Freeport McMoran Sells Copper Mine Stake for $1 Billion

This should resonate well with Freeport shareholders, as the company is following through with promises to deleverage the balance sheet.

Freeport-McMoRan Inc., the U.S. copper producer that’s seeking to cut debt after the rout in commodities hammered prices, agreed to sell an additional 13 percent stake in its Morenci mine in Arizona to Sumitomo Metal Mining Co. for $1 billion.

The transaction will cut Freeport’s stake in the open-pit mine to 72 percent from 85 percent, while 28 percent will be owned by Sumitomo Metal, as well as unit that’s jointly owned with Sumitomo Corp., according to a statement on Monday. Freeport expects to record a gain of about $550 million on the deal, it said.

Commodities producers including miners are cutting debt, trimming production and slashing spending as copper prices trade near a six-year low. Freeport, which is seeking to cut its debt by $5 billion to $10 billion, last month flagged it would consider deals involving core operations, which include Morenci. The rout in raw materials is putting pressure even on major operators, potentially spurring sales of top-tier mines, Rio Tinto Group’s Chief Executive Officer Sam Walsh told Bloomberg Television last week.

“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,” Freeport Chief Executive Officer Richard C. Adkerson said in a statement on Monday.

Shares of FCX are down 18% for the year and have a short interest of 21% of the companies float. Conditions appear to be bleak for shorts, at least in the interim.