as well. Question on the copper market. We had CESCO a couple weeks back. Most folks seem to come out of there with a sense that the copper industry really sees cost cutting, not curtailment of supplies, is the best path to take in the current market. I was wondering, Richard, if you believe we're going to need any more cuts in production over this next year to help support pricing given some projects ramping over the rest of the year, given Grasberg ramping up. For you, would you consider maybe fully idling any of the assets where you're currently at half rates or so?

Well, thanks Matthew. I mean the reality of this, and I’ve been through a number of these cycles and gone through this is that decisions to shutdown mines are very complicated because of the transition cost that you incur in having to do it. Not only is there an issue of the – and this varies country-by-country depending on labor laws, but the cost of employee severances, but it also often triggers reclamation obligations and shutdown obligations because the mine is an operating system. And when you operate that system, you're able to manage a lot of environmental issues in a particular way by the way you process material. And once you shut it down then you often have to come up with new system of how to operate water flows and so forth. That’s one of the things we faced at Sierrita. Those are complicated. So the barriers to shutdown mines that you are seeing across the industry has to do with these transition costs. And sometimes those costs are economically more significant than operating losses at marginal profitability or even losses. Not clearly the lower prices go, the more pressure will be and the more shut-ins you’ll have. We would have some more. But for example at our – and sometimes it’s not the entire mine. Its segments of the mine, which we did in Morenci in 2008, 2009 when we cutback our mill processing and cutback our mine rates and the crushing rock we put on our SXEW stacks, our lead stacks. For example, we cutback El Abra by half, but the remaining half that we’re operating at El Abra is profitable at these prices and at lower prices. So it's a dynamic situation, it will be driven by prices, but what we’re seeing is people are really focused on cost. Now, the thing that I think that we're looking at in a positive way and I’ll suggest that that market looks at, is what is the price of replacing this shortfall that’s looming for the copper industry. I gave you the numbers 10 years out, but that the market does not have a significant surplus balance today. Who knows what’s going to happen. There is risk in the global marketplace, but there is opportunities. And this thing could come back and even today the incentive price to develop new production and we know this because we got all these resource being studying for years, it's going to take a very high price $3, $3.30 to develop new resources from known resources. There are not major new discoveries. The expansion projects that are available to the industry are either expensive underground projects or projects that require low grades and lots of infrastructure development, so absence just a calamity in China or the global marketplace are still in very positive that this copper business is going to be a great business to be in and Freeport is going to be a really strong leader, player in that industry.

Thanks. That actually well leads to my next question. Given your position as a leader in the industry, how – when you're looking and considering the sale of the mining assets, how important is it for you that you still maintain operating control over that asset? I'm wondering whether that has limited the opportunity set, the set of potential buyers who may not be interested if there's -- if you're really just talking about minority stakes.

Well listen, if you just listen to what I just said you know how bad I feel about selling any of our assets. I mean we put together a great company ahead of diverse set of assets and now circumstance had led us to have to do some and we really don't want to do. So that answer your question varies asset by asset. When we look at our business there certain of our assets and we create a lot of value for by having them managed together, regular share equipment, technology, people, resources, and that’s a huge benefit for us. And so one thing we are looking at how can we do transactions that retain that ability for Freeport to create value. Other assets which we don't want to sell, but we have to look to sell would involve a transfer of ownerships. There are certain companies in the world today, who would only do a transaction if they can be operators. You read about it everyday in the paper. So we are having to look across the Board for that and at the end of the day, we are looking for transactions that are executable at acceptable values and in ways it help us meet our financial objectives.

Got it. Thanks so much and best of luck.

Thank you so much Matthew.

Your next question comes from the line of Jeremy Sussman with Clarkson. Please go ahead.

Hi. Thanks very much for taking the question and certainly good job on costs this quarter. In terms of just – in terms of the asset sales process, I guess you've announced $1.4 billion since mid-February. Obviously in your release you noted that you expect to show additional progress. I think specifically in Q2 was what was mentioned. I know there's a springing collateral and guaranteed trigger that was added, which basically means I think you need to total $3 billion in aggregate announcements by mid year. Assuming my math is correct, that's another $1.6 billion or so in announcements in the next couple months. So I guess do you feel comfortable with the timeline and maybe just conceptually how would you sort of describe activity level relative to your initial expectations in terms of just parties at the table. Any big picture color would be great? Thanks guys. Bye-bye.

All right. The answer is yes, we really expect to meet that springing collateral test in the second quarter, very confident about that. And I've tried to get across and have done my best to talk with you today knowing that I can't meet the hopes that many had that I could give you very specifics, but to tell you how much more positive I am on this call than I was on our call for the year-end earnings release. This year started out really tough and I’m not telling any of you that it really started out itself with uncertainties in the global commodity space and uncertainties about China and copper, a lot of unknowns as to how we receive. We thought internally as we talked among ourselves about how we approach the market that we would get good receptively because of the high quality of assets. Now we know we are getting good receptivity, so we know it internally, we are confident we are going to get this done in a reasonable way and now you know we're going to be charged with executing that reporting to you the results as we go forward.

Richard, that extra color is very helpful. I'll turn it over. Thanks very much.

Okay. Thank you, Jeremy.

Your next question comes from the line of Chris Mancini with Gabelli & Company. Please go ahead.

Hi there. Just a quick question. Most of my questions were answered. In terms of cash management when you do realize the proceeds from the sales of Morenci and your JV with Reservoir, do you intend to buy back some of your higher yielding bonds at that point or are there covenants in your credit line that would require you to hold a cash balance to pay that down first?

Chris, this is Kathleen. We have agreed to a cash flow asset sale cash sweep to our term loan lenders, a 50% of asset sales and if our leverage is greater than six times, which we’re not currently, they would get 100% of proceeds. So we'll have opportunities we believe to not only repay term loans, but also look to repay other debt in the capital structure and look at you know take care of the upcoming maturity. So that is what we're thinking at this time. And as Richard said the debt levels, the trading levels have improved from where they were earlier in the year, which opens up other opportunities. But we’re focused on absolute leverage reduction, but also given ourselves enough runway over the next several years in terms of maturity schedule.

Okay. Great. Thanks a lot and good luck with the asset sales.

Chris, I can’t tell the frustration of looking six weeks ago where our bonds were trading, where our stock was trading and not having the money to buy them.

Yes, no, I bet. For sure. Thanks a lot.

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Thank you. I was studying slide 23, which has the oil and gas output price realization and direct cost and it looked like the margin was $7.96 per BOE times the $12.1 million, or $96 million for the quarter, if I'm reading it right. Put a different way, a $0.09 upswing in the copper price would give you as much cash flow as oil and gas has in the March quarter, admittedly probably at the bottom of the oil price, we all hope. Do you think it's worth just shutting in all the oil and gas output and preserving the resource and waiting for a better day after the market gives us $0.25 of upside on copper?

Well you know John that’s a kind of scenario analysis that in hindsight you could say maybe that would been the right answer, we can’t live in that world. And the nature of oil production is such that you just cannot make decisions like that and preserve the reservoir, preserve the asset. So it’s you know I recall back in 2008 you may have been at a meeting I had one time when somebody said, why don’t you just shut in all of your North American production. The market doesn’t need it and it would balance the market and is not - my answer then was you know running these kinds of assets is not like managing a portfolio of stocks and bonds. You can’t just sell something and get out of it you have to manage a lot of complicated operating factors in doing it. I understand your financial analysis the practicalities of it or that we can generate some cash to help meet our obligations that we have. We’re cutting these costs aggressively now. We’ll continue to do that and we’ll take the actions to preserve these assets and create some incremental value over time. We are working on contingency plans now, for example, of how do we look forward in terms of drilling some of the really attractive tieback opportunities. We are not going to spend money now, but we’re going to be prepared to as markets increase to help arrest the natural decline. There is a big difference in these average numbers that you talk about between California, which is a significant production, and the deepwater. The California doesn’t have the decline issues that the deepwater has and we’re able to basically breakeven out there and preserve all of the resource, but continue and operate it.…

Thank you. If I can ask a simpler question, just about the accounting. Over the last six quarters the oil and gas charges have been about $22.9 billion. Is there only about $5 billion in carrying value left? And what was the 12-month average oil price for the March quarter, full cost test? Would think that at some point the balances would wind down and the charges would pretty much be de minimis.

John, it’s Kathleen. If you look at the balance sheet, we separately identify the capitalized cost for oil and gas. And we've got – at March 31, we have roughly $3.4 billion which includes $1.7 billion that’s subject to amortization which is part of this full cost ceiling test that you referenced and we’ve got about just over 1.7 not subject to amortization and those are things where we don't have proved reserves both at this point. And in terms of the 12-month trailing average that we used at March 31 for the ceiling test write-down it was $46 a barrel WTI.

Thank you very much.

Your next question comes from the line of Chris Terry with Deutsche Bank. Please go ahead.

Hi, guys. I'll try to be quick. You've obviously talked about asset sales and mentioned around your views on equity raisings. What's your thoughts around streaming or royalty transactions?

We’ve had a lot of discussions about that recently and over the years. I mean going back 25 years or more, we’ve looked at doing that. The asset where we have the biggest streaming opportunities is Grasberg with the big gold component associated with it. Yes, that gold component is what makes Grasberg such a strong strategic asset for us and reduces our cost and that’s - it is not an inexpensive place to operate. We got 30,000 plus workers there and one of the world's largest mills, what will be the world's largest underground development, complicated environmental issues to maintain complicated community issues and community support issues, logistics issues. And so really we’ve concluded and thank God we didn't succumb to that idea in past years because today that would be a bad decision, but we really believe having the goal component of Grasberg together with high copper grades what makes it such a great strategic asset for us. So we look at that, we watched what’s going on in the industry, we talked to companies involved in bankers and if something makes sense we would be open to it, but today we’ve concluded that it has not made sense.

Okay. Thanks very much. And just a final one. Given the importance of the second half of Grasberg and the mill issues you've highlighted, can you just remind us, what's the mill split between the open pit and the underground for 2016 and 2017?

This is Mark. Right now, the underground provides about 45,000 tons of ore out of 200,000, so the remainder is coming from the pit and that will change next year 2017 the pit starts to wind down a bit and the underground ramps up. It's more like 130 and 70. 130 from the pit and 70 from the underground.

Okay, thanks very much.

And we vary that from time-to-time based on the nature of the material in the pit.

We are looking at the highest value material we sent to the mill, so that drives that determination.

I visit there and went to the team and I mean its and I’ve been around since the initial development of the Grasberg and to see the technology advances, so what we are able to do underground is remarkable through remote mining equipment, safety factor of that, but also the efficiency we have, we are working very well with our contractors and our team there is doing that. So this you know – once at this point in time, we're looking at having a significant reduction in mill throughput as results are going on ground. Now we look at it and we are going to be able to keep our mill build. We have to make some – actually some enhancements over time in the mill. The resources is just grown and the economics of mining, large-scale underground mining have become much more attractive than we would've thought years past.

Thanks very much for the color.

Yes, thanks Chris.

Your next question comes from the line of Matthew Fields with Bank of America. Please go ahead.

Hi, everyone. I just wanted to ask, there's been – I know you're laser focused on asset sales and it seems like you're pretty confident about hitting that June 30 deadline to avoid the springing collateral, but – and I probably shouldn't ask this as a credit analyst, but what's so bad about secured debt? I mean, if I'm an equity holder I think I'd rather grant the bank security over some assets rather than giving away a chunk of future earnings.

Well, I think as an investment grade company, we worked hard to have a structure of flexible capital structure where everyone was secured. Our objective is Richard just talked about is to takedown leverage very significantly. We think over time, we have the ability to commence the rating agencies of the strength of our assets. And we like to return to investment grade and we also see the benefits of having non-secured capital structure. And having said all that, we recognized the relationships we’ve had with our bank group, the commitments they've had to support our business and we are going to work cooperatively to make sure that those lenders - all the lenders are protected but also just to make sure we have an ongoing continuation of bank relationships that will allow us flexibility in the near-term to navigate through this situation. But we do - we worked hard to get to a completely unsecured structure and we want to get our balance sheet back and restore the strength that we had previously and I know it’s a tall order but we are very focused on taking the steps to get there.

Okay. And then I think just one more follow-up. I think earlier on the call you said that the proceeds from Morenci, you obviously have that 50% cash flow sweep but that you could look elsewhere in the capital structure. I think in the press release when you announced it you said that FCX expects to use the proceeds to repay borrowings under its bank term loan and revolving credit facility. Is that still the thinking for that $1 billion of proceeds?

Yes, we have – as you saw we had $500 million drawn roughly at March 31 under our bank credit facility and we've got the mandatory prepayment on the term loan and will use the balance to reduce borrowings under the revolver.

Okay. And then just sort of lastly, just real high level on this whole asset sale versus secured debt question, because I get it a lot and it's something we talk about a lot in the credit world, is obviously there's a disconnect between the way your securities are trading when we see the spot copper prices and where strategic assets trade on a sort of future basis with obviously a much higher longer term price deck. Is the tradeoff do I sell assets at this valuation versus a secured debt deal that could clear my runway for a number of years? What's the tradeoff there?

Just to be clear we’re not doing these asset sales to avoid secured debt that was just a provision that we agree to in our bank facility. We’re doing the asset sales to repay debt and restore our balance sheet strength. So it has nothing to do with secured versus unsecured it’s simply is the reality of us needing to accelerate our debt reduction and that's what we’re focused on and we are looking for ways to do it in a way that reflects long-term values in these assets not the kind of spot pricing that’s currently reflected in the market but long-term values for these assets as you saw with the Morenci transaction while we were able to demonstrate a very significant value and its reflective of that long-term asset of the resource there and that the price view of other participants in the industry not to use a spot pricing but a longer-term view of prices.

Okay Thanks for the [indiscernible]. Just one last, real quick. Is the priority overall debt reduction over sort of just clearing the deck for the next four, five years of maturities?

Yes, Matthew let me just make a broader comment. Our company is over leveraged, I mean in the nature of the business that we are in where you have such high operating leverage from commodity prices, you just should not be this leveraged, because when conditions unfold as they do from time-to-time and your revenues drop because of what's going on the global commodity prices having this kind of debt is a killer and unfortunately we’re in a position that were in. So from a broader perspective we got great assets, we need to get back to where we have a balance sheet that is does not put us in a overleveraged situation. And that's what we’re about fixing that. So unfortunately we got here and now we’ve got to fix it. So all the other issues about managing maturity levels in doing that is part of the tactics of how do you do that. But at the end of the day we have good assets, we have great resources, we can create a good company, we have to give up some of those to get us to a position of we’re not overleveraged.

All right. Thanks very much for the perspective.

Your final question will come from the line Justine Fisher with Goldman Sachs. Please go ahead.

Thanks. I'll make it quick since it's been a long time. Just on - Kathleen, on the working capital comments in press release, you said that based on certain price assumptions the Company expects $4.8 billion of operating cash flow this year, including $800 million from working capital and other tax payments. My question is how sensitive is that $800 million to pricing, i.e., if we have a different price deck than you guys, could we assume that most of that $800 million might still materialize? Because that number was a much larger gain that what we had expected. I just want to know how much certainty we could have around that number if our price deck is different.

Yes, it wasn’t materially different, Justine, at $2 copper, we’re getting and we’ve received some already, but we’re getting some refunds, tax refunds in 2016 related to payments made in previous years. And then also with our international business the timing of when we pay taxes based on the prior year has an impact on it. But we did going into the year expect a working capital source and it’s somewhat price-sensitive but not significantly price-sensitive.

All right. Fabulous. Thanks very much. End of Q&A

We will now turn the call back over to management for any closing remarks.

Once again thanks everybody for your interest in our Company and participating in the call. And we look forward to our next opportunity we have to get together.

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