Turbulence In Indonesia Is Manageable For Freeport-McMoRan
Stephen Simpson, CFA
Stephen Simpson, CFA
Dec. 28, 2015, 10:22 AM
- Freeport-McMoRan (FCX -7.1%) drops in early trade after co-founder James Moffett said he will step down as chairman and quit the company's board, months after the miner added two new directors under pressure from activist investor Carl Icahn.
- Moffett, who has been appointed chairman emeritus, will be a consultant to Freeport-McMoRan's board, including advising the company on its Indonesia operations.
Dec. 23, 2015, 5:11 PM
- Freeport McMoRan (NYSE:FCX) plans to run an auction process for its oil and gas assets in early 2016, in what would be its first concrete move to end its ill-fated move into oil and gas after it said in October it would explore strategic options for the assets, Reuters reports.
- FCX reportedly has retained Lazard to advise on possible sale of its entire oil and gas interests, which could be worth more than $3B, according to the report.
- FCX's energy division includes assets in the deepwater Gulf of Mexico, onshore and offshore assets in California, and in the Haynesville natural gas shale formation as well as other natural gas assets in Louisiana.
- Shedding the oil and gas business would leave FCX with substantial copper and gold mining assets, as ~60% of the company's $21B of revenue in 2014 came from copper, with ~20% from oil.
- FCX soared 16% in regular trading amid today's rally in commodities.
Dec. 9, 2015, 5:49 PM
- Freeport McMoRan's (NYSE:FCX) capex cuts includes plans to idle two of the company's three contracted deepwater Gulf of Mexico drillships, which Evercore ISI analyst James West says puts Noble Corp. (NYSE:NE) and perhaps Rowan (NYSE:RDC) at risk.
- While FCX says it is ongoing discussions with its rig vendors and other service providers to obtain cost reductions, West believes the two higher priced NE drillships could be at risk while the company continues to operate the lower priced Rowan Relentless.
- FCX's most recently approved permits are for work with the Rowan Relentless, and West thinks RDC could successfully negotiate blend and extend contracts for this and at least one of its three other drillships rolling off contract in 2017-18.
Dec. 9, 2015, 8:36 AM
- Freeport McMoRan (NYSE:FCX) says it is suspending its dividend of $0.20/share and further reducing its capital spending plans for 2016-17.
- FCX says it is cutting oil and gas capex to $1.8B for 2016 and $1.2B 2017 from $2B/year in 2016 and 2017.
- Following its previously announced 25% cut in 2016 capital spending for its mining business, FCX says it will fully shut down of its Sierrita mine in Arizona and adjust operating plans from its primary molybdenum mines, which will increase curtailments to 350M lbs./year of copper and 34M lbs./year of molybdenum.
- Assuming prices of $2/lb. for copper and $45/bbl for Brent crude oil during 2016, FCX estimates consolidated operating cash flow would exceed capex by more than $600M.
- FCX says the dividend cut will enhance liquidity by saving ~$240M/year.
- FCX -0.2% premarket.
Dec. 7, 2015, 4:56 PM
- The speaker of Indonesia's House of Representatives denies that he demanded a stake worth billions of dollars in Freeport McMoRan's (NYSE:FCX) Grasberg gold and copper mine in exchange for allegedly helping it extend its operating contract.
- The speaker and a businessman ally appeared today before a House ethics council to answer questions about a tape recording submitted by FCX’s local head in which the speaker appears to request shares of FCX’s Indonesian operation for senior government officials and other actions to help push through a stalled, multibillion-dollar contract extension between the company and the government.
- The case has dominated news in Indonesia for several weeks and is one of the country's biggest political scandals in years.
Dec. 4, 2015, 8:24 AM
- Freeport McMoRan (NYSE:FCX) is at the center of a major political scandal in Indonesia after confirming that the speaker of the country's parliament tried to extort shares from the company to ensure a contract extension.
- The head of FCX's Indonesian operations has told the parliament's ethics panel he secretly recorded a meeting in which the speaker asked for a 20% stake in the unit, estimated to be worth billions of dollars.
- FCX had asked for an extension of its contract to give it legal certainty before investing billions of dollars in an underground phase at its Grasberg gold and copper sites; FCX generated 8.4% of its revenue last year from Indonesia.
Dec. 3, 2015, 2:58 PM
- Freeport McMoRan (FCX -1.8%) suffers a setback after a top Indonesian minister says the government will not take a quick decision on whether to extend the company’s operating license at the Grasberg copper and gold mine, FT reports.
- FCX’s Indonesian unit has been seeking reassurance that its permit for the mine would be renewed beyond the current 2021 expiration date, even though local regulations say negotiations can only begin two years before the contract ends.
- "We don’t want to extend this contract until 2019,” the minister says, according to FT. “Why should we give them an extension today when we have to break our own regulation?”
- The comments appear to mark a sharp change in the government’s stance, as FCX believed it had received assurances that its Grasberg operations would be extended beyond 2021 (I, II).
Nov. 20, 2015, 8:10 AM
- Newmont Mining (NYSE:NEM) is set to resume exports from Indonesia following a nearly two-month hiatus after securing a recommendation for an extension of exports permit from the government.
- NEM's export permit, which expired in September, will be extended for another six months with a quota to export 430K metric tons of copper concentrate from its mine in eastern Indonesia.
- NEM also agrees to transfer $3M to its partner, Freeport McMoRan (NYSE:FCX), toward the development of new smelting facilities in the country.
Nov. 19, 2015, 11:37 AM
- Indonesia's government has launched an investigation into alleged attempts by senior officials to extort a stake in Freeport McMoRan's (FCX -2.2%) Indonesian unit in return for an extension of the miner’s right to operate in the country, Financial Times reports.
- The minister of energy and mineral resources filed a complaint with the country's House of Representatives ethics committee this week alleging that the Speaker demanded FCX divest shares to Pres. Widodo.
- The scandal renews concerns about corruption in the country and Widodo’s leadership, and could to uncertainty for FCX as politicians push for an evaluation of the company’s operations in Indonesia; FCX already is coping with weak commodity prices and Indonesia’s ban on the export of unprocessed minerals.
Nov. 13, 2015, 9:32 PM
- U.S. pipeline regulators order Plains All American Pipeline (PAA, PAGP) to shut down and clean out a California crude oil pipeline system to prevent corrosion after a separate but nearby pipeline ruptured and fouled Santa Barbara beaches last May.
- The U.S. Pipeline and Hazardous Materials Safety Administration says Plains must purge oil from Line 903, a 130-mile pipeline that runs from Gaviota, Calif., inland to Kern County, as well as three shut offshore oil pipelines operated by Freeport McMoRan (NYSE:FCX) that normally feed Line 903.
- The agency says surveys have shown that Line 903 has "similar corrosion characteristics" as Line 901, which ruptured and spilled more than 100K gallons of crude onto beaches and into the ocean last May.
- Line 901 has been shut and empty since the spill, with the damaged section removed shortly thereafter; Line 903 also is shut but PHMSA says it has been "full of crude oil" since May except for a small section.
Nov. 9, 2015, 6:17 PM
- Copper prices plunged to a six-year low today, dragging down mining company shares, after China's import data showed declining demand from the world's top buyer of the industrial metal.
- China's imports of copper and copper products for the first 10 months of 2015 fell 4.2% Y/Y to 3.82M tons, the government said today; China accounts for ~40% of global copper demand, and the import data highlights long-running concerns that the country's economic slowdown would translate into lower copper imports.
- The fall in copper prices rattled the mining sector, which has been battered by a prolonged slump in metals prices; Glencore (OTCPK:GLCNF, OTCPK:GLNCY), which got 20% of its operating income from copper production in H1 of 2015, fell 5.3% in London, and Freeport McMoRan (NYSE:FCX) ended 2.3% lower.
- ETFs: JJC, CPER, CUPM
Oct. 23, 2015, 12:37 PM
- Southwestern Energy's (SWN -6.6%) $2.8B impairment and Freeport McMoRan's (FCX -0.5%) $3.7B charge are just the beginning, as Barclays estimates at least $20B in charges are coming during Q3 for just six companies, as reported by Bloomberg.
- SWN’s $2.8B writedown was double Barclays’ forecast, which also predicts ceiling-test impairments for Apache (APA -0.1%), Chesapeake Energy (CHK -2.3%), Devon Energy (DVN -0.1%), Encana (ECA -2%) and Newfield Exploration (NFX +0.1%).
- "Many companies will have writedowns as the price of oil is about half of where it once was and gas is also down,” says T. Rowe Price's Timothy Parker, but "it won’t generally hurt the companies because very few have debt covenants that are linked to book value, which the writedowns affect."
Oct. 22, 2015, 9:17 AM
- Freeport McMoRan (NYSE:FCX) -1.6% premarket after reporting a wider than expected Q3 loss and a 35% Y/Y drop in revenues to $3.68B.
- FCX says it took total one-time charges of $3.7B in the quarter, including a $3.5B net charge tied to the company’s oil and gas division amid weak crude prices.
- FCX says it is cutting operating rates at its Sierrita mine in Arizona by 50% and considering a full shutdown; the pullback will cut ~100M lbs. of copper and 10M lbs. of molybdenum annually.
- Q3 copper sales fell to 1B lbs. from 1.1B in the same period last year; the average realized price for copper fell to $2.38/lb. from $3.12 a year ago.
- Q3 gold sales fell to 294K oz. from 525K oz.; the average price dropped to $1,117/oz. from $1,220/oz.
- Q3 oil sales rose to 13.8M barrels from 12.5M barrels; the average price declined to $55.88/bbl from $88.58.
- The latest results may provide further ammunition for Carl Icahn, who said in August he intends to pressure the company to shrink operations with high-cost production.
Oct. 22, 2015, 8:04 AM
- Freeport-McMoRan (NYSE:FCX): Q3 EPS of -$0.15 misses by $0.07.
- Revenue of $3.7B (-35.1% Y/Y) misses by $260M.
Oct. 21, 2015, 5:30 PM
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Oct. 16, 2015, 8:26 AM
- Indonesia's energy ministry says a contract extension for Freeport McMoRan's (NYSE:FCX) operations in the country will be given "promptly" once the government implements a planned mining regulatory amendment, which it aims to finalize by year's end, Reuters reports.
- The mines ministry dismisses earlier statements from two senior ministers who maintain that a contract extension will not be decided for at least another four years, saying they do not have the authority to decide on such matters.
- FCX seeks to renew its contract that would allow it to continue operating beyond 2021 at the Grasberg mine in Papua, one of the world's biggest deposits of gold and copper.
- Indonesian Pres. Widodo starts a five-day trip to the U.S. on Oct. 25, including a visit with FCX execs, and the battle over the contract extension threatens to mar his trip.
Freeport-McMoRan, Inc. engages as copper, gold and molybdenum mining company. The company operates through five segments: North America Copper Mines, South America Copper Mines, Africa Mining, Indonesia Mining, and Molybdenum Mining. The North America Copper Mines segment operates seven open-pit... More
Sector: Basic Materials
Country: United States
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