Freeport Rules Out Deals in Near Term -- WSJ
By Alistair MacDonald
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 14, 2020).
U.S. mining company Freeport-McMoRan Inc. has no interest in
major strategic deals over the next three years, its chief
executive said Monday, potentially stymieing informal overtures
from Barrick Gold Corp. to merge.
Barrick Gold Chief Executive Officer Mark Bristow has told
reporters that there is logic in merging with Freeport. That has
stoked expectations among some investors and bankers that the two
sides could get together. Alongside copper, Freeport's massive
Indonesian mine, Grasberg, is also one of the world's largest gold
But Freeport is too focused on the engineering challenge of
turning Grasberg from open pit mining into an underground operation
to think about mergers and acquisition deals, said the company's
veteran CEO, Richard Adkerson.
In addition, market challenges related to the U.S.-China trade
war mean this isn't the best time for major strategic moves, Mr.
"Our company is laser-focused on completing that [Grasberg
transition], so we are focused on that and not M&A
opportunities," he told The Wall Street Journal. "After that is
complete, we would be in a position to look at a number of
alternatives that could be attractive to our shareholders," he
That could be a problem for Barrick. Mr. Bristow recently told
Bloomberg News that if Barrick were to attempt a merger with
Freeport, it would have to be a friendly rather than hostile
approach. The South African executive has talked generally about
adding more copper to its current reserves of the metal. That makes
sense because the industrial metal is often found with gold, and
because copper is an important component in the increasing
electrification of energy, he has said.
Mr. Adkerson declined to comment on whether Barrick Gold has
approached his company. Barrick also declined to comment.
The two executives know each other through their work at the
International Council on Mining and Metals, a trade group that
represents the world's largest mining and metals companies.
At current copper prices, Freeport's cash flows will double in
two years, Mr. Adkerson said, but investors have yet to price in
the expected growth. Meanwhile, the company faces lower revenue and
higher capital costs during the transition at Grasberg. The change
represents a significant technical challenge, analysts say.
When Freeport does come to look at strategic opportunities, this
could be about pouring capital into its own projects, rather than
M&A, he said. Freeport is developing several new projects,
including one in eastern Arizona.
"It is a real challenging time for us to think about strategic
opportunities, because of the cash flow situation as we move" from
open pit to underground, Mr. Adkerson said.
Mr. Adkerson, who joined Freeport in 1989, said he is feeling
bullish about the copper market, given that the scarcity of new
projects in the metal should boost its price. Analysts mainly share
that view. The scarcity has also triggered speculation about deals
as miners look to increase their exposure to the metal, with
Freeport frequently talked of as an acquisition target.
In 2018, Indonesia took a 51% stake in Grasberg, paying $3.65
billion to Freeport and Australian miner Rio Tinto PLC. The
agreement has ended a standoff with Indonesia. The country's
government refused export permits and threatened new taxes.
Relations between the sides remain positive and the mine is
progressing well, Mr. Adkerson said.
Corrections & Amplifications Freeport-McMoRan Inc. has no
interest in major strategic deals over the next three years, its
chief executive said Monday. The headline of an earlier version of
this article misspelled the company's name as Freeport-McMoron.
(Jan. 13, 2020)
Jacquie McNish contributed to this article.
Write to Alistair MacDonald at firstname.lastname@example.org
(END) Dow Jones Newswires
January 14, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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