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 producers.

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. Adkerson said.

"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 said.

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 alistair.macdonald@wsj.com

 

(END) Dow Jones Newswires

January 14, 2020 02:47 ET (07:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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