PHELPS DODGE <PD> SETS SIGHTS ON ACQUISITION
Phelps Dodge Corp chairman G. Robert
Durham said the company is prepared to make another large
non-copper acquisition and that a deal could be struck in the
near future.
    In an interview with Reuters, Durham said the company was
examining potential candidates but not yet talking with any.
    He declined to name the companies but said a deal could
occur as soon as the second half of 1987.
   
    Phelps Dodge, which ranks as the largest copper producer in
the U.S., last year paid 240 mln dlrs for Columbian Chemicals
Co, a maker of carbon black which is used in rubber and tires
among other products.
    The purchase was part of a strategic plan to diversify and
eventually match earnings from non-copper operations and copper
operations.
    Phelps Dodge could spend between 250 mln and 500 mln dlrs
to buy another non-copper company, Durham said, citing about
100 mln dlrs of cash and 580 mln dlrs of untapped bank credit.
   
    Any acquisition candidate would have to have a different
economic cycle than copper, substantial earnings and good
management, he said. Phelps Dodge would only want a friendly
deal, he added.
    "We're not talking high-tech, or financial services or
about a perfume company," he said. "We want a good basic
industrial company that will fit into our management
structure," Durham said.
   
    During the interview, Durham and other executives also said
continued strong demand and tight copper supply should lead to
higher prices for the metal.
    "In my view, it's not a matter of if but when the price
(for copper) will improve because there aren't that many new
projects coming on, and demand, short of a major recession,
will continue to grow modestly," said executive vice president
Douglas Yearley. Phelps Dodge continues to lower its cost of
producing copper, the executives said. Costs should be below 50
cents a pound, after depreciation but before interest and
corporate expense, by 1989 or 1990.
    Production costs are about 56 to 57 cents a pound now
compared to one dlr a pound in 1981, some Wall St analysts
said.
    Durham said copper supplies are lower than they have been
for almost 20 years and demand continued to be strong.
    He declined to project results for the second quarter or
year. But he said the quarter was going well and the rise in
copper prices in the last month will help results.
    Durham said last month that the second quarter should match
the first quarter when earnings rose about 11 pct to 16.8 mln
dlrs or 49 cts a share.
    First quarter sales rose 61.5 pct to 372.9 mln dlrs,
reflecting the acquisition of Columbian Chemicals and increased
copper shipments from the Chino copper mine in New Mexico, also
acquired last year.
    Analysts are projecting 1987 earnings of 2.20 dlrs to 2.75
dlrs a share, up sharply from 1.79 dlrs in 1986.
 Reuter
