Freeport-McMoRan to Sell African Mining Stake for $2.7 Billion -- Update
May 09 2016 - 4:14PM
Dow Jones News
By Ben Dummett
Freeport-McMoRan Inc. agreed Monday to sell its stake in an
African copper operation to a Chinese mining-and-processing firm
for $2.65 billion, as the Phoenix-based miner looks to pay down
debt amid a stream of similar moves by big miners.
Freeport, the biggest U.S. mining company by market value, said
it would sell its interests in TF Holdings Limited, a Bermuda
holding company that indirectly owns an 80% interest in the Tenke
Fungurume mine in the Democratic Republic of the Congo, to China
Molybdenum Co. Freeport has a 70% stake in TF Holdings, and an
effective 56% interest in Tenke.
The move comes as uneven global economic growth raises concerns
over demand for and prices of commodities including copper, which
has fallen in price over the last year by 27% to $2.10 and has
stagnated so far this year. Weak prices are pushing some of the
world's biggest miners to sell assets and shore up their
debt-burdened balance sheets as they contend with heavy losses.
The Tenke deal also underscores how China, where demand for
foreign mining assets remains strong, is benefiting from the
weakened bargaining positions of some sellers to acquire resources
cheaply.
China Molybdenum's deal with Freeport is its second transaction
in less than a month. The company, which is partly state-owned,
agreed in late April to acquire Anglo American PLC's Brazilian
niobium and phosphates business for $1.5 billion. Phosphates are a
key ingredient used to make fertilizers while niobium helps to make
steel stronger.
Other Chinese companies have targeted gold mines. Last year,
China's Zijin Mining Group agreed to buy a 50% stake in the unit
that manages Barrick Gold Corp.'s Porgera gold mine in Papua New
Guinea.
While many big miners are selling assets, Freeport has been
under increasing pressure to reduce its debt since August, when
activist investor Carl Icahn disclosed the purchase of a stake in
the miner. Since then, Freeport has suspended its dividend, cut
capital spending, and announced the resignation of longtime
Chairman James R. Moffett, an oil wildcatter who also developed the
company's Grasberg mine in Indonesia, one of its so-called super
mines.
Since the beginning of this year, Freeport has announced more
than $4 billion in asset-sale transactions.
By selling the Tenke stake, Freeport is reducing its exposure to
a politically risky area without undermining its ability to
increase copper production.
The Tenke mine operation is about 110 miles northwest of
Lubumbashi in the Katanga province, and as of the end of December
had recoverable reserves of 7.2 billion pounds of copper.
But the sale of conflict minerals, including tin, tantalum,
tungsten and gold, has made it a "challenging operating
environment," as proceeds used by rebels to buy weapons spur
"regional conflicts and attacks against innocent civilians," noted
Lundin Mining Corp., a minority owner in the Tenke project, on its
website.
Freeport also owns assets in the Grasberg minerals district in
Indonesia, one of the biggest copper and gold deposits, as well as
the Cerro Verde complex in southern Peru, which is expected to
produce over a billion pounds of copper in 2016.
"We are committed to our immediate objective of reducing debt,
while retaining...a leading position in the global copper
industry," Freeport Chief Executive Richard Adkerson said in a
statement.
Freeport had a debt load of about $20.8 billion at the end of
March and reported a $4.2 billion loss for the first quarter,
largely due to the declining book value of its oil and gas assets.
The company made a big bet on energy in 2013 when it bought McMoRan
Exploration Co. and Plains Exploration & Production Co. for a
total of $9 billion, a deal that added to the company's debt load
ahead of a steep decline in energy prices.
Last month, Freeport announced it would cut 25% of the
oil-and-gas workforce, or 325 jobs, as part of an overall
restructuring in that business. The company said it is evaluating
options for the oil-and-gas business, including possible asset
sales or joint-venture arrangements.
In addition to the TF Holdings transaction, Freeport said it
would negotiate exclusively with China Molybdenum to enter into
agreements to sell its interests in joint venture Freeport Cobalt,
which includes the Kokkola Cobalt Refinery in Finland, for $100
million. The company also seeks to sell the Kisanfu Exploration
project in the Democratic Republic of Congo for $50 million.
--Joshua Jamerson contributed to this article.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
May 09, 2016 16:59 ET (20:59 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Freeport McMoRan (NYSE:FCX)
Historical Stock Chart
From Apr 2024 to May 2024
Freeport McMoRan (NYSE:FCX)
Historical Stock Chart
From May 2023 to May 2024