Climax still safe for now
LEADVILLE The company that owns Leadvilles Climax Mine reached a deal to be purchased, but that move has not derailed plans to reopen Climax at least for now.Freeport-McMoRan Copper & Gold Inc. sealed the deal to purchase copper miner Phelps Dodge Corp. That deal that will create the worlds largest publicly traded copper company.The companies announced Sunday that Freeport-McMoRan will acquire Phelps Dodge for $25.9 billion in cash and stock.One of the aspects of this combination is that there are not duplicative assets, said Peter Faur, Phelps Dodge vice president of corporate communications. Freeport does not have a molybdenum business and were proceeding as we have proceeded so far.That means business as usual, at least for now. Faur said the whole thing still depends on the outcome of a feasibility study to determine whether Climaxs new owners can make money digging molybdenum out of the ground.Friday and Monday were good times to own Phelps Dodge stock. The price soared as the deal drew near.The offer that they have brought to us is a 33 percent premium over what our stock price was last quoted at, Faur said. So for us, its a very compelling transaction.In morning trading Monday, Phelps Dodge shares soared $27.23, or 29 percent, to $122.25 on the New York Stock Exchange, while Freeport-McMoRan shares fell 45 cents to $56.95.
Richard C. Adkerson, president and CEO of Freeport-McMoRan, said he and J. Steven Whisler, Phelps Dodges CEO, began talking and laying the groundwork for serious negotiations within the past few weeks.Adkerson expects shareholders and regulators to approve the deal by the end of the first quarter of 2007. He said acquiring Phelps Dodge provides an opportunity to diversify with an attractive set of assets.He said acquiring Phelps Dodge will bolster the companys standing in an industry thats characterized by fewer and larger companies.This will allow us to compete effectively for resources, for equipment, and services from suppliers as we go forward, Adkerson said Monday in a conference call with investors.The cash portion of the transaction totals $18 billion and Freeport-McMoRan said it would issue 137 million shares to Phelps Dodge shareholders. That would give them about 38 percent of the combined company on a fully diluted basis. Freeport-McMoRans board will also be expanded to include three independent Phelps Dodge directors.Freeport-McMoRan said JPMorgan and Merrill Lynch have committed to funding the cash portion of the transaction, which will boost its total debt by year-end to about $17.6 billion.The merged companies will operate under the Freeport-McMoRan Copper & Gold banner, though businesses operating as Phelps Dodge will continue to do so. Adkerson will be the CEO of the merged firms.Freeport-McMoRan officials say they dont expect any job cuts or facility closures because of the deal. Our operations dont overlap, Adkerson said.The combined companys headquarters will be in Phoenix, although Freeport-McMoRan will maintain an office in New Orleans for accounting and administrative functions for its operation of the Grasberg mine in Papua, Indonesia. The Papua mine is one of the worlds largest precious metal mines.Phelps Dodge has operations throughout the world, and is working on an $850 million expansion of its Cerro Verde mine in Peru. It also is building a $550 million copper mine near Safford, Ariz., and planning a $650 million copper mine at Tenke Fungurume in the Democratic Republic of the Congo.In October, Phelps Dodge reported a steep rise in third-quarter profit to $888 million, or $4.36 per share, from $366.1 million, or $1.81 per share, in the year-earlier quarter.Freeport-McMoRan more than doubled its third-quarter earnings. The company earned $350.7 million, or $1.67 per share, on revenue of $1.64 billion, compared with $165.8 million, or 86 cents per share, on revenue of $983.3 million a year earlier.The worlds largest copper company in terms of production is Codelco, or Nacional del Cobre de Chile, owned by the country of Chile.While the companies say the combination will make it the worlds largest publicly traded copper company and the largest metals and mining company based in North America Adkerson said it will hardly have a corner on the market.This is a competitive, global marketplace in which there is a number of significant producers, he said. We will be a large company, but not anything like one that will cause any concerns.Associated Press contributed to this report.Vail Daily, Vail, Colorado CO