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Freeport McMoRan, World's Second Largest Copper Miner, Suspends Dividend
They are dropping like flies. A day after Kinder Morgan announced it would slash its dividend by a more than expected 74% overnight to reflect collapsing commodity prices and a debt-heavy balance sheet, moments ago Freeport McMoRan, the world's second largest copper miner behind Codelco and one of the world's biggest producers of gold, just announced it too would suspend its dividend of $0.20, an action expected to save some $240 million per year.
This follows a comparable dividend cut announced in March of 2015 when the company slashed the bulk of its dividend by 84%, from $0.3125 to $0.05 quarterly.
This however may not be sufficient to stem the bleeding and prevent further turmoil for the company which has seen its stock price drop to the lowest level in over a decade, and as a result the company is also slashing its CapEx guidance from $2 billion for 2016 and 2017 to just $1.2 and $1.8 billion respectively.
The headlines:
- FREEPORT-MCMORAN SUSPENSION OF STOCK DIV
- FCX IN PACT W/ BANK GROUP TO AMEND LEVERAGE RATIO ON TERM LOAN
- FCX IN PACT W/ BANK GROUP TO AMEND LEVERAGE RATIO ON REVOLVER
- FCX EVALUATING SALE OF MINORITY INTERESTS IN SOME MINING ASSETS
- FREEPORT-MCMORAN NOW SEES '17 CAPEX $1.2B, SAW $2.0B
- FREEPORT-MCMORAN NOW SEES '16 CAPEX $1.8B, SAW $2.0B
From the release:
Freeport-McMoRan Inc. (FCX) today announced additional actions in response to market conditions, including further revisions to its oil and gas capital spending plans, additional curtailments in copper and molybdenum production and the suspension of its common stock dividend.
Oil & Gas Review. As previously reported on August 5, 2015, Freeport-McMoRan Oil & Gas (FM O&G) is deferring investments in several long-term projects in response to oil and gas market conditions. Following an ongoing review, capital expenditures for 2016 and 2017 have been reduced further from $2.0 billion per year in 2016 and 2017 to $1.8 billion in 2016 and $1.2 billion in 2017, including idle rig costs. The revised plans, together with initiatives to obtain third party financing or other strategic alternatives, will be pursued with the goal of achieving funding for oil and gas capital spending within its cash flows and resources.
The revised plans incorporate a reduction in rig utilization from three Deepwater Gulf of Mexico drillships to one drillship while increasing production from third quarter 2015 rates of 150 barrels of oil equivalents per day (MBOE/d) to an average of 159 MBOE/d in 2016 and 2017. FM O&G expects to bring eight wells on line in late 2015 and 2016 from its successful tie back drilling operations at the Holstein Deep, Horn Mountain and King Projects in the Deepwater Gulf of Mexico. These projects, combined with other initiatives, are expected to add low cost oil production, enabling cash production costs to decline from $19 per barrel of oil equivalents (BOE) in 2015 to less than $16 per BOE in 2016 and 2017. Under the revised plans, FM O&G’s cash flows would substantially fund its capital expenditures at $45 per barrel of Brent crude oil in 2017.
FM O&G is engaged in ongoing discussions with its rig vendors and other service providers to obtain reductions in costs and to evaluate opportunities to market idled equipment to third parties.
As previously reported on October 6, 2015, the FCX Board is engaged in a strategic review of its oil and gas business to evaluate alternative courses of action designed to improve FCX’s financial position, enhance value to FCX shareholders and achieve self-funding of its oil and gas business from its cash flows and resources. FM O&G’s high quality asset base, its substantial underutilized Deepwater Gulf of Mexico infrastructure, its large inventory of low risk development opportunities and its talented and experienced personnel and management team provide alternatives to generate value.
Mining Review. FCX continues to review its capital projects and costs to maximize cash flow in a weak commodity price environment and to preserve its resources for anticipated improved future market conditions. FCX previously announced a 25 percent reduction in its capital spending for its mining business for 2016 (from $2.7 billion to $2.0 billion, including $0.6 billion in sustaining capital) and announced curtailments at its North America and South America mines totaling 250 million pounds of copper and 20 million pounds of molybdenum per year. FCX is undertaking further actions involving plans for a full shut-down of its Sierrita mine in Arizona and adjustments to its operating plans from its primary molybdenum mines, which will increase its curtailments to approximately 350 million pounds of copper and 34 million pounds of molybdenum per annum. FCX is continuing to evaluate its mining operating plans in response to market conditions and will make further adjustments as required.
FCX is also evaluating other financing alternatives, the potential sale of minority interests in certain mining assets and other actions to provide additional proceeds for debt reduction. FCX has a broad set of natural resource assets that provide alternatives for future actions to enhance its financial flexibility.
Dividend on Common Stock. FCX also announced today that its Board has suspended its annual common stock dividend of $0.20 per share. This action will provide cash savings of approximately $240 million per annum and further enhance FCX’s liquidity during this period of weak market conditions. FCX’s Board will review its financial policy on an ongoing basis and authorize cash returns to shareholders as market conditions improve.
Assuming prices of $2.00 per pound for copper and $45 per barrel Brent crude oil for 2016, FCX estimates consolidated operating cash flow would exceed capital expenditures by more than $600 million.
James R. Moffett, FCX’s Chairman of the Board and Richard C. Adkerson, Vice Chairman, President and Chief Executive Officer said, “We are taking further actions to strengthen our financial position during a period of weak and uncertain market conditions. While copper prices have weakened in recent weeks and the near-term copper outlook is uncertain, we view the medium and longer term outlook positively, supported by copper’s important role in the global economy and limitations on global supplies. As we approach 2016, we are positioning the company for free cash flow generation in a weak commodity price environment and remain focused on actions to reduce debt. Our high quality portfolio of long-lived assets, flexible operating structure and experienced management team provide a solid base to address the current market conditions while maintaining an attractive portfolio of assets positioned for long-term success.”
Equity Transactions. Since commencing its $2 billion at-the-market equity programs in August 2015, FCX has sold a total of 154.6 million shares of common stock, generating gross proceeds of $1.6 billion through December 4, 2015. Approximately $0.4 billion remains available under the programs. As of December 4, 2015, FCX had 1.19 billion common shares outstanding.
Amendment to Bank Credit Facility. Following recent declines in prices for its primary products, FCX has reached agreement with its bank group to amend the Leverage Ratio (Net Debt/EBITDA) under its revolving credit facility and $4 billion term loan from the previous limit of 4.75x to 5.5x at December 31, 2015, 5.9x for the first half of 2016, and stepping down to 5.0x by year-end 2016 and 4.25x in 2017. The Leverage Ratio is unchanged at 3.75x thereafter.
FCX is a premier U.S.-based natural resources company with an industry-leading global portfolio of mineral assets, significant oil and gas resources and a growing production profile. FCX is the world’s largest publicly traded copper producer.
FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America; the Tenke Fungurume minerals district in the DRC; and significant U.S. oil and natural gas assets in the Deepwater GOM, onshore and offshore California and in the Haynesville natural gas shale, and a position in the Inboard Lower Tertiary/Cretaceous natural gas trend onshore in South Louisiana.
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nothing says "recovery" like canceled dividends
Copper is useful for carrying electricity....motors, wiring.....people with 29.5 wk/jobs can't afford crap like that.
Wait till they start offering shares up to raise cash. That and reverse split. WOuld make a nice entry if they don't go BK
Big cuts in copper mining effect silver production directly.
Might want to start buying what is available now.
Supply pipeline just got a big knot tied into it.
My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.wallstreet34.com
Holy crap, things are getting serious.
Copper is the canary in the coal mine. So is oil.
So how are we doing gang?
waiting for indonesia to nationalize fcx mines ..but wait it is just a hole in the ground you pour money into..maybe not.
Money pit?
Tar pit?
Please, the global economy was nationalized a long time ago. There is no avoiding global Weimar now.
I just got a live feed from inside the white house.
https://www.youtube.com/watch?v=jd8219Nj2so
In the future dividends will be negative.
That's right fuckers. You pay us.
I laughed, but then I thought "Shit, they might do that soon!".
How effing messed up is that?
Latter day Earth sucks!
How is it any different than NIRP?
Instead of loaning your money to the bank, and paying them to hold it, you loan it to a company at a cost...
Which is safer, the bank or the company?
Fucking criminal, isn't it.
is it a buy, how about the bonds??? fcx you fucked up big time, but the management guys still live large..fuck the stock holders.
if things stay like they are big oil will cut capex then dividends too eventually and the "market" will soar.
Weird how all the companies that actually do shit are floundering, while all the useless ones are designing even cooler offices?
Eventually, the people in those offices are going to wonder why they cannot get all their fancy shit anymore. By then it will be too late.
pods
Virtual fancy shit.
That is the future. Embrace it or be left behind in your archaic touch world.
Yes. Unfortunately, putting the producers of real goods and services (especially essential goods and services) out of business will have massive consequences. Get your tribe of productive people together and prepare.
Nothing else one can really do. The laws of Nature and physics will be re-asserting themselves soon enough. Evolve or die motherfuckers. same as it ever was...
Laws of Physics apply to wireless technology too. We don't need no stinking copper wires.
I use this exact argument w/ 'merica folks'. Look if you'd shut fractional reserve lending down, labor would increase in value. They actually make money out of thin air...how the fuck do you compete w/ that? Why is it that the banks, realtors, and Insurance fucks are making good money? Some of them are exceptionally good looking and should be coddled and primped so I can enjoy the site of them, but besides that, what the hell do they actually offer besides, espionage, theft, and the willingness to prey on your insecurities. At this point the average mind of an American is thinking about the coddled and primped bitch w/ fake tits...we're fucked.
Better Duck. The wheels are coming off this train.
A good Example of Gail Tverberg of Finite world's thesis.
We cannot move out of the deflationary cycle in real economy (and concomital inflation cycle in Debt and Paper assets) without addressing CAUSALITY. Cause and effect.
The capitalist markets based on supply side logic and risk asset pumping based on debt steroids is DEAD.
All hail the deflationary cycle of collaborative commons, cheap marginal cost and low carbon imprint renewables energy, and the elimination of debt via deflation of WS beanstalk and massive debt writeoffs; provided we kick start the real economy on the collaborative commons template. We may need to create a new monetary system based on blockchain type independent circuits.
This about turn now being perceived in the elite Uber circles will take five years...
So fasten seat belts and hope they (the current militarist/oil/Fiat cabal) won't have blown up the world in the meantime!
Man, wouldn't a big cushion of cash be nice right now? Oh well, I guess it was all well spent buying back stock at artificially high prices. Now that the stock prices have fallen, those hard earned profits have been completely disappeared. At least the executives were able to cash in.
Like no one saw it coming
LME copper inventory has been dropping like a stone since the August-Sept Glencore liquidation. The market is in much more of a deficit than the conventional wisdom realizes.
http://www.kitconet.com/charts/metals/base/lme-warehouse-copper-6m-Large...
So if most silver is mined as a by-product of base metal mining .........?
It's bitching to be in both Copper and Oil&Gas at the same time, and FCX is not a badly run company or someone deserving of some comeuppence like Glencore, but what can you do
"Assuming prices of $2.00 per pound for copper and $45 per barrel Brent crude oil for 2016,"
I'm not sure if those assumptions can stick, either of them
In related news:
Anglo American’s massive restructuring involving 85,000 layoffs shows miners bracing for prolonged downturnLondon-based Anglo plans to get rid of 60 per cent of its assets and shed a staggering 85,000 jobs, meaning it will go from about 135,000 employees to just 50,000. Money-losing assets will be sold or shuttered and the dividend has been suspended. The company will also consolidate from six businesses to just three.
http://business.financialpost.com/news/mining/anglo-american-to-cut-8500...
Reallity coming home to the roost -
Just one BIG reason why I *NEVER* buy equities and bought treasuries instead.
Equity buyers have been reaching for higher dividends and gains and will instead be getting no dividends and higher losses.
Meanwhile, I have been getting absolutely predictable reliable secure safe income plus HUGE capital gains, AND my investment will be repaid at par if I hold to maturity.
The tortoise has won over the hare, and this is no fairy tale.
Who the hell is upvoting this clown? All he ever does is post the same treasury-pimping bullshit, sometimes copying and pasting the same post from one thread to another.
I have large 6-digit capital gains IN ADDITION TO my interest income.
Why don't you tell us what you wasted your money on - IF you actually have any - and how big your losses have been ?
I regret to inform you that I am not impressed to even the slightest degree.
Uber Bullish. Watch this stock soar today.
The deflationary meltdown continues. Going to buy some FCX when it hits $3.
I will start buying FCX when it drops below $5 if it is driven by a large volume of shares.
I have been looking for a speculative stock - for a small % of my retirement account - 10 year time horizon.
I figure 20,000 shares purchased under $5 could be worth $500K in 5 years - $750K in 10 years.
Or it could be worth zero - but if things get so bad a "copper" company like FCX can't survive then I can always fall back on my holdings of brass and lead.
The JAWS of DEATH will soon commence.
http://www.thestreet.com/story/13387842/1/why-the-dow-jones-industrial-a...
Icahn bought 100 million shares during quarter ended 9/30/2015 at $20+.
Yesterday FCX closed at $6.74. Wonder if he still owns it.