Freeport stock sinks as mining contract uncertainty rattles market
TORONTO, July 24 (Reuters) - Shares of diversified miner and energy producer Freeport-McMoRan sank for a second session Friday, as uncertainty around Indonesian mining contracts added to worries about spending plans, high debt and falling commodity prices.
The Phoenix, Arizona-based company has assured analysts it fully expects the Indonesian government to issue a six-month export renewal on Saturday, when the current permit expires, but questions remained on a longer-term contract.
Freeport's stock tumbled 10 percent to $12.27 on New York on Friday, after a 9 percent drop Thursday, as several analysts cut price targets.
Over the past two days, Freeport's market capitalization has shed some $2.9 billion, dropping to $12.75 billion on Friday afternoon from $15.66 billion at the close Wednesday.
Freeport, whose chairman is currently in Indonesia for talks with the government, is also negotiating terms of a contract or license that could extend to 2041.
Contract certainty is crucial, Freeport said, because it will spend $15 billion on an underground expansion at its massive Grasberg copper and gold mine, and must commit to a new smelter, estimated at $2 billion-$2.5 billion.
"Right now, more than 75 percent of our reserves are going to be produced after 2021," Freeport Chief Executive Richard Adkerson said on a conference call Thursday.
A current contract of work expires in 2021.
Freeport is looking to raise funds as it eyes a $1.2 billion to $1.6 billion investment to boost energy production. Continued...