CYPRUS MINERALS, AMAX CONSIDER SALE OF MOLYBDENUM ASSETS

CYPRUS MINERALS, AMAX CONSIDER SALE OF MOLYBDENUM ASSETS

Cyprus Minerals Co. and Amax Inc. are weighing the sale of a portion of their molybdenum assets in order to facilitate the merger of the two companies, an Amax spokesman said Tuesday.

"Cyprus and Amax have proposed, and are discussing with the Justice Department, the divestiture of certain molybdenum mining and processing assets in connection with the merger to address Justice Department concerns," the spokesman said, referring to information contained in proxy material that was mailed to shareholders.Shareholders of each company will vote Nov. 12 on whether to accept the merger.

A merger of the two companies would give the resulting entity a virtual monopoly over molybdenum primary production in the United States.

"Neither Amax nor Cyprus intends to resolicit votes of stockholders as a consequence of any agreement they may reach with the DOJ or the effects it may have on Cyprus Amax, whether any such agreement is reached before or after the special meetings," the proxy material said.

Climax Molybdenum Co., Amax's subsidiary, produces 40 million pounds a year at its Henderson, Colo., mine. Its Climax mine is not operating.

Cyprus owns the Thompson Creek and Tonopah mines in Idaho and Nevada, both of which are idle.

Last year, however, Cyprus produced 25.4 million pounds of molybdenum as a byproduct of its copper production.

Magma Copper Co., Phelps Dodge Corp. and Kennecott Corp. all produce byproduct molybdenum from their copper operations.

U.S. byproduct output totaled 60 million pounds last year.

From the time the merger was announced this spring, the molybdenum operations have been viewed by analysts as the only potential stumbling block. But analysts have noted, as well, that the Cyprus and Amax molybdenum production is much higher cost than the by-product output of the major U.S. copper producers, which would have an economic advantage over the merged company.

The two companies have been in talks with the Justice Department since this summer concerning their molybdenum holdings. On July 30, Justice requested additional information from the companies regarding their molybdenum businesses.

The molybdenum market has been pressured by poor demand from the specialty steel industry, its major market. The large amount of byproduct molybdenum on the market, in turn, has pressured and undercut primary producer prices.