A planned transfer of the majority stake in copper miner
Grupo Mexico, which had planned to move the Southern Peru shareholding into its umbrella Americas Mining group, which owns both Asarco and Grupo Mexico’s Mexican mining operations, agreed to delay the sale until a U.S. federal court authorizes the company to proceed, or “for a limited time.”
The Department of Justice obtained a temporary restraining order contending that the sale of Asarco’s 54% shareholding in Southern Peru Copper was an attempt to shelter assets from environmental liabilities, principally those arising from cleanups near an old Asarco smelter in Tacoma, Wash.
The U.S. government has estimated the cleanup cost at around US$60 million and Asarco’s obligations across the country as “running into hundreds of millions of [U.S.] dollars.” A spokeswoman for Washington Senator Maria Cantwell, speaking to wire service reporters, claimed Asarco’s cleanup obligations to be US$1 billion.
The Department of Justice claimed the Southern Peru shares were Asarco’s most valuable asset, and were being transferred for less than their fair value. Grupo Mexico said the sale had been examined by independent valuators and that the Department of Justice knew the valuators had agreed about the sale price.
The shareholding is currently collateral for a US$450-million loan that will be due in the fall of 2002. Asarco had expected to pay off the loan using the cash it would receive from its parent, and thus have lower interest payments. At current market prices, the shareholding is worth about US$680 million. The large minority shareholders are
Southern Peru Copper (SPCC), whose principal assets are the Toquepala mine and Ilo smelter complex, and the Cuajone mine, all in southern Peru, reported net earnings of US$26.8 million (US34 per share) on revenue of US$193.4 million, for the three months ended June 30. That was an increase in both top and bottom lines over the second quarter of 2001, when revenue of US$162.8 million gave Southern Peru a net profit of US$7.5 million.
For the half-year, Southern Peru incurred a profit of US$31.4 million on revenue of US$329.6 million. Revenue in the first half of 2001 was nearly identical, at US$325.3 million, but earnings were US$23.2 million.
Although copper prices were slightly lower in the second quarter, compared with a year ago, prices for SPCC’s byproducts, molybdenum and silver, were higher.
Toquepala’s mine-mill production was 952 tonnes greater in the second quarter of 2002 than in the corresponding period of 2001, as higher-grade zones were mined in the Toquepala pit and mill recoveries improved. SPCC’s solvent extraction-electrowinning plant also produced more copper in the recent quarter than a year earlier.
Cuajone produced 680 tonnes less copper in the quarter than it had in the second quarter of 2001; mill throughput declined, and recoveries in the mill were poorer.
An expansion of the mill at Toquepala was 96% complete at the end of the quarter, with US$56 million of the US$70-million budget expended. The expansion will bring Toquepala’s mill capacity to 60,000 tonnes per day, an increase of 15,000 tonnes from its present capacity. Southern Peru is predicting Ilo will receive 123,000 tonnes of additional concentrate from Toquepala.
Southern Peru had US$315 million in current assets, including US$120 million in cash, at the end of the quarter. Payables and accrued liabilities amounted to US$99.7 million, giving the company about US$215.3 million in working capital.
Grupo Mexico earned US$65.4 million (US10 per share) on revenue of US$654 million in the three months ended June 30, and has a net profit of US$44.4 million (US7 per share) on revenue of US$1.3 billion in the first half of 2002. In the second quarter of last year, the company made US$6.1 million on revenue of US$776.7 million, and was showing a loss of US$42.7 million on revenue of US$1.6 billion at the halfway mark of 2001.
The improved earnings stem largely from continued cost reduction, which has brought expenses down US$158.9 million. Grupo Mexico’s “significant personnel reductions” and suspension of mining at several of its properties brought production down as well, and lower metal prices cut into revenue.
Within the group, Asarco made a net profit of US$19.4 million in the second quarter on revenue of US$145.4 million. Earnings in the second quarter of 2001 were US$9.7 million, made on US$236.7 million in revenue. For the six months ended June 30, Asarco made US$12.4 million on revenue of US$283.5 million; in the first half of 2001, it lost US$44.6 million on revenue of US$502.4 million.
Cutbacks at Mission
Cutbacks in the mining rate at Asarco’s Mission mine in Arizona brought production from that operation down to 19,802 tonnes — a 38% reduction, compared with last year, though mill recoveries increased by 4%. Asarco’s other large operation, the Ray mine, also in Arizona, increased production by about 36%, to 67,853 tonnes, as grades improved and a new mine plan came into effect.
Grupo Mexico’s domestic operations, under operating company Minera Mexico, had revenue of US$174.1 million and made US$19.2 million in earnings during the recent quarter, and has a loss of US$11 million on revenue of US$375.7 million in the first half. Work stoppages at four mines — La Caridad, Cananea, San Martin and Charcas — affected production, as did a strike at the San Luis Potosi zinc plant.
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