March 10, 2008 / 5:06 PM / 11 years ago

Freeport sees M&A, high copper prices

NEW YORK (Reuters) - Copper prices should stay high despite a slowing U.S. economy, as China keeps buying the metal and big miners gobble up smaller, capital-hungry rivals, the head of Freeport-McMoRan Copper & Gold Inc (FCX.N) said on Monday.

Richard Adkerson, president and chief executive officer of Freeport-McMoRan Copper & Gold Inc., speaks during the Reuters Global Mining Summit in New York, March 10, 2008. REUTERS/Keith Bedford

“We’re actively looking for exploration projects around the world because we have such a positive outlook for copper,” Chief Executive Officer Richard Adkerson told the Reuters Global Mining Summit in New York.

“The industry will continue to consolidate; it’s just inevitable because of the lack of investment opportunities,” he said, when asked about the credit crunch that is making it difficult for companies to raise capital.

Although he stressed Freeport was looking mostly to grow organically, as a result of the mines it acquired in last year’s $26 billion acquisition of rival Phelps Dodge, he did not rule out further merger activity.

“There is unquestionably, a challenge today in raising capital for virtually any business,” he said. “We see it as an issue that might lead to opportunities for companies like us.

“If this credit market was in place last year, we couldn’t have done it (the Phelps Dodge deal),” he said, noting that Freeport took on $17 billion debt to do the transaction.

Asked about the prospects for the copper market, which has seen the price of the metal rise more than six-fold in four years, Adkerson was bullish, although he declined to forecast the price. It closed at $3.79 per pound in New York on Monday.

“Trying to predict commodity prices is a dead man’s game. I wouldn’t be surprised if we had $5 copper but I wouldn’t be surprised if we had $2.50 or $2 copper,” he said.

“The conditions are there for an extended cycle in the copper industry,” he said of the market which is mainly driven by industrial growth in China which has gone from consuming 10 percent of world’s copper in 2003 to 25 percent today.

The only thing he could see that might upset the cycle would be “some sort of event or political situation in China that disrupted things significantly.”

The demand for copper is down in the United States because of the housing crisis and the credit crunch.

“The question is now how long will the slowdown persist in the housing market and it’s likely to be some time,” said Adkerson.

“We are seeing less copper use from residential home construction and the weakness in the U.S. dollar but that’s been offset by China and other countries.

“It’s striking to me that with all of the issues in the U.S today - a credit crunch (and) we may be in a recession, and yet the copper markets are so strong.”

Adkerson also told the summit that Freeport is in talks with the government of Democratic Congo and is confident its huge copper-cobalt mine project there will get the go-ahead.

“We believe that the government will feel that it’s advisable for a company like ours, with the technical capabilities we have (and) the track record of developing other projects, to go forward with this one,” he said.

Congo’s Mines Ministry completed a review of the terms of 60 mining contracts last month and wrote to Freeport and other companies with projects in the central African nation telling them of the findings.

Adkerson stressed that there was no real possibility that Kinshasa would void the contract or nationalize the Tenke Fungurume project, which Freeport considers to be one of the world’s biggest copper and cobalt deposits.

“Recently, the government has been encouraging us to go forward with the project and we are,” he said. “We are in construction and not delaying anything under the view that we will reach a resolution of the issues.”

(For summit blog: summitnotebook.reuters.com/)

Reporting by Steve James; Editing by David Gregorio

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