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Freeport (FCX) Inks Deal to Divest Portion of Cobalt Business

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Freeport-McMoRan Inc. (FCX - Free Report) entered into an agreement to divest its cobalt refinery in Kokkola, Finland to Umicore for roughly $150 million plus working capital at the time of close. The deal also includes the sale of associated cobalt cathode precursor business.  

Per the terms, Freeport will separate cobalt business prior to the transaction closure. Umicore will purchase the refinery and cathode precursor business, which contributed around 60% to the refinery’s historical revenues.

Freeport and its partners will retain the remaining cobalt business along with operations and sales offices in the United States, Europe and Asia. Notably, this retained cobalt business is a leading manufacturer of cobalt fine powders, catalyst, chemicals, ceramics and pigments globally.

The deal is subject to regulatory approvals and other customary closing conditions. The transaction is likely to close by the end of 2019. Moreover, Lundin Mining Corporation is entitled to get 30% of the proceeds from the transaction.

Also, cash flow and earnings contribution from the assets being sold was insignificant to Freeport in the first quarter. The company expects to realize a gain from the transaction.

Freeport’s shares have plunged 42.7% in the past year compared with the industry’s 32% decline.



The company’s adjusted earnings per share came in at 5 cents in the first quarter, which missed the Zacks Consensus Estimate of 8 cents.

Freeport projects consolidated sales volumes for 2019 to be roughly 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 800 million pounds of copper, 265,000 ounces of gold and 25 million pounds of molybdenum for second-quarter 2019.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Materion Corporation (MTRN - Free Report) , Fortescue Metals Group Ltd. (FSUGY - Free Report) and AngloGold Ashanti Limited (AU - Free Report) , all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 23.1% for 2019. The company’s shares have gained 14.4% in the past year.

Fortescue Metals has an impressive projected earnings growth rate of 101.5% for the current year. The company’s shares have surged 63.2% in a year’s time.

AngloGold has an estimated earnings growth rate of 86.8% for the current year. Its shares have rallied 37.8% in the past year.

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