Freeport sees way forward without asset sales
After an initial drop, shares in copper and gold giant Freeport-McMoRan (NYSE:FCX) closed higher on Tuesday as investors weighed the impact of a proposed $1.5 billion share issue to cut debt against an announcement that the company is holding off on further asset sales this year.
Reuters reports CEO Richard Adkerson said on a conference call after second quarter results that he is “confident the company could reduce its $18.8 billion of net debt to between $13.2 billion and $10.5 billion by the end of 2017 on the back of already executed asset sales and excess cash it expects to earn from higher mined volumes and metals prices.”
“I feel we’ve turned corner, we can see the way forward without further asset sales, without further equity sales,” Adkerson said although he kept the door open to “all strategic moves” to create shareholder value.
Freeport’s asset sales this year top $4 billion, including $1 billion for a 13% stake in its giant Morenci operation (at 463,000 tonnes last year the fifth largest copper mine in the world) in the US and the $2.6 billion sale of the high-grade Tenke Fungurume mine in the Democratic Republic of Congo to China Molybdenum.
Freeport’s debt pile is mostly the result of the ill-advised energy purchase made less than four years ago.
In April Freeport announced it is removing the top management of its oil and gas business and reintegrating the operation into the larger group after failing to dispose of the unit.
In December 2012 Freeport acquired Plains Exploration for $6.9bn and bought back for $3.4bn in cash McMoRan Exploration, a deep sea drilling company, which it spun off 18 years before. At the time of the oil and gas investment in December 2012 Freeport was worth more than $30 billion.
Freeport was the second most traded stock on the New York Stock Exchange with a massive 70 million shares changing hands to end the day up 2.4% after a 7% drop at the open.
The Phoenix-based company, which vies with Chile’s state-owned Codelco as the world’s top copper producer, has gained 87% in value so far this year for a market worth of $15.5 billion. Measured from its January low the stock is up 274%.