PHOENIX — Freeport-McMoRan Copper & Gold Inc.'s $26.4 billion purchase of Phelps Dodge Corp. is turning out better than expected.
The company, now the largest publicly traded copper producer, is surging from copper prices that remain three times what they were in the 1990s, and the company could pay off $10 billion in debt that came from the Phelps Dodge deal by the end of this year, CEO Richard C. Adkerson said.
"We feel excellent," Adkerson told The Associated Press on Tuesday. "We're really benefiting by the fact that we have such high prices right now, because it generates so much cash."
The company's stock price has shot up 48 percent since Freeport announced the acquisition of Phelps Dodge in March. And the copper market has blessed the deal with prices remaining well above $3 per pound, compared with $1 per pound throughout the 1990s.
Freeport officials had expected it would take three to four years to pay off the loan to acquire Phelps Dodge. But after raising an unexpected $5.6 billion by issuing new stock, the company may pay it off by December if copper prices remain high, Adkerson said.
Even so, the company still would have about $7.6 billion in debt, Freeport spokesman Pete Faur said.
Adkerson, 60, said he and former Phelps Dodge Chief Executive J. Steve Whisler had been informally talking about some kind of partnership for years.
"We always recognized there was a good match strategically between Freeport and Phelps Dodge," Adkerson said.
Freeport focuses its attention on one primary asset, the Grasberg mine in Papua, Indonesia — one of the world's largest sources of precious metals. Meanwhile, Phelps Dodge manages numerous operations around the world.
Adkerson saw the Phoenix-based miner as a quick way to diversify Freeport's assets and boost its copper reserves. But it wasn't until Phelps Dodge canceled its bid to take over Toronto-based Inco Ltd. last fall that Adkerson got serious, he said.
"At that point, I felt Phelps Dodge was at a turning point," he said. "They had the situation with shareholders who were critical of their financial policy and were trying to get the company to return more cash to shareholders in the form of dividends or stock buybacks. So the company was, strategically, in an unusual place."
Buying Phelps Dodge put Freeport $17.6 billion in debt. The company already has paid off much of that with the $5.6 billion in new stock. It also deposited another $500 million in April.
Though its debt is under control, Adkerson told the AP that he still is thinking about selling off some of the company's assets.
"We bought this company to be a major copper producer, so the major copper producing mines are certainly assets that we would not be likely to sell," he said.
That leaves businesses such as Phelps Dodge's wire and cable company in Coral Gables, Fla., and the Henderson mine in Colorado that produces molybdenum, a metal used in high-strength steels and other alloys.
"There are several things that we might do," he said.
Freeport's Grasberg mine remains the company's primary asset. Company officials still worry about a separatist movement in Papua, and Adkerson said Freeport continues to spend $6 million to $7 million per year to help the Indonesian military protect the mine.
Indonesian officials also have questioned the environmental impact of the mine, suggesting that the company install a pipeline to dispose of rock from the mine instead of dumping it into a river.
But the company has rejected that idea in government documents as "costly, difficult to construct and maintain, and more prone to catastrophic failure."
Adkerson said the rock from the Grasberg mine is "relatively clean," without the "heavy metals that some places have to deal with like arsenic and cyanide."
"And there are environmental reasons that make our system better from an environmental standpoint than pipelines."
Adkerson said a pipeline would force Freeport to stack up billions of tons of rock over the life of the mine.
"You'd end up with these huge stacks of waste material in the tropical rain forest."