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Tuesday, January 28, 2020

Freeport CEO 'looking forward' to deals once expansion projects done

By Ernest Scheyder

(Reuters) - Freeport-McMoran Inc (N:FCX), the world's largest publicly traded copper producer, would consider acquisitions, mergers or other deals once three ongoing expansion projects finish by 2022, Chief Executive Richard Adkerson said in an interview on Tuesday.

Demand for copper is projected to surge this decade because of the rising popularity of electric vehicles, which use twice as much copper as internal combustion engines. That, in turn, is expected to fuel an M&A wave across the sector.

Despite that, Phoenix, Arizona-based Freeport's shares are worth half what they were in 2010, dragged down by uncertainty over the company's stake in a major Indonesian mine and debt from an ill-fated oil and gas venture.

But those issues are largely behind the company, which is about to open a copper mine in the United States, is expanding Indonesia's Grasberg mine and has launched an analytics program to boost production in Peru.

Those projects should double the company's cash flow and boost the company's stock price, giving the company ammunition to consider deals, Adkerson told Reuters.

"I'm looking forward to having a new experience in my career toward accessing alternatives and deciding which way we go," said Adkerson, an accountant by training who became CEO in 2003.

Those alternatives could include buying part or all of another company, building new mines or other deals, he said.

"We don't have a clear directive now on what that direction could be, but we will be attractively situated and will have an opportunity to add value through investments," said Adkerson.

According to recent news reports, Barrick Gold Corp (TO:ABX) CEO Mark Bristow has spoken favorably of Freeport's assets and a potential combination.

Adkerson declined to comment. A Barrick spokeswoman declined to comment.

Adkerson, 73, said he has no plans to retire and is in good health.

"This is not a time that I'm thinking about walking away," he said.

Adkerson called the outbreak of a deadly coronavirus in China a "real black swan event." The term is a reference to the book "Black Swan," which looks at the potentially catastrophic effects of unpredictable events.

Copper prices have dropped more than 10% this month on concerns the virus could affect the global economy. Copper prices are closely linked to global economic health because the metal is used for construction and manufacturing.

Freeport's stock dropped more than 9% last Thursday due in part to virus concerns even as the company posted better-than-expected quarterly results.

Its shares were 2.5% higher at $11.175 in afternoon trading, along with a broad rally in global equity markets as investors took a less pessimistic view of the potential economic fallout from the coronavirus outbreak.

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