Moody's affirms Freeport's unsecured debt rating

Moody's affirms Freeport's unsecured debt rating

NEW YORK (Reuter): Moody's Investors Service confirmed the Ba1
senior unsecured debt ratings of Freeport McMoRan Copper & Gold.

The rating action was taken in response to the company's
announcement that it had agreed to acquire a fifteen percent
interest in each of two Indonesian joint ventures, which will
respectively control the mining rights of the Busang II & III
gold properties in Kalimantan, Indonesia.

The remainder of the two Indonesian ventures will be owned 45
percent by BRE-X Minerals, Ltd. (BRE-X) and 40 percent by
Indonesian interests, including the Government of Indonesia. As
consideration for the ownership interests, FCX will provide 25
percent, or up to $400 million of the estimated $1.6 billion
investment, to complete reserve delineation and construct the
initial complex.

The remaining $1.2 billion investment will likely be project
financed at the joint venture level. Moody's rating confirmations
anticipate that such financing will be non-recourse to FCX and
that the project development will be completed within currently
estimated budgets.

Furthermore, Moody's expects FCX's overall debt protection
measurements to remain relatively stable given that its direct
expenditures will be spread over a period of two to three years.

The rating confirmations also recognize the significance of
FCX's existing mining operations in Indonesia, reflected in its
$6 billion market capitalization, and anticipate that the company
will maintain a prudent capital structure as it continues to
develop its operating profile.

The ratings confirmed are: Freeport McMoRan Copper & Gold Inc.
-- senior unsecured debt at Ba1; preferred stock at "ba3"; shelf
ratings at senior unsecured (P)Ba1, subordinated (P)Ba3,
preferred (P)"ba3."

P.T. ALatieF Freeport Finance Company B.V. -- guaranteed
senior notes at Ba1 FCX Finance Company B.V. -- shelf ratings at
senior unsecured (P)Ba1, subordinated (P)Ba3, preferred (P)"ba3"
Freeport McMoRan Copper & Gold Inc., headquartered in New
Orleans, Louisiana, is engaged in mineral exploration and
development, mining and milling of copper and silver in Irian
Jaya, Indonesia and the smelting and refining of copper
concentrates in Spain.

An Indonesian subsidiary of Freeport McMoRan Gold and Copper
of the United States will pay US$400 million for its 15 percent
stake in the giant Busang gold find, a company executive said
Wednesday.

PT Freeport Indonesia president Adrianto Machribie told
journalists in Timika, Irian Jaya, that the company would be
contributing 25 percent of the paid up capital of $1.6 billion.

"Even though our stake only amount to 15 percent ... for
operational purposes we will pay 25 percent of the 1.6 billion
dollars," he was quoted by AFP as saying.

Machribie said Freeport would be the principal manager of the
Busang project, and that it may reimburse previous costs incurred
by Bre-X, including for exploration.

Freeport already operates a huge gold and copper ore mine on a
concession area of 2.6 million hectares (6.4 million acres) in
the province of Irian Jaya.

Bre-X down

In Toronto, shares in gold exploration firm Bre-X Minerals Ltd
took a further beating on Tuesday, and uncertainty surrounded the
future of the stock.

Barrick Gold Corp on Monday dropped out of the race to control
Bre-X's vast Busang gold find in Indonesia, losing a long battle
for the right to mine the deposit to U.S.-based Freeport-McMoRan
Copper and Gold Inc.

Under the deal, Bre-X's stake in Busang will be cut to 45
percent from 90 percent. Freeport, an affiliate of Anglo-
Australian mining giant RTZ-CRA, will be operator of the Busang
deposit.

"We still have a speculative buy on (Bre-X). I think
ultimately we have got a target of C$24 to C$27 (a share)," said
Rick Cohen of Goepel Shields.

Michael Fowler, a gold analyst at Levesque Beaubien Geoffrion,
has a C$23.50 target on the stock based on an analysis of Bre-X's
asset value.

"We are disappointed that they essentially got shafted in our
opinion. But all is not lost. That 45 percent is worth a great
deal and should be the subject of takeover possibilities," Fowler
said.

Gold miner Placer Dome Inc has not yet decided the fate of its
US$5 billion offer to merge with Bre-X in light of the Freeport
deal, a Placer spokesman said.

Traders were not so sanguine about the stock, with many
betting that Bre-X's shares face further bloodletting.

"It's going to go a lot lower because they had 90 percent (of
the Busang gold find in Indonesia) and now they have 45 percent,"
said one arbitrageur who asked not to be identified.

Even speculation that Placer or some other suitor may emerge
for Bre-X and its much-reduced stake in Busang failed to draw
investors back into the stock.

The arbitrageur said Placer's original interest in a merger
was based upon Bre-X holding 60 percent of Busang and having
operating privileges.

"So even if Placer bids (now) they will probably they will
probably bid dramatically lower," the arbitrageur said.

"You are probably not going to have a takeover of Bre-X and
the stock is going to go lower," he added.

Bre-X fell to a low of C$20.75 on the Toronto Stock Exchange
mid-morning before recovering to trade down C$2.05 at C$20.95.
Volume was a hefty 2.57 million shares.