Top publicly-held copper producer Freeport-McMoRan Copper & Gold (NYSE:FCX) in May announced the sale of its largest African copper mine to China Molybdenum (CMOC) for up to $2.65 billion.
On Wednesday Reuters reported that the Democratic Republic of Congo’s state-owned Gecamines has submitted its own bid for Freeport’s 56% stake in the high-grade Tenke Fungurume mine.
Gecamines already owns 20% of the operation while Toronto-based Lundin Mining controls 24% which includes a first right of refusal to pick up Freeport’s stake.
The central African country’s mines minister said in May “that he suspected Freeport was hiding its true value”:
“For us, it’s a matter of setting up a new joint venture with new partners to facilitate the exit of Freeport and reassure the state and the workers,” Gecamines’ interim director-general Jacques Kamenga told Reuters.
“He added that Gecamines had received “serious proposals from potential industrial and financial partners”. He did not specify who but said CMOC’s participation was not ruled out.”
Apart from the deal for Tenke, Freeport is also in talks with CMOC to sell its interests in Freeport Cobalt, including the Kokkola Cobalt Refinery in Finland, for $100 million and the Kisanfu Exploration project in the DRC for $50 million. Freeport reported consolidated Tenke sales for the year 2015 totaling 467 million pounds of copper (215,000 tonnes) and 35 million pounds of cobalt (16,000 tonnes) at a net unit cash cost of $1.21 per pound of copper.
China Molybdenum in March picked up Brazilian assets from Anglo American which is also in the midst of a radical restructuring and asset sale program. The Chinese company paid $1.5 billion cash for niobium and phosphates operations inside the South American country.
Like many of its peers Freeport has been struggling to get its debt load under control which ballooned to $20 billion following the ill-timed acquisition of oil and gas assets three years ago. In February the Phoenix-based company sold a 13% stake in its US Morenci mine, the world’s fifth largest, for $1 billion to Japan’s Sumitomo, but so far has not been able to offload the energy operations despite putting them on the block a year ago.
Richard C. Adkerson, Freeport’s President and CEO, said since the start of 2016 the company has announced over $4 billion in asset sale transactions: “We are committed to our immediate objective of reducing debt while retaining a large portfolio of high quality assets and resources and a leading position in the global copper industry.”
Better sell it to Gecamines.
They’ll destroy the operation within a decade, and less copper is more valuable copper.
I think Gecamines plans a flip. Buy the 56% from Freeport and sell at a higher price to CMOC. China wants to control the Cobalt supply and price and will do so at almost any cost.