Freeport (NYSE:FCX), Lundin (TSE:LUN) Reach Agreement on Tenke

After a long period of negotiations with the Congolese government, Freeport-McMoRan Copper & Gold Inc (NYSE:FCX) and Lundin Mining (TSE:LUN) have come to an agreement with them on a Tenke contract.

While continuing to maintain majority interest in Tenke, Freeport did have to give up 1.75 of there 57.75 percent stake in Tenke, and drop it to 56 percent. Lundin Mining's stake dropped to $24.75 percent.

BMO Capital Markets said, "The impact from the lower equity in Tenke is estimated at less than 1 percent for Freeport-McMoRan and less than 2 percent for Lundin."

The value of the Tenke Fungurume copper and cobalt project is an estimated $2 billion.

Together the two companies had to pay over $70 million in fees to the Democratic Republic of Congo, who via their state-owned company Gecamines, raised their stake in Tenke to 20 percent.

While winning some important concessions, the process and resultant changes could backfire on Congo, as many watching the process are more concerned than ever about doing business in the country.

All the concessions don't even include the high income tax rate of 30 percent, a royalty rate of 2 percent, and an export fee of 1 percent.

Freeport-McMoRan (NYSE:FCX), Lundin Mining (TSE:LUN) Tenke Project to Exceed Annual Estimates

The Tenke Fungurume Mining copper and cobalt project in the Democratic Republic of Congo will surpass its projected targets in 2010, according to Richard Robinson, Social Programs Manager of the mine, benefiting Freeport-McMoRan (NYSE:FCX) and Lundin Mining (TSE:LUN) more than expected, along with their other partner, Gecamines, the state mining firm.

Freeport-McMoRan has the largest stake in the project at 57.75 percent, Lundin in next with a share of 24.75 percent, and Gecamines has a 17.5 percent stake in the mine.

The mine has now reached production capacity, producing 2,300 tons of cobalt and 29,000 tons of copper in the first quarter. Projected out, that will go beyond the estimated 8,000 tons of cobalt and 115,000 tons of copper originally targeted for the year.

There are an estimated 119 million ton of reserves, having average ore grades of 0.4 percent cobalt and 2.6 percent copper.

Freeport-McMoRan (NYSE:FCX) Finalizing 'Tenke Fungurume' Deal

Freeport-McMoRan Copper & Gold

Freeport-McMoRan Copper & Gold (NYSE:FCX) is said to be in the final stage of negotiations with the Democratic Republic of Congo over the Tenke Fungurume copper/cobalt project.

The mine is the largest undeveloped copper and cobalt project in the world, and included the highest grade as well.

This will be a huge win for Freeport, which has taken some negative blows recently, especially on the news China will be tightening up on its money supply in 2010, which some assume will result in less demand for raw materials, although that's not a proven reality at this time, and could turn around easily, as the iron ore story has unfolded where China was attempting push down the prices, which didn't work because demand is so strong for steel in the country. The same could happen with copper and cobalt.

Another major story for Freeport is the lower yields coming from its Grasberg property in Indonesia, which Tenke Fungurme would address for years into the future.

Tenke Fungurme is estimated to have the resources to produce up to 250 million pounds of copper and 18 million pounds of cobalt on an annual basis. That would and will be a boon for Freeport.

Freeport-McMoRan Copper & Gold