Shareholders of Southern Peru Copper (PCU-N) have approved a merger with the mining arm of Grupo Mexico, Minera Mexico.
Grupo Mexico currently owns 54% of Southern Peru Copper (SPCC). Grupo will transfer its unlisted Minera Mexico unit (99.15%-held by Grupo’s subsidiary, Americas Mining) to SPCC.
Minera Mexico owns, Mexicana de Cobre (and its subsidiaries, which include the La Caridad complex), Industrial Minera Mxico (IMMSA), Minerales Metlicos del Norte, (and its subsidiaries) and Mexicana de Cananea, (and its subsidiaries, including the Cananea complex).
La Caridad and Cananea are substantial open pit copper mines in northeast Mexico. In 2004, the two mines produced a combined total of about 320,640 tonnes of copper concentrate. IMMSA operates four underground mines in central and northern Mexico, one of which (Charcas) is the largest zinc producer in Mexico.
Southern Peru owns the Cuajone and Toquepala mines in southern Peru. The two mines produced a combined total of about 400,000 tonnes of refined copper last year.
The combined company will be the world’s second-largest copper producer by market capitalization and the largest listed company in terms of reserves.
Southern Peru intends to upgrade technology at the La Caridad and Cananea mines, increasing production by about 25% over the next three years.
Grupo Mexico will issue 67.2 million new shares to existing shareholders. The company will own about 75% of the newly formed company, which will be called Southern Peru Copper and will have about 147.4 million shares outstanding.
The company will trade on both the New York and Lima stock exchanges.
Minera Mexico has a debt of US$1.04 billion, while Southern Peru currently has debts of US$289 million. SPCC will pay a special dividend to shareholders of US$100 million prior to completing the deal.Phelps Dodge (PD-N) and Cerro Trading will each own 7.5% of the new Southern Peru.
Both Southern Peru Copper, and Grupo Mexico closed down on the news, by about 5% and 10% respectively.
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