Interview with Kathleen Quirk, CEO and president of Freeport-McMoRan | Fast Forward podcast episode 4 transcript

You can read the full transcript of our interview between Andrea Hotter and Freeport-McMoRan’s CEO and president Kathleen Quirk for Fast Forward podcast below. Or, listen to Fast Forward podcast on Spotify, Apple Podcasts, Amazon Music or wherever you get your podcasts.

Full episode transcript

Andrea Hotter [AH]: Welcome to Fast Forward, a podcast by Fastmarkets. I’m Andrea Hotter, special correspondent at Fastmarkets, and this is the fourth episode in our series focused on the critical minerals essential for the world’s energy transition. If you haven’t listened to the first three episodes, why not you’re missing out? Please go back and find them on Apple Podcasts, Spotify, or wherever you get your podcasts.

Now to this week’s interview. If you’re involved in commodities, you might have noticed that everyone very interested in copper right now. Even if you’re not involved in the world of commodities, copper may well have come on your radar in recent months anyway. So, whether you are a copper expert or not, I have a treat for you today.

I’m going to be chatting with Kathleen Quirk, the CEO of Freeport-McMoRan, one of the world’s largest copper producers. Kathleen has spent her career working for commodities companies and most of that time has been spent in copper. She’s been with Freeport since 1989. She was made chief financial officer in 2003. She became and remains president since 2021. And she joined the Freeport board in 2023. Kathleen became the CEO in June, 2024 with Richard Adkerson, who is a bit of an industry legend in his own right, remaining chairman. I am really excited to hear Kathleen’s view on what on earth is going on in copper right now. Why are we hearing so much about where things are going, whether the buzz around the market will last, and what’s coming next. Kathleen, thanks for joining us on Fast Forward.

Kathleen Quirk [KQ]: Thanks, Andrea, for having me. It’s great to be here.

AH: It’s great to have you here too. And our timing couldn’t be better. Copper is having a bit of a moment. It set record highs recently and seems to be a favourite with the investment community once again. Let’s dive right in. Why do you think that is?

KQ: Well, I hope it’s having more than just a moment. I think this is really an important time for the copper industry. The trends in demand that we’re seeing are so impactful. Copper’s role in global societies around the world is becoming more and more critical. Everywhere you turn, you see that copper’s intensity of use is increasing. It’s being driven by decarbonization trends, urbanization, connectivity, the world is becoming more and more connected. And so what we see as we go forward is demand for copper accelerate, which brings about a number of challenges for producers like ours who want to continue to serve the market and serve our customers. But the trends for demand are really important drivers as we go forward. And it doesn’t look like it’s going anywhere. It looks like it’s going to continue to accelerate as the world becomes more electrified.

And as we know, copper is the metal when it comes to electrification. So it’s really an interesting time. You mentioned I’d been in the industry for a very long time. And this situation that we’re in now, where we’re looking at demand growth going forward, puts a lot of pressure on suppliers like ourselves to try to boost supplies, which is a challenge.

AH: And it’s also a pretty volatile market right now. I’m curious, whether you think these recent record prices that we’ve been seeing are fundamentally justified or whether we’re at risk of being in a bit of a bubble situation?

KQ: We’ve been in this industry for a long time and it is a volatile industry. And sometimes you point to situations where the market overreacts on the downside and sometimes overreacts on the upside. But fundamentally, when you look out over the medium term and longer, really, the market is well supported, probably one of the most well supported fundamental stories of all the commodities that we look at. Short term, there’ll be macro trends or conditions that might influence sentiment. We certainly saw that earlier this year when power prices hit a new record. Many are calling for us to continue to see higher prices in the future. But what we really look at are the fundamentals and we think the fundamentals are very supportive of copper for the long term.

AH: Now, you mentioned it, you’ve obviously seen the cycles come and go. I’m curious, what’s the same now and what’s different from the past, particularly when we compare the cycle that started 20 years ago in 2004/05. I mention that because it was deemed to be a super cycle and I’m asking, are we in one now or is this something different?

KQ: I think it is different from what we had 20 years ago. 20 years ago, is when China emerged as the world’s largest copper consumer. And prior to that, copper really just traded off of GDP growth around the world and then developed economies. And then as China emerged with its huge populations became such a big consumer of copper now is 50 % of the market, the industry wasn’t prepared at the time for that surge in demand. so prices, which had been very low for some time, rose exponentially. Went from under a dollar to a $4. So went up four times. And now we have a new element of demand, which is broader based than just China.

When I think this underpins, the outlook for demand as we look forward. The growth in demand is coming from decarbonization trends. We’ve seen the big investments going on in renewable energy and those are going to continue as we look forward. And so what’s different now than in the last 20 years is the demand for copper is broader based. It’s not just coming from China. The growth in demand is really global.

The other thing that’s different on the supply side is as we’ve gone through the last 20 years, there have become fewer and fewer copper projects that are actionable to develop. And so, the lead times to develop new sources of copper supply have been extended. We’ve seen some really good, exciting things go on in the Democratic Republic of Congo, but there haven’t been discoveries of new copper deposits over the last several years, even though the industry has been exploring and trying to find new sources of copper.

So we have fewer projects to invest in. I think there’s an opportunity for us as an industry to get more help in boosting supply from technologies, which have evolved over the last 20 years. And now we have technologies that we haven’t had.

AH: There’s so much to unpack in there. I’m going to take you right back to the start there with the China thing. Cause I do want to dig into that just a tiny little bit more. Obviously still some people are so used to looking at China, they still get their eye on it. And currently things are a little bit different there. As you mentioned, the Chinese economy seems to be running at two speeds with exports and manufacturing doing pretty well, but consumption and property markets look quite weak. And that’s being demonstrated in physical copper offtake there, which is disappointing relative to price performance. So what’s going on? Where do you see the Chinese market in terms of demand right now?

KQ: So the Chinese market is an important part of the overall global copper demand, currently 50% or more. And last year in 2023, there were heightened concerns which are continuing today about the property sector, which had been previously a big consumer of copper. And that sector has been very weak over the last several quarters.

But what’s happened in China and last year, even with the property sector, actually saw consumption growth in copper hit a record in 2023. And that was the result of new uses of copper, things like investments in the renewable energy that we talked about earlier, but also electric vehicles that offset the more traditional uses of copper. Now, as 2024 is unfolding, people are asking questions the Chinese economy, we’re seeing some inventory builds going on in China at a time when normally inventories are declining. And so people are asking the question, what is going on in China?

What we do see is China’s got a commitment to continuing to build out its renewable infrastructure. That’s very copper intensive. We’re seeing China lead the world on the production of electric vehicles. That’s a strong element for copper demand. And there is talk about potentially stimulus or other activity that could boost the property sector. So people are giving China the benefit of the doubt when it comes to copper in looking at what it could be in the future as opposed to what it’s been over last few months. But time will tell.

AH: You spelled out the positives for demand. There are some questions around electric vehicles, however. I know, again, it’s regional. It depends where you are in the world. There’s been so much buzz as you highlighted around EV when it comes to new copper demand growth, but sales of EV have stalled this year. The pain points seem to be related to all things that matter to copper. Range anxiety is due to a concern over a lack of infrastructure charging, which requires copper. Power grids aren’t being developed to account for the new energy required and there’s not enough energy storage. And so all of that potentially impacts copper, right? Not always all good news?

KQ: Yeah, I think you’re right. You’re continuing to see announcements come out about the pace of the EV adoptions and the production of EVs. China continues to be producing a lot of electric vehicles, but elsewhere in the world, we aren’t doing as well. And I think it does take time. Any type of disruptive technology like this is going to take time for adoption. Like you say, the infrastructure needs to be developed to where people are comfortable that they will be able to charge when they need it. All that is happening. It’s not linear, but I think the trend is for more electrification. As any new technology, it’ll continue to improve and I think the adoption rates will grow over time, but it’s not just going to be out of the box perfect.

We really are hopeful that as we look forward, technologies will evolve to a level where some of our big haul trucks can be electrified. And there’s big implications for that if we can get it right and get the economics right, because we spent a lot of money maintaining diesel engines. And so I think there’s a big opportunity for the mining industry as a whole, if we can find breakthroughs like that, that allow us to get more cost-efficient and bring electrification into our business in a bigger way.

AH: Well, we’ve been talking a lot about demand. You mentioned supply earlier. Let’s turn to that side of the equation, there are, as you said, huge challenges when it comes to developing new mines. Permitting is a major one. I think if I had a pound for every time someone complained to me about the lengthy times that it takes for permitting, I’d be growing my retirement fund quite nicely. And I’d probably have quite a lot of copper in those coins too, if I think about it, but it can take over a decade to get permits for projects. And we often hear that some corporate projects run into stumbling blocks and delays that mean they run out of money before they can even get up and running. What can we do about all of that?

KQ: Well, I think the good thing about all this, the rise of the importance of copper and other metals for the energy transition is not lost on governments. So governments are looking to find ways to increase supplies of copper and other critical metals.

It’s not easy, but I think the process can be streamlined. And so one of the things that we talk to the government about is we really don’t need duplication of efforts. So we should work to streamline permitting. But sometimes you can get crossways because some people view streamlining permitting as meaning that the mining industry gets a pass on doing the right. And we know after having been in this industry for so long, that this is a very long-term commitment when you go into developing a mine. And you need to do things in the right way. You need to plan, you need to understand the impacts that you’re going to have on the communities, on the environment. That takes years of studying to really understand what the impacts are, years of modelling. You can’t just go in willy-nilly and say, “I’m going to build this mine. And yes, we’ll figure it out.”

You really have to do a lot of upfront planning to make sure that what you’re doing as a mining business is done in a sustainable way. So the first part of that work has to be the science, the work that we do to mitigate impacts and with the work that we do to collaborate and work with communities. Companies need to be really transparent with communities the pluses and minuses that go into developing a mine. So you can’t circumvent that process. That process is critical.

The work with communities is so important. The before, the during, and the after of a mining project are just critical. And so our philosophy at Freeport is that we’re going to be there for a hundred years in the world. go into developing a mine and we need to make sure that we’re doing it in the right, that the plans are robust, that we understand all of the impacts and we’ve modeled the results and that we’re adhering to those stringent requirements that we put upon ourselves and that we’re continuously improving. So that part of it can’t be dictated by a government.

AH: I’m so glad you brought that up because I think the community’s part, the sustainability aspects, it’s central to it. Opposition to projects often comes from, it’s grounded in local populations being concerned about what mining is going to mean for their daily lives. That leads to the question, does the mining industry need to do a better job of promoting itself? And also perhaps some bad actors, because sadly they do exist, do a better job of behaving?

KQ: Well, I think our industry has a very long way. We need to be less defensive and more on the offense about the good things that we do for our communities and societies. The buzzword ESG in our industry is so important. We’ve been doing it for a very long time, even before it was called that. But what has changed, I think, for the better is become a lot more transparent. And we’re reporting on all the things that we do, all the impacts that we have, the good things and the things that we need to continue to work on, things like carbon emissions. So all that transparency, I think has been good to build trust in the industry.

You talk about bad actors. think that’s the real exception rather than the rule. think most of the companies that are involved in our industry, and there are a huge number of companies involved in the industry. I think in the ICMM organization, they’re 30 or so, maybe a bit more or less. And all of these companies are committed to doing the right thing. And copper in particular, and Freeport’s been a big part of this, we started through this organization called the Coppermark, third -party assessments that measure us on 30 some criteria that were designed in connection with the United Nations sustainability goals. So each one of our operational sites, and we have several here in the U S, we have a big one in Indonesia, two large sites in South America, and we have downstream as well. Each one is put up to a test of these criteria that a third party comes in and assesses our compliance. And so it’s a transparent process that all of copper producers can measure themselves against. It’s got a lot of traction with governments, also with our customers that are asking some of the same questions.

We can show them the results of the copper mark and how we’re managing our responsibility against these important criteria.

AH: And on that subject of sustainability, and you mentioned carbon emissions earlier, we hear so much about green premiums. At some point, I know a lot of companies are hoping that the market starts to differentiate between sustainably and less sustainably produced copper in a commercial way. So, the copper mark can be a way of distinguishing that. The other main way so far in markets like aluminium is around carbon emissions. So do you ever see the carbon emission intensity per unit of copper being priced into copper contracts? Or is that wishful thinking. Do you think the market’s going to start paying for green copper?

KQ: You hear people talking about that from Freeport’s perspective. We view it as binary. If we’re not a responsible producer, we’re not going to be able to sell a product. We need to just hold ourselves to high standards in terms of all aspects of sustainability, including carbon reduction. I’ll throw in here, Andrea, I know you know this, but copper in terms of its carbon intensity is not as high as some other commodities. Copper is actually an enabler of the energy transitions, but it doesn’t mean that we shouldn’t pay attention to our carbon emissions. And so we’ve got a number of objectives that we’re pursuing to reduce our carbon intensity. We’ve made some real impacts on our emissions and we’ve got more to do as we go forward. But I don’t we’re getting paid more, we just feel like it’s the right thing to do. And if we don’t do it, people will go to producers that do it and use them as their preferred supplier.

I think it’s really table stakes in our industry to be a responsible producer. And at Freeport, we really take it very seriously as part of our franchise.

AH: Yeah, a new non-negotiable. changing the subject slightly, where do you see the prospective areas for supply. How do you assess regions like, for example, Central Asia as a future location for copper production, particularly in comparison to the African copper belt and Latin America, for example? I’m thinking here of Kazakhstan as a potentially bigger producer than it is now. That region generally, how do you see it?

KQ: Well, we’re not involved in Kazakhstan. I know there are others that are and see the opportunity there, the resource there. I think what it tells us is in order to develop new supplies, we as an industry are going to have to go into new areas. When Freeport went into the DRC back in the 200 -08 timeframe, not a lot had been developed in the Congo. And we went in with a major investment at that time and were successful there. It’s not easy, but that’s the reality of the market right now in order to develop new supplies. You’re going to have to take different types of risks than we’ve taken in the past. We need to go into new frontiers as we look forward. And there are lot of deposits in different places that haven’t been developed for a variety of reasons and challenges.

But at Freeport, what we’re really focused on is our brownfield development opportunities. So we’ve got expansion opportunities in Chile. We’ve got a whole host of opportunities here in the US where we already have an existing franchise, where we already have community acceptance. Those opportunities for us are lower risk and potentially higher value opportunities than going into a whole new jurisdiction. The other thing that we’re pursuing, we’ve got opportunities in Indonesia and Freeport has been there for over 57 years and not a lot of companies have been successful there, but it’s been an area that Freeport really has differentiated itself and been very successful in operating in over many decades. And so as we look forward, we see continued opportunity in Indonesia.

But the other thing that we’re working on at Freeport, which we’re very excited about, it involves technology and something that the industry needs to think about is, given the demand outlook for copper and the constraints on new supply development, we need to find ways to be more efficient and get more out of the resources that we already have.

We’re heavily involved in a new leaching technology to get more out of our US assets than we ever would have imagined in the past. And this is using new technologies that were not available in the past and we see an opportunity here in the US to bring on new supplies from just recovering more copper in our stockpiles than what we had previously projected.

We’ve hit our initial milestone in that and as we look forward, see the potential to basically bring on new copper. Very low carbon emissions, very low capital intensity. So it’s very exciting.

We’re going to need to make investments. We’re going to need to continue to do exploration. But I think in the medium term, looking at the next three to five years, there are some technologies that we can take advantage of in our industry to get more copper that’s going to be needed to supply this growing demand that we talked about earlier.

AH: Yeah. Sounds like the industry is going to have to get a lot better at using that technology to produce copper. I do want to ask you one more question on the supply front. If you forward far enough and after allowing for the depletion of existing operations, do you think there’s going to be enough committed mine supply to meet demand forecasts? I mean, that’s the real question, is it? Where is the supply growth going to come from? Are we going to get there?

KQ: Well, it’s a real question. It is a real question. I think people take some comfort in the fact that there are a lot of copper resources out there. Now there are challenges to developing those resources. Some of them are in communities that have rejected development of new copper mines. That’s a difficult one to overcome. And some of them are in locations where there are new jurisdictions that will require development over time. But going into a new jurisdiction is not always easy.

And we’ve just seen that with what’s happened in Panama after multiple years of investment and sizable investments and now to have that mine currently shut down is a setback. The resources are there, the challenges of development are enormous, but to me that’s where these technology initiatives really need to be pursued. And one of the things that I’m so excited about is we’re hearing a lot more about copper broadly. In the past, not a lot of people outside of our industry really understood what the role of copper is in modern society.

And now it’s becoming more mainstream where people really understand its importance in our everyday lives. And I think that attention is going to bring in new talent to our industry, new investments in technology. You saw what happened in oil and gas over the last 20 years or so, where all these new technologies came in and actually did have an impact on building supplies. I think that as we look forward and see all of the new technologies that are coming available, if some of that gets directed towards our industry, that’s going to help us boost supplies. We’re seeing investments being made to help cut down on the time that it takes to explore for copper, mine planting, software and those types of things that are coming into play. Artificial intelligence and machine learning is going to be impactful for our industry. We don’t know how and exactly when it’ll manifest itself, but I really do believe that with all this focus on copper, which had been, I think, ignored in some cases in the past, that’s going to bring about new technologies and new talent to help us to improve supply.

There’s also going to be other things that happen, right? We know scrap aggregation is very hard. It’s a very fractured business, but we’ll see that helps to supply more copper in the future because copper is recyclable. And so we’ll see that come into play too, but it’s going to require higher prices and sustained higher prices for people to build a business

AH: It’s certainly true. I do like the fact that people know a little bit more about copper and I don’t feel such a metals geek when I talk about it with my friends. In episode three, Kathleen, I chatted with Jeremy Weir of Trafigura about geopolitics. Now, it was a really interesting conversation. If the audience hasn’t heard it, I encourage you to go back and listen to it. Kathleen, I’d love your view on the impact of geopolitics on copper. You talked about new jurisdictions. That’s also part of this whole story. There’s an emphasis by many Western governments on working with domestic or friendly sources of copper and other raw materials. How do you see that impacting supply chains, particularly given that China is such a dominant consumer of copper?

KQ: Yeah. Well, Jeremy is certainly an expert. I did listen to that podcast and encourage people to take a listen as well, but geopolitics is going to continue to be very important in our sector more and more. And I think with this energy transition, it’s really opened the eyes of governments around the world about supply chains and whether or not the supply chains are resilient.

And we like free trade at Freeport in the industry. And we like the fact that copper is a global commodity, but more and more countries have become concerned about trade relations to make sure that their supply chains can withstand geopolitical issues. So you’ve seen much more governments, including the US, become very focused about where their supplies of materials are coming from and trying to find ways to encourage investments in countries that are friendly to the US to make sure that the supply chains are resilient.

And so it is a big issue. You’re also seeing the impact of countries that want to make sure that, I’ve gone through this in Indonesia, where Indonesia is rich in natural resources and became concerned that its resources were being exported and wanted to see more investment in country in terms of downstream process.

Part of what we agree to with the Indonesian government is to build capacity, not just in the mind, but to build downstream capacity so that Indonesia could have its own industry and benefit to the maximum extent from its resources. I think you’re going to see more and more of that where countries really want to make sure that they’re getting the benefit of the resources, that they’re not just exporting them and allowing other countries to develop the higher-value goods and leave their countries behind.

Resource nationalism has always been a part of what we do and issues that we face in dealing in other countries. It’s got to be a partnership where the country feels that they’re getting a fair share of the resources. You’ve got to find that balance between what returns the investors require and what is good for the country and all of its stakeholders.

So finding that right balance and that long-term model is a really key part of what we do as investors in developers of projects. And so we’ve got to find common ground. You’ve got to find a model that works over the long term for not only the investor taking the risk of investing multi-billion dollars in these resources, but you’ve got also that look at what it does for the people of the country and what it does for communities and the betterment of countries.

Our industry is such a great example of how we can provide employment. We can provide significant development, tax revenues and multiplier effects for what we do. But we’ve got to go in there and find the right model, not be too greedy, but be strong in terms of managing our long-term rights because it is a long -term business.

You don’t want to make a lot of upfront investments and find out that you didn’t have a deal that works over the wall.

AH: Yeah, absolutely. You’ve been talking here about brownfield and greenfield. Let’s turn now to M&A because we’re seeing a real revival of interest in copper companies. We can talk a little bit about tech resources and Glencore and BHP and Anglo-American in a minute. You’ve been through major M&A before at Freeport, Kathleen. There’s definitely preference to buy and not build and add new supply right now. Why do you think that is?

KQ: Well, I think the reality of the situation is that if companies had actionable projects to build and could grow organically, they’d be doing that. And you see all the large companies around the world over last 10 to 15 years, you can look at their strategies. They have all been focused on finding ways to get more exposure to copper. And yet these are well-capitalized companies, but they haven’t been able to meaningfully grow in investing in new copper projects.

So the only way really to do something and grow your copper exposure is to buy, because it takes so long to build, even with the best exploration team with the best development team. It’s a real challenge. Multiple years and really to have a big impact. When’s the last time that you saw something like an Escondida get discovered? Something like a Grasberg get discovered.

I mentioned earlier, there’s been some terrific development in the Democratic Republic Congo, but that’s been the exception rather than the rules. So I think it’s not a question of either or. I think it’s really what’s actionable. And even M&A is not actionable as we’ve been witnessing.

If companies could invest, make discoveries, go forward with project development, they would be doing that all over the place. It just shows the scarcity of copper and it’s leading people to say, if I do want exposure, I may have to buy it rather than build it because building is very long -term and uncertain.

AH: And still doesn’t solve that problem with more supply growth, it ultimately I mean, there seems to be a move towards being a pure play copper company. Even the large diversified miners are slipping down portfolios and focusing on a few core areas of which copper is won. We talked about the fundamentals. I’m guessing it’s probably going to be related to that. But why do you think that is, that real focus on copper right now?

KQ: Well, I think it’s about the fundamentals. And when you compare the fundamentals of copper supply and demand over the coming years and decade, you’re hard pressed to find a commodity that is more well-structured in terms of its fundamentals. This is something that people have recognized over the last 20 years. This isn’t a new phenomenon.

What has been a new phenomenon has been the acceleration of demand associated with decarbonization and electrification. But people have been calling for this for some time and copper has now have been differentiated among other commodities as one of the best structure to a fundamental standpoint.

So in terms of the M&A, I think there are some benefits of being large. Freeport is of the size where we are able to undertake projects of scale, we’ve got the balance sheet that allows us to make big commitments. It is helpful in terms of the risks that you have to take in making these types of investment in terms of the portfolio management.

We’re not interested in becoming larger just for the sake of being larger, but there are some benefits in applying technologies across a broader portfolio and in generating synergies and best practices and finding best talent. So there are some benefits of M&A, but I think what’s driving these companies now to copper are the fundamentals and the inability to grow copper just through investment.

If you’re going to move the needle when you’re of a certain size, it’s going to have to be through M&A. And there are fewer and fewer companies out there that are to your place in copper. And so that’s becoming more and more topical to look at what can companies do that want to increase their exposure to copper. And M&A is going to be part of that, but it’s not predictable because nobody wants to sell, right? Anybody has a good copper asset wants to hold on it.

AH: Well, you mentioned Glencore wanted to buy tech, including base metals. That didn’t happen. BHP wanted to acquire Anglo-American, including copper. That didn’t happen. What’s Freeport’s approach to M&A? Is the company planning to get involved in this current game of musical chairs?

KQ: Our focus is really organic. We don’t have a strategic issue to solve. Our strategy and being foremost in copper is rooted in what we have today. We’ve got large scale production today, plus we have organic opportunities to grow. Doesn’t happen overnight, takes time, but we’ve got a series of short term, medium term and long term opportunities that we believe will create value for our shareholders and also allow us to be relevant and a major supplier of copper in the future.

So for us to get involved in M&A, it would have to be something where there was value creation, something where there were synergies that we could combine with other companies and drive synergies, you know, take our operating practices or our technologies and spread it over more operations or vice versa. Take technologies that other companies have perfected and bring value to our operations. It would have to be something that would add value. We don’t have a strategy to grow the company by M&A. Our strategies on organic growth, but we’re alert to all the opportunities out there. You mentioned the M&A that we were involved in 15 years ago or more when we acquired Phelps Dodge. And that was a transaction that brought about value because it made the two companies stronger as one. It gave the Phelps Dodge business a very large, low-cost operation and it provided diversification for Grasberg in a larger, better capitalized company. So that was a really good strategic transaction. And from there, we were able to take it and build reserves and develop opportunities. So there may be another one out there, there are fewer and far between, but we’re alert to opportunities. You can’t always plan when the sun and the star and the moon will align.

But we’re ready. We understand what’s out there. And if it makes sense, if it’s something that drives value at the end of the day, then it certainly will be at the table. But it’s not something we feel we have to do.

AH: Well, now I know what the criteria are. I’m keeping my journalistic eyes open and beady eyes on the sector. Look, Kathleen, you are the new CEO of Freeport. What’s on the agenda?

KQ: Well, it’s exciting time. I’m honored to step in as CEO at this critical time in our industry. I’ve worked with Richard for a long time, as you know, and we worked together to build this company and Richard should start a fantastic job in building a culture at Freeport of competence and camaraderie and competitive spirit and doing the right thing for our business and stakeholders. So I’m looking forward to continuing that tradition. I’ve got some priorities that we’ve been talking about with the organization and they center around things like execution. That’s been a hallmark of Freeport, but it’s something you can’t lose sight of and we need to continue to execute reliably and responsibly. That’s something that’s just table stakes. We’ve got to continue to do.

We’ve also got to lean more into technology. And I’ve talked about the leaching opportunity, but it’s broader than that. And over the next few years, I really want to see us find ways to take technology to a new level that helps us be more efficient because it got challenges. You’ve got lower grades, got longer hauls. We need to find ways to be more productive in our business. so technology is a big part of that. Talent development is a big part of my agenda as well. We’ve got a great team of people, but I’m looking forward to the next generation coming up in the industry. I think we can great learnings from them. They can match up with our experienced people and the partnership between the experience and the new ways of working, the new ways of looking at things, I think are going to be very powerful.

I’m very much looking forward to making the company better, leaving it in a better place than where it is today. That’s a tall bar because the company’s in great shape. We’ve done a lot of great things at Freeport. I think there’s more to come. So it’s a really exciting time.

AH: For sure. think your agenda is going to be pretty busy by this time. Kathleen, I’d like to ask you a couple of questions that we ask all our guests. One of them is what’s one thing we might be ignoring, but we all should be looking at related to copper?

KQ: It’s pretty well understood. I can’t think of one single thing that is not understood. And I wouldn’t have said this three years ago, but really over the last few there is greater recognition about the importance of copper. And I think that was missing three years ago, four years ago, 10 years ago.

People just viewed it as another mined commodity. But I think there is recognition now about how important copper is to achieving our goals as a society to become more electrified, more modern, more connected, to take advantage of technologies. Copper is a big part of all of that.

AH: And the other question we have is, if you had to fast forward a decade, what would the landscape for copper look like?

KQ: Well, I really do believe that we’re going to see technology improvements, more automation, more technology, which will allow us to, think, better at what we’re doing today at being more efficient. I don’t see any major new unfound copper resources. The industry is pretty mature. I think that if we look forward 10 years, I think the industry will be a lot more innovative than there has been over the last 10 years. Not that say we’ve been sleepy, we’ve been working really hard at all this, but I think necessity is some other invention and we’re going to see more innovation, more technologies as we look forward.

AH: And now, let’s take a quick break from the interview to hear from one of our in-house experts here at Fastmarkets.

Olivier Masson: Thanks, Andrea. My name is Olivier Masson. I’m a principal analyst in the Fastmarkets battery raw materials team, where I oversee the nickel and copper analysis.

A key theme for the decades to come is decarbonization, which entails replacing CO2 emitting industries and technologies with low carbon or carbon free alternatives. Typically, that means replacing fossil fuels with metals.

Among the first industries to embark on this decarbonization drive, are power generation and land transport, starting with personal vehicles. In both cases, copper is one of the key metals to enable this transition. Crucially, this decarbonisation drive is broadly a global initiative. It will likely spur demand growth in most countries rather than just China, which has been the main driver of demand growth in the past decade. Given the global push towards greater renewable power generation, we expect a trebling of copper consumption for wind power generation over the next decade.

Solar power is a mostly land-based technology and although we expect a solid increase in generation capacity, the lower copper intensity compared to wind power generation means that we expect the growth of copper consumption in solar applications to be slower than for wind power.

The electric vehicle sector is another energy transition linked driver of refined copper demand. We estimate that the average copper content in an electric vehicle to be about three and half times greater than for an internal combustion engine vehicle, with copper required in the battery itself and in the electric motor as well as the wiring.

Moreover, electric vehicles require a charging infrastructure, which also needs its copper cabling. Given the outlook for EVs, we expect this sector to be the major driver of energy transition copper demand over the next decade, with a forecast quadrupling of refined copper consumption over the next 10 years.

With the energy transition increasing the requirements for copper, the question arises of where the industry will find the required additional units. Investments will be needed in expanding existing operations, extending mine life, bringing new projects online, as well as greater exploration activity. So even if some potential future mergers or takeovers are successful, additional copper supply will still be required. This can only come from greater mining activity, an increasing recycling or even technical innovation. One thing is certain, with the energy transition driving refined copper demand growth in the years ahead, the supply side is going to have to find ways to keep up with this demand. This will make copper a very sought after commodity. Activity in the market could get red hot.

AH: And now, back to the interview.

All right, so it’s that time in the podcast where we take a few questions from the audience that were sourced on social media. Now we had a really great question. What makes more sense, developing already discovered large but low-grade copper projects in anticipation of higher prices to make the economics work in the future, or exploring first for higher grade deposits that would be lower on the cost curve but profitable if prices stagnant? Is it all about the grade or is it any cost?

KQ: Well, really the answer is we’ve got to do all the above, but at Freeport, as we look back at exploration and finding grade, I mean, that’s been the Holy Grail for our industry for some time. People have been looking for that high grade because it’s very challenging to get a low grade deposit to work economically. But at Freeport, since we already have infrastructure, we’ve been very good about being able to manage and operate low grade mines, particularly here in the US over last several decades.

For us, that increment of making investments in not only increasing production, but also finding ways to be more productive to bring down the costs of production. That for us has been a better outlook. And we’re not ruling out exploration, but it’s a lot less certain. And like with this leach opportunity, we’re finding a new mine with something we already have right in front of us. And so for us, that is a lot better risk reward opportunity than exploration. So like I said, we’re not ruling out exploration. We’re still doing some, but you can’t put all your eggs in that basket because it’s very rare to have a new discovery. Freeport shows a chart of the major copper mines and when they were discovered. And most of the copper mines were discovered decades ago. Some of them a century ago. So when you look at what’s been discovered recently, it’s a very short list.

In terms of the certainty for us, it’s more on investing in assets that we already have and making them better and making them more profitable and scaling them. But it’s, know, other people have a different strategy because they have what we already had, you probably wouldn’t do what we do starting from scratch.

AH: Some people need to do that exploration. that leads nicely into another question that we had from the audience, which was around the price that incentivizes exploration. Is there a price that spearhead significant exploration encourages the startup of new lines? What’s the incentive price? Or again, is it something different?

KQ: Higher prices bring in a lot of different thought. You’ll see more scrap come available at higher prices. You’ll see thrifting that happens. The topic of substitution always comes up, although it’s difficult to replace copper’s characteristics. But the exploration part is not something that happens overnight. Going from exploration to ultimate development is a decade. It’s even what we’re doing in Chile, where we’ve got it defined. We’ve got this great opportunity to go through the permitting process and construction process. That’s seminary years on something we already understand and we’ve been operating for decades. So the exploration phase takes a very long time. You have to drill multiple cores to understand what you have. You’ve got to work on mine planning, all the ancillary things that go into it. How are you going to manage salines? Or if it’s a leach facility, do you have enough land there? Enough water? All the things that go into planting a mine take a very long time. And so if copper prices were to double tomorrow, the industry just can’t respond quickly enough to add supplies. Now, yes, that’s going to bring out these things I talked about, scrap and thrifting and substitution, but it’s not going to change the ability to take a new discovery and bring it on in three years.

So, we need some more technology to help with that equation, but it’s not there yet.

AH: For sure. For sure. Well, it’s definitely a good story at the moment. Kathleen, I could talk to you for ages. This has been absolutely great. Copper is so central to our everyday lives and you have really clarified quite how much. Thank you so much for giving me your time today. I always learn a lot from you and I know our listeners will have too.

KQ: I just want to tell you thank you for your coverage of our industry. You’ve been following it for a long time and you understand it. You understand the people, you understand all the dynamics. And so it’s always a pleasure to talk to someone like you that has such a deep knowledge of the industry and the market. So thank you for having me.

AH: Well, that’s very kind. And thanks also to you at home, at work, in the gym, in the car, electronic, I hope as well, or wherever you are listening to us today.

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