Only one copper division for Grupo Mexico

One of Mexico’s biggest natural resource company’s, Grupo Mexico, wants to merge two of its affiliates to create a behemoth in the copper world.

The company is proposing to merge Asarco and Southern Copper’s (SCCO-N) to usher in greater efficiency and rationalize its mining division.

The two companies would be brought together under the Americas Mining Corp banner – which is also a subsidiary of Grupo Mexico – in a deal that would give Sothern Copper shareholders 1.237 shares in Americas Mining. The shares of the merged company would then trade in both the U.S. and Peru.

The deal values Asarco at $5.9 billion and would leave Southern Copper’s minority shareholders with 16.6% of the new company.

Southern Copper has a strong Peruvian focus and boasts the largest copper reserves in the world. It is 80% held by Grupo Mexico.

Asarco is third-largest copper producer the U.S., turning out roughly 400 million lbs of copper per year. Both companies are integrated miners with smelting and refining facilities.

Grupo Mexico regained full control of Asarco late last year when it pulled it out of a four year chapter 11bankruptcy.

By bringing the two mining units together, investors would have a single stock through which to access the conglomerate’s mining division. Grupo also has railroad and oil-drilling units.It is considering doing a separate IPO for its rail division. 

As for the increased efficiency that Grupo believes the merger would bring, the company says transportation costs and capital investments would be lowered if the two companies were merged.

Word of the proposed merger had yet to unleash a positive impact on Southern Copper’s (SCCO-N) share price as the company was off a percentage point to $31.72 in New York on July 23. The stock, has however, run up from a price of $29.33 on July 16.