Atticus Capital Buys More Phelps Dodge

Atticus Capital, the $12 billion hedge fund, continues building its Phelps Dodge(PD - Cramer's Take - Stockpickr) war chest.

The New York-based hedge fund, in a regulatory filing Friday, says it added to its already considerable equity stake in the copper-mining company during the second quarter of the year. Atticus was buying shares of Phelps during a period that the Arizona-based company proposed an ambitious and ultimately unsuccessful three-way $40 billion merger with two Canadian nickel-mining companies.

Atticus, which has become something of a thorn in the side of Phelps' management, opposed the complicated merger and has urged the company to bolster its stock price by buying up shares. The hedge fund also has said it wouldn't be opposed to seeing Phelps get bought out.

In the filing, Atticus reported that its equity stake in Phelps, as of June 30, was 8%, or 16.3 million, up from 6%, or 12.3 million share, at the end of March. The hedge fund's stake in Phelps is worth about $1.3 billion, compared to $1 billion, in the prior reporting period. The stake includes only the shares owned by Atticus, not call options to buy shares of Phelps Dodge at a future price.

Phelps Dodge recently became the center of a merger triangle when the company bid for nickel miners Inco(N - Cramer's Take - Stockpickr) and Falconbridge(FAL - Cramer's Take - Stockpickr). In the proposed deal, Inco was to first buy Falconbridge and then Phelps would acquire Inco.

Atticus and a fund manager with Lehman Brothers'(LEH - Cramer's Take - Stockpickr) Neuberger Berman, another big institutional investor, both went on the record criticizing the deal, saying that it was too dilutive to Phelps Dodge's earnings. Privately, sources say other Phelps investors also opposed the deal.

The three-way merger affair recently dissipated, after Xstrata, a rival suitor for Falconbridge, beat out Inco with a higher bid. Phelps has since decided to focus only on acquiring Inco. But this week, another mining concern Teck Cominco(TCK - Cramer's Take - Stockpickr), offered a rival bid for Inco. Phelps is reportedly considering raising the cash portion of its bid for Inco.