FCX Freeport McMoRan Inc

Mining giant Freeport-McMoRan Copper & Gold Inc. (FCX) together with its joint venture partners have wrapped up its earlier announced acquisition of a cobalt chemical refinery based in Kokkola, Finland, from specialty chemicals and materials company OM Group, Inc (OMG).  

The joint venture will be operated by Freeport-McMoRan under the name “Freeport Cobalt”. Freeport-McMoRan will hold a 56% stake in the joint venture with its partners Lundin Mining Corporation and La Generale des Carrieres et des Mines retaining 24% and 20% interests, respectively.

The aggregate consideration for the acquisition was roughly $355 million. Freeport-McMoRan funded 70% of the consideration while Lundin Mining financed the balance. Under the deal terms, OM Group is eligible to receive additional consideration of up to $110 million over a period of three years, subject to the attainment of specific sales-based milestones.  

The acquisition of the Kokkola cobalt refinery reinforces Freeport-McMoRan’s cobalt marketing position, product portfolio and product development capabilities. In addition, it offers direct end-market access for the cobalt hydroxide production at the Tenke Fungurume mine in the Democratic Republic of Congo.

Freeport-McMoRan is conducting explorations close to its existing mines with a goal to boost reserves, which will facilitate the development of additional future production capacity across the large minerals districts where it operates.

As per the company’s exploration data, there are opportunities for meaningful future reserve additions in North and South America as well as in the Tenke Fungurume minerals district.

Freeport-McMoRan is optimistic about its African operations considering the potential at Tenke. Moreover, the acquisitions of Plains and McMoRan Exploration will usher in new opportunities. However, a weak global economy is still affecting demand for copper and production costs remain a concern.

Freeport-McMoRan currently retains a Zacks Rank #3 (Hold).

Other companies in the mining industry worth considering are Atlatsa Resources Corporation (ATL) and Paramount Gold and Silver Corp. (PZG). Both hold a Zacks Rank #2 (Buy).

 
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