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Freeport Closes Sale of Interest in TF Holdings for $2.65B

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Mining giant Freeport (FCX - Free Report) has wrapped up the sale of its 70% interest in TF Holdings Limited (“TFHL”) to China Molybdenum Co., Ltd. for $2.65 billion in cash.

Under the deal terms, Freeport could also get contingent consideration of up to $120 million in cash. The contingent consideration consists of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price surpasses $20 per pound, both during calendar years 2018 and 2019.  

TF Holdings indirectly owns an 80% interest in Tenke Fungurume Mining S.A. located in the Democratic Republic of Congo. Freeport had a 70% interest in TF Holdings and an effective 56% stake in Tenke.

The transaction supports Freeport’s strategy of strengthening its balance sheet and enhancing value for shareholders. The company plans to use the net proceeds from the transaction to repay debt.

Freeport logged net income (attributable to common stock) of 16 cents per share for third-quarter 2016, as against a loss of $3.58 per share a year ago. Adjusted earnings of 13 cents a share missed the Zacks Consensus Estimate of 19 cents. Revenues climbed around 15% year over year to $3,877 million and surpassed the Zacks Consensus Estimate of $3,860 million.

Freeport plans to strengthen its balance sheet and speed up its debt-reduction initiatives. The company expects to generate substantial cash flows over the next 18 months for debt reduction, with the successful completion of the Cerro Verde expansion and access to higher grade ore from the Grasberg mine in future quarters.

Freeport currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked companies in the basic materials space include BHP Billiton Limited (BHP - Free Report) , Vale S.A. (VALE - Free Report) and Endeavour Silver Corp. (EXK - Free Report) .

BHP Billiton holds a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of 217.4% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vale has an expected earnings growth of around 315.2% for the current year. The stock carries a Zacks Rank #2 (Buy).

Endeavour Silver carries a Zacks Rank #2 and has an expected earnings growth of around 187.9% for the current year.

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