Carl Icahn Is Winning: Freeport-McMoran Shareholders Rejoice After Spending Cuts
Freeport-McMoRan Inc (NYSE: FCX) said Wednesday that it will suspend its dividend. Shares are up more than 10 percent after the news, rewarding bulls and major investor Carl Icahn.
The company is the United States' largest miner and a major copper producer. The additional actions include further reducing its capital spending by $1 billion over the next two years as it responds to falling commodity prices which have revealed a disastrous investment in gas and oil and drillings.
Activist investor Icahn became involved in the stock earlier this year. Icahn> currently owns about an 8.7 percent stake in Freeport-McMoRan. He recently has been showing his agitation for change and secured two board seats at the company.
The spending cuts are a part of a broader plan in which the investor is pushing Freeport-McMoRan to adopt. Freeport-McMoRan's board has also undertaken a strategic review of its gas and oil business (FM O&G) to further evaluate alternative ways which may be designed to improve its value to shareholders.
The board is also looking to achieve self-funding of the gas and oil business from its resources and cash flows.
James R. Moffett, FCX's Chairman of the Board and Richard C. Adkerson, Vice Chairman, President and Chief Executive Officer stated, "We are taking further actions to strengthen our financial position during a period of weak and uncertain market conditions.
"While copper prices have weakened in recent weeks and the near-term copper outlook is uncertain, we view the medium and longer term outlook positively, supported by copper's important role in the global economy and limitations on global supplies," he added. Moffett sees free cash flow growth in 2016 and said the company will continue to focus on cutting debt.
Following the ongoing review, capital expenditures for 2016 and 2017 have been brought down even further from $2.0 billion per year in 2016 and 2017 to $1.8 billion in 2016 and $1.2 billion in 2017. This reduction also includes idle rig costs.
Among other changes that were announced on Wednesday,Freeport-McMoRan said it would reduce its copper production by 350 million pounds, in comparison to the the previously announced 250 million.
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