Freeport-McMoRan Copper & Gold said Monday it has offered to buy Phelps Dodge for nearly $26 billion, creating the world’s largest North American-based mining company.
On a pro forma basis, the combined company’s production for 2006 would be about 3.7 billion pounds of copper, 1.8 million ounces of gold and 69 million pounds of molybdenum. The company would have long-lived reserves totaling 75 billion pounds of copper, 41 million ounces of gold and 1.9 billion pounds of molybdenum.
Molybdenum is used in high-strength metal alloys and high-temperature steels, including aircraft and oil pipelines.
While copper prices have retreated sharply from their highs of earlier in the year, Freeport is apparently betting the commodity will remain in high demand. Industrial development in China and India has helped support copper prices, though increasing production out of China has been partly responsible for the pullback in prices.
Among the notable projects ongoing are Phelps Dodge’s recent commissioning of an $850 million expansion of the Cerro Verde mine in Peru, the development of the new $550 million Safford mine in Arizona; a potential project to extend the life of El Abra through sulfide leaching; and the Tenke Fungurume copper/cobalt project in the Democratic Republic of the Congo, which is expected to begin production by 2009.
Richard Adkerson, CEO of Freeport, will serve in the same role for the combined company, while Phelps Dodge CEO, Steven Whisler, is expected to retire once the deal is complete.
James R. Moffett, chairman of the board of FCX, said: “This transaction combines two
leading mining companies to form a strong industry leader at a time when we see significant long-term opportunities in our industry. FCX has been built through our exploration and development capabilities, and we will focus on aggressively pursuing opportunities in the extensive Phelps Dodge asset portfolio.”
The companies said the parent company will retain the Freeport-McMoRan name, while the Phelps Dodge name will still be used in existing operations. The corporate headquarters will be located in Phoenix, and Freeport will keep its New Orleans office for accounting and administrative functions for its large Indonesian operations.