Press Release: Freeport-McMoRan Financial Assurance Proposal Puts New Mexico at Risk

For Immediate Release

October 14, 2016

Contact: Allyson Siwik, Executive Director, Gila Resources Information Project 575.590.7619 cell

 

Freeport-McMoRan Financial Assurance Proposal Puts New Mexico at Risk

GRIP calls for phase out of $104 Million Third Party Guarantee

The Gila Resources Information Project submitted public comments on Wednesday to the Mining and Minerals Division and NM Environment Department recommending that the state eliminate Freeport-McMoRan’s Third Party Guarantee for the Chino, Tyrone and Cobre mines. Given the company’s declining financial situation and failure to pass the Mining Act’s Financial Soundness Test for 2015 and the first two quarters of 2016, Freeport no longer qualifies as a Third Party Guarantor and must replace the Third Party Guarantee as part of financial assurance for its three mines.

The most recent applications and proposals by Freeport-McMoRan Inc. (FCX) request a Third Party Guarantee (TPG) of $104 million for all three mines, seek consideration of replacement of the Third Party Guarantor with Freeport subsidiary Freeport Minerals Corporation (FMC), and rely on overvalued ranches as collateral. The applications and proposals are not in the public’s best interest as they put the State of New Mexico in a position of significant environmental and financial risk.  Should Freeport-McMoRan go bankrupt, the state of New Mexico would have insufficient funds to cover the full cost of cleanup at Grant County mines.

“To accept $104 million in Third Party Guarantee — essentially an I.O.U. — when the guarantor has failed the Financial Soundness Test is not only contrary to the Mining Act, but is irresponsible in the face of Freeport-McMoRan’s continued financial decline. GRIP recommends a full phase out of the Third Party Guarantee and replacement with a more secure form of financial assurance in order to protect taxpayers and our environment,” stated GRIP Executive Director Allyson Siwik.

Additionally, GRIP believes that the state should not accept subsidiary Freeport Minerals Corporation as the Third Party Guarantor. FMC has the same risk portfolio as its parent Freeport-McMoRan Inc. In January 2016, Moody’s downgraded FMC to junk bond status (to B1 from Baa3) given its high degree of risk.[1] Claims of confidential business information prevent the public from access to the details of FMC’s Financial Soundness Test results. A TPG from Freeport Minerals Corporation would also put the state of New Mexico at risk of not having sufficient funds to cover the full cost of clean up should FMC default, and therefore should not be accepted.

Additional concerns with Freeport-McMoRan’s financial assurance proposals are laid out in GRIP’s public comment letter available at: http://gilaresources.info/wp/wp-content/uploads/2016/10/GRIPLettertoMMD-NMED-FST-FA-101216.pdf

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[1] Moody’s downgrades FCX’s ratings, assigns B1 CFR; outlook negative. January 27, 2016.

https://www.moodys.com/research/Moodys-downgrades-FCXs-ratings-assigns-B1-CFR-outlook-negative–PR_343032

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Gila Resources Information Project

305A North Cooper Street
Silver City, NM 88061

phone/fax 575.538.8078
email: grip at gilaresources.info

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