Freeport (FCX) to Sell Stake in Candelaria Mine to Lundin
Freeport-McMoRan Inc. (FCX) has entered into an agreement with Canadian miner Lundin Mining Corp. to sell its 80% stake in the Candelaria copper mining operation in Chile for $1.8 billion in cash.
In addition, Freeport expects to receive contingent consideration of up to $0.2 billion that is calculated as 5% of net copper revenues in any annual period over the next five years when the average realized copper price exceeds $4.00 per pound. The sale, with an effective date of Jun 30, 2014, is expected to complete by end of 2014 subject to regulatory approvals and other closing conditions.
The sale of its stake in the Chile copper mine represents an opportunity for Freeport to reduce debt following the $3.1 billion sale of its Eagle Ford shale assets in Texas in June. The transaction includes all of Freeport-McMoRan's interests in the Candelaria/Ojos mining district. Freeport-McMoRan expects to receive about $1.5 billion after taxes from the sale, excluding the additional fees.
Candelaria is currently owned 80% by Freeport-McMoRan and 20% by Sumitomo Corp. and Sumitomo Metal Mining Co. Ltd. Following the mine's acquisition by Lundin, Sumitomo will continue to own its 20% stake. Consolidated production at the mine for the first six months of 2014 amounted to 169 million pounds of copper and 42,000 ounces of gold.
Freeport currently holds a Zacks Rank #3 (Hold).
Other mining companies with a favorable Zacks Rank include U.S. Silica Holdings, Inc. (SLCA), Hi-Crush Partners LP (HCLP) and Alcoa Inc. (AA). While both U.S. Silica Holdings and Hi-Crush Partners sport a Zacks Rank #1 (Strong Buy), Alcoa has a Zacks Rank #2 (Buy).
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