UPDATE 3-Freeport eyes move into resource elite with energy buys

Tue Jan 22, 2013 1:06pm EST

* Shares jump on outlook, higher profit

* Will not hold shareholder vote on energy buys

* Fourth-quarter profit up 16 pct

* Expects 2013 gold sales 37 percent higher than 2012

By Rod Nickel and Swetha Gopinath

Jan 22 (Reuters) - Freeport-McMoRan Copper & Gold Inc's move into energy and gas will place the miner into a heavier weight class of resource companies and offers new opportunities for it to get even bigger, the company said on Tuesday.

Freeport, the world's largest listed copper producer, said early last month it would buy Plains Exploration & Production Co and McMoRan Exploration Co to enter the energy business. The $9 billion bid to buy the two U.S. oil and gas companies has been criticized by investors as an expensive and unnecessary distraction.

"We can look globally because with these acquisitions ... we leapfrog" several other companies, said Chairman Jim Bob Moffett on a conference call with analysts. "We've got a resource here now ... that can compete with the majors worldwide."

The company will look for opportunities to add to its expanded assets, with decisions based on commodity prices and returns to shareholders - the same approach management has long used, Moffett added.

Freeport reported a 16 percent rise in fourth-quarter profit on higher copper and gold production, sending its shares up five percent.

Its acquisition of the two energy companies is expected to be completed in the second quarter of 2013.

By moving into energy, Freeport can now consider a broader range of opportunities to grow, said Chief Executive Officer Richard Adkerson, although he said the company currently has no plans for acquisitions in either mining or energy.

Those opportunities look to be down the road. Adkerson also said the company intends to bring its debt down to a target of $12 billion of net debt from $20 billion of gross and $16 billion in net after the acquisitions. The company expects to reach the new level in two-and-a-half to three years.

"I take that to mean that we've got several quarters to come before we see Freeport return to M&A in any big way," said analyst Daniel Rohr of Morningstar.

The Phoenix, Arizona-based company's shares dropped 16 percent on Dec. 5 following the announcement of the deal, but have since partly recovered.

Some observers have questioned the close ties among the companies.

Jim Bob Moffett is chairman of Freeport-McMoRan and co-chairman and chief executive of McMoRan Exploration. In addition, Plains owns nearly one-third of McMoRan Exploration's shares after a 2010 asset sale.

Freeport will not hold a vote of its own shareholders on the deal because it is not required by the New York Stock Exchange or Delaware law, Adkerson said.

The move into energy comes at a time when prospects for growth in the flagship copper business are waning as mines age, grades decline and costs rise. There are very few premier accessible copper mines left to be acquired.

Freeport's net income in the fourth quarter rose to $743 million, or 78 cents per share, from $640 million, or 67 cents per share, a year earlier. Revenue rose 8 percent to $4.51 billion.

Higher volumes helped Freeport beat a fall in prices in the fourth quarter. Copper output rose 22 percent to about 1 billion pounds, while gold production soared 39 percent to 251,000 ounces.

Spot gold fell nearly 6 percent to $1,674.34 per ounce during the December quarter. Three-month copper on the London Metal Exchange fell 4 percent to $7,931 per tonne during the period.

Freeport said projected 2013 gold sales are expected to be 37 percent higher than in 2012, primarily reflecting higher ore grades at its Grasberg mine in Indonesia.

Gold output from Grasberg was hurt for most of last year as the company worked through a layer of lower-grade ores.

Freeport shares were up 5 around percent at $35.38 in afternoon trading.