Freeport-McMoRan Inc (NYSE:FCX) announced that it has entered into a definitive agreement to sell a 13 percent ownership interest in its Morenci unincorporated joint venture to Sumitomo Metal Mining Co., Ltd. (SMM) for $1.0 billion in cash.
Richard C. Adkerson, FCX’s President and Chief Executive Officer, said: “We are pleased to expand our partnership at Morenci with Sumitomo. This transaction represents an important initial step toward our objective to accelerate debt reduction and restore our balance sheet, while retaining a portfolio of high quality assets and resources.”
Mr. Adkerson continued: “Our Morenci partnership with Sumitomo was first established 30 years ago and both companies are confident of the operation’s long-term future. With its long-lived reserves, substantial resource position, attractive cost structure and best in class operating team, the Morenci joint venture is positioned to be a continuing strong contributor to the success of FCX and Sumitomo.”
The Morenci unincorporated joint venture is currently owned 85 percent by FCX and 15 percent by Sumitomo Metal Mining Arizona Inc. (SMMAz is owned 80 percent by SMM and 20 percent by Sumitomo Corporation). Following completion of the transaction, the joint venture will be owned 72 percent by FCX, 15 percent by SMMAz, and 13 percent by an affiliate that is fully owned by SMM.
As of December 31, 2015, FCX’s 85 percent share of consolidated recoverable reserves totaled 12.0 billion pounds of copper and its 85 percent share of 2015 production approximated 900 million pounds of copper. In 2015, FCX’s 85 percent share of Morenci revenues totaled $2.2 billion and production and delivery costs totaled $1.5 billion.
The transaction is expected to close in mid-2016, subject to regulatory approvals and customary closing conditions. FCX expects to use the proceeds to repay borrowings under its bank term loan and revolving credit facility.
FCX expects to record an approximate $550 million gain on the transaction. FCX expects to use losses to offset cash taxes on the transaction. (Original Source)
Shares of Freeport-McMoRan closed last Friday at $5.53. FCX has a 1-year high of $23.97 and a 1-year low of $3.52. The stock’s 50-day moving average is $5.08 and its 200-day moving average is $8.78.
On the ratings front, FCX has been the subject of a number of recent research reports. In a report issued on February 10, Cowen analyst Anthony Rizzuto reiterated a Buy rating on FCX, with a price target of $10, which represents a potential upside of 80.8% from where the stock is currently trading. Separately, on February 9, FBR’s Lucas Pipes maintained a Hold rating on the stock and has a price target of $3.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Anthony Rizzuto and Lucas Pipes have a total average return of -13.1% and -27.6% respectively. Rizzuto has a success rate of 38.7% and is ranked #3256 out of 3576 analysts, while Pipes has a success rate of 19.7% and is ranked #3539.
Freeport-McMoRan, formerly Freeport-McMoRan Copper & Gold, deals in the mining of copper, gold and molybdenum.