Freeport Leads Gains by Miners as JPMorgan Said to Be Advising

  • Shares had tumbled 58% this year in global commodities rout
  • Freeport opened the door to selling shares in its energy unit

Freeport-McMoRan Inc. rose the most among major mining stocks after people familiar with the matter said the company is working with JPMorgan Chase & Co. to review its strategy following activist investor Carl Icahn’s entry into the shareholder register.

The Phoenix-based company gained 6.3 percent to $10.32 at 9:43 a.m. in New York and climbed as much as 7.8 percent as trading resumed after a holiday Monday. The 20 most valuable miners rose an average of 1.8 percent.

Shares in Freeport are down 58 percent this year as signs of slowing Chinese demand and abundant supply exacerbated a rout in commodity prices. Copper rallied Tuesday after China reported higher imports of the metal.

Freeport, which has scaled back dividends and investment plans in a bid to preserve margins, may consider options including further cost and spending cuts and asset sales, people with knowledge of the matter said Sept. 5. Icahn amassed about an 8.5 percent stake in Freeport, according to a regulatory filing last month. Freeport’s discussions with its advisers are at an early stage and no decisions have been made, the people said.

Representatives for Freeport and JPMorgan declined to comment.

IPO Proposal

Icahn may seek board representation and intends to hold talks with Freeport on “capital expenditures, executive compensation practices and capital structure as well as curtailment of the issuer’s high-cost production operations,” according to the Aug. 27 filing.

Just hours earlier, Freeport announced plans to cut production at some mining operations, reduce its U.S. workforce and lower capital spending next year to $4 billion from a previously forecast $5.6 billion. Freeport has also opened the door to selling shares in its energy business and the unit that operates the giant Grasberg mine in eastern Indonesia.

The copper miner bet big on the energy market in late 2012, sending debt levels ballooning just before prices collapsed. As a result, yields on Freeport’s $14.7 billion of bonds surged to levels that are more than what investors typically demand to lend to high-yield companies.

On Sep. 3, Standard and Poor’s lowered its outlook on the company to negative from stable, a move that indicates the BBB- rating may be cut, citing the possibility that cost-cutting and production targets won’t be met.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE