Freeport McMoRan Copper & Gold $1 billion convertible talked at 5.0-5.5%, up 40-45%

By Ronda Fears

Nashville, March 22 - Freeport McMoRan Copper & Gold Inc. returned to the convertible market to tap investors for $1 billion with a perpetual convertible preferred talked to yield 5.0% to 5.5% with a 40% to 45% initial conversion premium.

Morgan Stanley and Merrill Lynch & Co. are joint bookrunners on the Rule 144A deal, which is slated to price after the close Wednesday.

The convertible will be non-callable for five years, then callable with a 130% trigger for life.

Holders will have dividend protection for common dividends over 20 cents per share per quarter.

There is a $100 million greenshoe available.

Proceeds are earmarked for the New Orleans-based mining concern's buyback of 23.93 million of its Class B shares from a subsidiary of Rio Tinto plc.

Rio Tinto acquired these shares in mid-1995 for $20.90 per share in connection with Freeport's spin-off from its former parent and Rio Tinto's participation in a major expansion project of Freeport's subsidiary, PT Freeport Indonesia.

Rio Tinto's joint ventures with PT Freeport Indonesia, under which it has an interest in copper and gold production above specified levels and rights to participate in expansion and exploration activities, are not affected by the share repurchase.

The buyback will allow Freeport shareholders to participate to a greater extent in the value of the company's Grasberg copper and gold mining complex without an increase in debt, Richard C. Adkerson, chief executive of Freeport, said in a news release.

Rio Tinto will continue to benefit from a relationship with Freeport through a direct interest in Grasberg, according to Leigh Clifford, chief executive of Rio Tinto.

Freeport said its common shares outstanding, following the transaction, will be about 177 million shares.

In February 2003, Freeport sold $500 million of 7%, up 70% convertible senior notes. The mining company also has an 8.25% convertible note due 2006 and has been actively buying back that issue with stock. After the latest exchanges in February, the company said $67 million remained outstanding.

Freeport also said that when the 8.25% convertible becomes callable this coming July 31, it intends to exercise the call.

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