"It's like a bear that stumbles into a honey factory"
A note from Mineweb on the build up of a position in Freeport-McMoran by Carl Icahn.
What does Carl Icahn want with Freeport-McMoran?
Mining finance and investment
The activist investor has taken a big slug of the company’s shares.
Kip Keen | 28 August 2015 09:44
HALIFAX – It must have been an interesting exercise for a billionaire that has made a name as an activist shareholder to tackle the mining industry now. To make a list of mining targets in a decimated market with resources meaningful enough to raise the spectre of a serious shake-up at one of the world’s largest mining companies.
It’s fair to simply step back and chuckle for a moment. For a whole lot of miners are so creamed, so loss-making for so many, that an activist raider surveying the field of options must be like the bear that stumbles into a honey factory after a hurricane.
Where to start? Who can I lean on? Which shareholders will treat me sweetest? Would Barrick have been on that list? Teck? Anglo American?
Yee Gads. You wonder if some mining heads might have muttered under their breath Thursday afternoon, Thanks be to Freeport. Icahn leaves us alone.
For ultimately Icahn chose Freeport to assemble an eight-percent-plus shareholding, promising in an SEC-filing-sort-of-way to rattle Freeport management and directors.
It happened on an interesting day for Freeport. Its shares popped 30%. It announced a significant cost reduction strategy and the spot price of copper flicked back over $2.30/lb. Connected? Maybe.
Of course, there’s little official to know about what Icahn wants, or how Freeport will respond to Icahn as a shareholder, assuming, given his history, he tries to force change.
I left a message at Icahn Enterprises to seek his view of Freeport. I also asked a Freeport spokesperson how it would respond to Icahn. I haven’t heard back this evening.
But one possibility is a break-up. John Tumazos, over at John Tumazos Very Independent Research, sees it that way.
For it’s no secret there was grumbling by some shareholders over the marriage of mining and oil & gas assets back in 2012, with FCX’s takeover of Plains Exploration & Production Company and McMoRan Exploration Co. (Subsequently the company was renamed Freeport- McMoRan.) This has made Freeport one of the most indebted miners in the world – with $20 billion in long-term debt, or twice its recent market capitalization.
With this discontent, Tumazos wonders if Icahn might angle for a Freeport break-up, putting the mining and oil and gas units into separate companies. Then the oil and gas assets – considered high cost – might become a compelling target for an oil and gas company, he thinks.
Tumazos thinks it might also make sense from a taxes point of view. Talking with me Thursday night, Tumazos notes that Freeport stands to write-down assets by as much as $3 billion in September in large part owing to the decline in oil and gas prices, by his calculation. “There’s a lot of value in the losses in the oil and gas,” Tumazos says.
And there’s unhappy shareholders to sway. Tumazos hit Freeport hard saying Icahn speaks for a silent majority of shareholders who want change in the company. Freeport’s office of the Chairman has been “slow moving and wrong-minded,” he said, adding, “investors will cheer decisions that create value and cause Freeport to react quicker.” (Disclosure: Tumazos owns Freeport shares.)
Who knows what will transpire? Icahn and Freeport haven’t disclosed or discussed publicly (as far as I know) what he may want to see happen at Freeport. But he must want to make money. And he isn’t close to that point yet. He and his partners, according to SEC filings, bought shares at prices between $9.50 and $16 averaging about $13/share in the past couple months.
Freeport, surging 30% Thursday, only just clawed back over $10/share, making Icahn – like many other shareholders in most major mining companies – still very much underwater. But hold on tight.
It’s fair to simply step back and chuckle for a moment. For a whole lot of miners are so creamed, so loss-making for so many, that an activist raider surveying the field of options must be like the bear that stumbles into a honey factory after a hurricane.
Where to start? Who can I lean on? Which shareholders will treat me sweetest? Would Barrick have been on that list? Teck? Anglo American?
Yee Gads. You wonder if some mining heads might have muttered under their breath Thursday afternoon, Thanks be to Freeport. Icahn leaves us alone.
For ultimately Icahn chose Freeport to assemble an eight-percent-plus shareholding, promising in an SEC-filing-sort-of-way to rattle Freeport management and directors.
It happened on an interesting day for Freeport. Its shares popped 30%. It announced a significant cost reduction strategy and the spot price of copper flicked back over $2.30/lb. Connected? Maybe.
Of course, there’s little official to know about what Icahn wants, or how Freeport will respond to Icahn as a shareholder, assuming, given his history, he tries to force change.
I left a message at Icahn Enterprises to seek his view of Freeport. I also asked a Freeport spokesperson how it would respond to Icahn. I haven’t heard back this evening.
But one possibility is a break-up. John Tumazos, over at John Tumazos Very Independent Research, sees it that way.
For it’s no secret there was grumbling by some shareholders over the marriage of mining and oil & gas assets back in 2012, with FCX’s takeover of Plains Exploration & Production Company and McMoRan Exploration Co. (Subsequently the company was renamed Freeport- McMoRan.) This has made Freeport one of the most indebted miners in the world – with $20 billion in long-term debt, or twice its recent market capitalization.
With this discontent, Tumazos wonders if Icahn might angle for a Freeport break-up, putting the mining and oil and gas units into separate companies. Then the oil and gas assets – considered high cost – might become a compelling target for an oil and gas company, he thinks.
Tumazos thinks it might also make sense from a taxes point of view. Talking with me Thursday night, Tumazos notes that Freeport stands to write-down assets by as much as $3 billion in September in large part owing to the decline in oil and gas prices, by his calculation. “There’s a lot of value in the losses in the oil and gas,” Tumazos says.
And there’s unhappy shareholders to sway. Tumazos hit Freeport hard saying Icahn speaks for a silent majority of shareholders who want change in the company. Freeport’s office of the Chairman has been “slow moving and wrong-minded,” he said, adding, “investors will cheer decisions that create value and cause Freeport to react quicker.” (Disclosure: Tumazos owns Freeport shares.)
Who knows what will transpire? Icahn and Freeport haven’t disclosed or discussed publicly (as far as I know) what he may want to see happen at Freeport. But he must want to make money. And he isn’t close to that point yet. He and his partners, according to SEC filings, bought shares at prices between $9.50 and $16 averaging about $13/share in the past couple months.
Freeport, surging 30% Thursday, only just clawed back over $10/share, making Icahn – like many other shareholders in most major mining companies – still very much underwater. But hold on tight.
Read the article online at Mineweb here: What does Carl Icahn want with Freeport-McMoran? - Mineweb
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