Freeport Selling DRC Mine to China Moly for $2.65 Billion

  • Freeport could get further payment on copper, cobalt price
  • Company enters exclusive talks for sale of cobalt unit

Freeport-McMoRan Inc. agreed to sell its Democratic Republic of Congo copper mine to China Molybdenum Co. for $2.65 billion as the Phoenix-based company reduces debt racked up in the commodities boom.

China Molybdenum will acquire Freeport’s indirect 56 percent stake in the Tenke Fungurume mine, which also produces cobalt, via a 70 percent interest in TF Holdings Ltd., Freeport said in statement Monday. The two companies also agreed to negotiate the sale of its interests in other cobalt assets. 

Freeport, which plunged 71 percent last year as commodity prices collapsed, has been seeking to offload assets and reduce a debt load that stood at $20 billion at the end of 2015. Chief Executive Officer Richard Adkerson said last month he expected to sell more mines and the Tenke deal brings the total to more than $4 billion this year.

“This transaction is another significant step to strengthen our balance sheet and enhance value for shareholders,” Adkerson said in the statement.

Freeport shares fell 3.6 percent before the start of regular trading on Monday. The stock has rallied 74 percent this year.

Tenke is one of Freeport’s five so-called core mines, which also include Cerro Verde and Morenci, as well as El Abra in Chile and Grasberg in Indonesia. Canada’s Lundin Mining Corp. owns 24 percent of Tenke, while Gecamines, Congo’s state-owned copper producer, holds 20 percent.

Cobalt Talks

Lundin hasn’t received a notice from Freeport about the sale, Chief Executive Officer Paul Conibear said in an e-mailed response to questions Monday. Lundin has the right to match any offer for Freeport’s stake, and has 90 days after receiving notification to make the decision, he said.

As part of the Tenke sale, Freeport may get a further $120 million based on copper and cobalt prices. It also agreed to negotiate exclusively with China Molybdenum on the sale of 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.

China Molybdenum last month agreed to pay $1.5 billion in cash for Anglo American Plc’s niobium and phosphate unit in Brazil. Chairman Steele Li said in a separate statement that the acquisition announced Monday will allow his company to benefit from favorable conditions for cobalt, which is used in rechargeable car batteries.

Credit Terms

For Freeport, the deal would allow it to meet requirements with creditors to avoid having to provide collateral for its revolver and term loan. The producer of gold, silver and copper agreed in February to sell a 13 percent stake in the Morenci mine in Arizona to Sumitomo Metal Mining Co. for $1 billion.

TF Holdings is a Bermuda holding company that indirectly owns 80 percent of Tenke Fungurume Mining SA. Freeport has 70 percent of TF Holdings and an effective 56 percent interest in Tenke.

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