Freeport-McMoRan sells Arizona mine stake to Sumitomo for $1bn
Sumitomo already owns 15 per cent of Morenci and the deal will cut Freeport’s stake to 72 per cent. The mine produced around 400,000 tonnes of copper last year for Freeport and was the group’s largest single source of the metal.
Freeport is the world’s largest stock market-listed producer of copper but its problems from the falling price of the metal have been compounded by controversial transactions four years ago to step up its exposure to oil and gas. The deals massively increased Freeport’s debt, leaving it more exposed as the commodity cycle has turned.
The mining industry is being most affected by the economic slowdown in China, which became by far the largest source of commodities demand over the past decade. The slowdown has hit demand for minerals used in construction and industry.
In a statement on Monday, Richard Adkerson, Freeport’s chief executive, said the deal with Sumitomo “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”.
Indebted miners are trying to sell assets but are very reluctant to entertain offers for their best mines unless their financial circumstances become desperate. Larger miners such as Rio Tinto and BHP Billiton are hunting for copper acquisitions, which will boost growth once the cycle recovers, but will only consider those that are large, low-cost and in safe jurisdictions.
Sam Walsh, Rio’s chief executive, last week said that assets so far offered for sale by distressed companies were “distressed for a reason”.
Shares in Freeport have rebounded from lows a month ago but are still down almost three-quarters over the past 12 months.