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Freeport-McMoRan pledges to cut up to $10 billion debt; shares jump
January 26, 2016 / 1:24 PM / 2 years ago

Freeport-McMoRan pledges to cut up to $10 billion debt; shares jump

(Reuters) - Freeport-McMoRan Inc (FCX.N), the U.S. mining and oil group, on Tuesday made its strongest pledge yet to reduce its massive debt, saying it wants to lop off as much as $10 billion through proceeds from a mix of asset sales and joint ventures.

Freeport also reported a lower-than-expected fourth-quarter loss, and the shares jumped as much as 12 percent.

At one point, the stock fell on concerns about securing an important Indonesia copper export permit before Thursday’s deadline.

Freeport faces “serious challenges” because of weak copper and oil prices and the massive debt on its balance sheet, Chief Executive Officer Richard Adkerson said on a conference call.

“We are addressing this seriously and with a degree of urgency and we’re very focused on it,” he said, mentioning a debt restructuring target of $5 billion to $10 billion for the first time.

Freeport’s shares have tumbled 80 percent in the past year from the double whammy of falling oil and copper prices and $20 billion in debt.

Credit default swaps showed investors pricing in slightly less risk of a Freeport default after the results. Still, the massive premium demanded to insure Freeport debt implies a better-than-85 percent chance of default within five years.

Freeport was in talks with a number of parties on joint ventures or sales involving its copper assets, any of which could be sold at the right price, he said.

The company continues to weigh alternatives for its oil and gas assets.

Freeport expects to make “significant” progress on debt reduction in the first half of 2016, Adkerson said, but declined to give a time frame for the $5 billion to $10 billion target.

Freeport, the biggest U.S.-listed copper producer, suspended its annual dividend last year and made cuts to capital spending and copper output.

Adkerson did not rule out another equity issue but said Freeport was focusing on asset sales and joint ventures.

Excluding charges of $4.1 billion, Freeport reported an adjusted net loss of $21 million, or 2 cents a share, better than analysts’ estimates of a loss of 17 cents.

Freeport’s shares closed at $4.20, up 6.6 percent after rising as high as $4.42, in line with other copper stocks.

“Even though it was a wild day, no real change at the end of the day... How Freeport fares in 2016 will have a lot to do with both copper and oil pricing and how the company shapes itself from a strategic standpoint,” Clarksons Platou Securities analyst Jeremy Sussman said.

Reporting by Nicole Mordant in Vancouver; Additional reporting by Narottam Medhora in Bengaluru; Editing by Jeffrey Benkoe and Lisa Shumaker

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