Photo By Freeport-McMoRan
Does move indicate forthcoming company sale?
By Jon Johnson
GRAHAM COUNTY – On Wednesday, Freeport-McMoran Inc. sent out a notice to its employees indicating a reduction in future benefit accruals.
The notice reported that the company will cease all benefit accruals for all participants effective as of Sept. 1, 2020, essentially freezing employees’ pension plans to not grow beyond the level earned as of Aug. 31, 2020.
The plan only freezes future benefits not yet accrued and does not change any benefits employees have already earned as of Aug. 31.
Freeport previously issued various worker furloughs but have since brought employees back.
Many might wonder what the pension freeze means for their retirement. Asking an investment advisor who is a fiduciary is a great place to start.
We asked Bruce Bryce co-founder of the local advisory firm Ash Creek Financial Advisors what steps FMI employees should take regarding their pension.
Bryce: “First, try not to panic, the pension is still there for those who are vested, but the increases you would have received will cease at the end of August. You may be able to become fully vested as stated in the announcement, but your benefit will not increase over time. A final assessment will be available next year. That final income number is protected and cannot go down according to the Q & A section in the announcement. If a lump sum of your pension becomes available, ask a competent advisor to calculate what kind of return you would need each year if you moved your pension vs keeping it where it’s at. This calculation depends on multiple factors that are specific to each individual including their age and future income needs. Everyone’s situation is completely unique so it’s important to get solid advice. Typically, there’s no need to move the pension to an outside IRA account but get advice anyway.”
Gila Herald: “This sounds like it can be complex, so is there a way to make up for the shortfall in pension income?
Bryce: “Yes, strategies can be implemented into a retirement plan to do what the pension was designed to do and can also offer additional access to your investments through retirement. We prefer flexible strategies that allow our clients to turn on and off income and adjust it as needed. But again, everyone’s situation is different, so I am not suggesting a one size fits all for your readers. Life throws curve balls and having someone guide you and help you make changes will make a big difference in your retirement experience.
Gila Herald: “Ok that all sounds great. What will the expert calculations and advice cost the Freeport employee who just wants some answers?”
Bryce: “Ash Creek Financial Advisors offers free advice and calculations to anyone and without the requirement to become a client. Feel free to call us, we have four advisors in town, one in New Mexico and two in the Mesa area. In-office visits are also available but not required for advice.”
Gila Herald: “Is there anything else FMI employees should be focused on right now?”
Bryce: “Well, like I was saying, everyone has a different situation, but now is the time to really look at how your 401k and other assets are positioned in this environment. According to the announcement, the ECAP on the 401k should return at the first of the year. At Ash Creek, we can audit your current investment plan and holdings using our training and fintech software to make sure you are on track to meet your goals. We strongly recommend taking advantage of the 401k match when it becomes available again.”
Gila Herald: “Thanks for taking time to explain what advice is needed for our FMI readers.”
Bryce: “Thank you for the interview, we embrace the opportunity to serve our community and we will do what we can to help our miners at this time.”
Is Freeport for sale?
Rumors of a buyout have been resurfacing as they have from time to time and the move to freeze employees’ pensions could indicate Freeport might be sold to another company. Previously, Barrick Gold has been rumored to be interested in purchasing the company as well as Barrick’s rival, Newmont Corporation. Barrick previously attempted a hostile takeover of Newmont, which later became a joint venture operation in Nevada.
According to an article in Forbes earlier this month, Barrick Gold’s stock had increased by 45 percent in 2020 while Freeport’s was down 12 percent. The difference was partly attributed to the COVID-19 pandemic, which saw a downturn in the economy and less demand for copper, which made up 62 percent of Freeport’s revenues in 2019. Conversely, gold made up 95 percent of Barrick’s revenues in 2019 and while copper decreased in value this year (down to a low of $2.10/pound in March but has since rebounded to about $2.89/pound) gold has increased in value during the pandemic from about $1,500/ounce from the beginning of the year to nearly $1,780/ounce.
According to Zacks Equity Research, Freeport is expected to report revenues of about $3.2 billion for the quarter that ended June 2020, which would be roughly 9.6 percent down from the year-ago quarter. Freeport’s earnings report is expected to be released July 23.
Newmont, which also makes most of its money (93 percent) off its gold, has also seen its stock rise during the pandemic and is rumored to be a possible suitor for Freeport as well.
While Freeport had a downturn with its revised operating plans released in April, its Lone Star project near its Safford Operations is on track to produce roughly 200 million pounds of copper per year beginning the second half of 2020 and the demand for copper may be on the upswing.
Freeport was established in 1988 and acquired Phelps Dodge in 2007. Its headquarters are in Phoenix and it operates seven open-pit copper mines in North America (five in Arizona and two in New Mexico), including its flagship mine in Morenci. It also operates molybdenum mines in Henderson and Climax, Colorado, and has mines in South America and Indonesia, which mine copper, gold, silver, and molybdenum.
Freeport has yet to respond to a request to comment on this article.
Investment advisory services offered through SCF Investment Advisors Inc. • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. SCF Investment Advisors Inc. and Ash Creek Financial Advisors are independently owned and operated.