Freeport-McMoRan Inc. (FCX) said that it has completed the sale of its 80% stake in the Candelaria/Ojos del Salado copper mining operation and supporting infrastructure in Chile to Lundin Mining Corporation for $1.8 billion in cash, before closing adjustments. The transaction includes all of Freeport-McMoRan's interests in the Candelaria/Ojos mining district.
Per the deal, Freeport could also receive contingent consideration of up to $0.2 billion, calculated as 5% of net copper revenues in any annual period over the next five years when the average realized copper price crosses $4.00 per pound.
The sale of its stake in the Chile copper mine represents an opportunity for Freeport to reduce debt. The company plans to utilize after-tax net proceeds from the transaction of roughly $1.5 billion to repay debts and expects to record after-tax gain of about $450 million on the transaction in fourth-quarter 2014.
Candelaria was owned 80% by Freeport 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.
Freeport released its results for the third quarter of 2014 last month. The company reported earnings of 53 cents per share for the quarter, reflecting a decline of 32.9% from the year-ago earnings of 79 cents. Profit declined 32.8% year over year to $552 million, hurt by lower pricing of copper and gold.
The results include net charges of $115 million or 11 cents per share. Barring that impact, earnings were 64 cents a share in the third quarter, topping the Zacks Consensus Estimate of 62 cents.
Revenues declined 7.6% year over year to around $5,696 million in the third quarter, but surpassed the Zacks Consensus Estimate of $5,596 million.
Consolidated sales from mines increased to 1.08 billion pounds of copper in the third quarter from 1.04 billion pounds in the year-ago quarter. Sales of gold also jumped to 525,000 ounces in the reported quarter from 305,000 ounces a year ago. Gold sales increased due to higher ore grades.
Freeport currently holds a Zacks Rank #5 (Strong Sell).
Other mining companies with favorable Zacks Rank include Solitario Exploration & Royalty Corp. (XPL), Energy Fuels Inc. (UUUU) and Thompson Creek Metals Company Inc. (TC). While Solitario holds a Zacks Rank #1 (Strong Buy), both Energy Fuels and Thompson Creek hold a Zacks Rank #2 (Buy).
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