Freeport will end Phelps Dodge's hedging of copper


From Reuters
via Yahoo News
Thursday, February 16, 2007

NEW YORK -- Freeport-McMoRan Copper & Gold Inc.will end Phelps Dodge Corp.'s policy of hedging on copper prices when it acquires the rival miner, Freeport's chief executive said on Thursday.

"We have no intentions to hedge copper," Richard Adkerson told Reuters in an interview.

Freeport-McMoRan expects its $25.9 billion acquisition of Phelps Dodge to be completed in March.

Phoenix-based Phelps' financial results have been hurt in recent quarters because the company locked in portions of its 2006 and 2007 copper production at prices below market prices, which have soared six-fold in the last three years.

Asked if the new combined company would continue such "copper collars" to hedge against sharp turns in the metal's price, Adkerson said: "You should not expect the new Freeport to sell copper forward or sell options or take steps to limit the upside of copper."

The company would honor Phelps' existing contracts through the end of 2007, but after that, no prices would be locked in, he said, noting that Freeport did not hedge.

"That has not been our approach, our philosophy, and I don't expect that to change. It's not a requirement of our financing.

"My personal view is that different companies can be in a position where they have a need to use derivatives to support their business," Adkerson said.

"But I believe our investors want us to drive their exposure to the copper. If investors want to hedge that exposure, they can do that on their own."

His comments came as U.S. copper futures closed at their highest level since early January amid speculative buying sparked by Chinese import data that signaled a possible demand recovery in the world's leading metals consumer.

Copper for March delivery ended 8.70 cents firmer at $2.6640 per pound on the New York Mercantile Exchange's COMEX division, its priciest close since Jan. 10.

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