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Freeport-McMoRan sells 13% in Morenci JV for $1 billion

Staff writer ▼ | February 15, 2016
Freeport-McMoRan (FCX) has entered into a definitive agreement to sell a 13 percent ownership interest in its Morenci unincorporated joint venture to Sumitomo Metal Mining (SMM) for $1 billion in cash.
Exploration   Partnership with Sumitomo was established 30 years ago
Richard C. Adkerson, FCX’s president and CEO, said: “We are pleased to expand our partnership at Morenci with Sumitomo. This transaction 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.”

Mr. Adkerson continued: “Our Morenci partnership with Sumitomo was first established 30 years ago and both companies are confident of the operation’s long-term future. With its long-lived reserves, substantial resource position, attractive cost structure and best in class operating team, the Morenci joint venture is positioned to be a continuing strong contributor to the success of FCX and Sumitomo.”

Freeport-McMoRan is one of the world's largest producers of copper and gold. The Morenci unincorporated joint venture is currently owned 85 percent by FCX and 15 percent by Sumitomo Metal Mining Arizona (SMMAz is owned 80 percent by SMM and 20 percent by Sumitomo Corporation).

Following completion of the transaction, the joint venture will be owned 72 percent by FCX, 15 percent by SMMAz, and 13 percent by an affiliate that is fully owned by SMM.

As of December 31, 15, FCX’s 85 percent share of consolidated recoverable reserves totaled 12.0 billion pounds of copper and its 85 percent share of 2015 production approximated 900 million pounds of copper. In 2015, FCX’s 85 percent share of Morenci revenues totaled $2.2 billion and production and delivery costs totaled $1.5 billion.

The transaction is expected to close in mid-2016, subject to regulatory approvals and customary closing conditions. FCX expects to use the proceeds to repay borrowings under its bank term loan and revolving credit facility.

FCX expects to record an approximate $550 million gain on the transaction. FCX expects to use losses to offset cash taxes on the transaction.