Grupo Mexico plans asset sale to pay off debt

Having borrowed US$817 million from Chase Manhattan Bank to acquire Asarco, Groupo Mexico is liquidating non-core assets to cover that debt and beef up its bottom line.

As a first step, the Mexican copper miner will sell Enthone OMI, Asarco’s specialty chemicals division, to Britain’s Cookson Group for US$503 million. Grupo Mexico then plans to sell the aggregates division, American Limestone, for as much as US$250 million.

Enthone, which supplies proprietary chemicals for plastic and metal coatings, enjoyed annual sales of more than US$350 million in 1998, whereas American Limestone had gross sales of US$56.5 million.

Meanwhile, press reports out of Peru indicate that Grupo Mexico is making a clean sweep of Asarco’s management. Reuters reports that no Asarco executives have been offered positions at Grupo Mexico, and that the New York office will be closed.

Grupo Mexico would not confirm these reports, saying it “continues to review the operations and organization of Asarco to determine all options,” adding that “some management changes are being made and there may be operational changes.”

Once it recoups its acquisition costs, Grupo Mexico intends to trim costs at the copper operations it acquired through the Asarco takeover. According to Reuters, the company has pledged to lower cash costs to US56 from US70 per lb. at its newly acquired mines in Arizona.

The conglomerate also plans to seek a listing in the U.S. through American Depository Receipts some time in the next 18 months, accompanied by an initial public offering.

Grupo Mexico is, in the meantime, considering building a new concentrator to process sulphide ores with zinc, copper and silver at its Cananea mine in Sonora state. At a daily capacity of 6,000-8,000 tonnes, the concentrator would process ore from the Buenavista deposit, which contains 100 million tonnes grading 1.6% zinc and 0.6% copper, plus 20 grams silver per tonne.

The company has encountered high-grade mineralization (1.5% copper or higher) beneath the northern portion of the Cananea open pit. The mineralization is up to 360 metres thick and sits beneath 300 metres of lower-grade leachable material. Grupo Mexico has intensified drilling in the area to establish reserves.

At the Caridad mine, also in Sonora, drilling has outlined several copper and molybdenum deposits that could increase the mine life beyond 25 years.

At the Arco copper deposit in Baja California Norte, Mexico, a feasibility study has outlined reserves of more than 1 billion tonnes of both oxide and sulphide material averaging 0.5% copper and 0.14 gram gold.