Takeover easy on Grupo’s pocketbook

Grupo Mexico expects to save up to US$200 million as a result of its recent merger with Asarco.

The savings stem from the elimination of administrative redundancies, consolidation of purchasing and sales, optimization of mine plans, and installation of automated systems.

Grupo Mexico, which completed the takeover in November 1999, had originally expected to realize only US$100 million in savings.

Also, the Mexican conglomerate says operating costs should fall to less than US50 per lb. of copper by 2002.

The Arizona mines acquired from Asarco are expected to produce copper at US63.7 per lb.

Production from Grupo Mexico’s 54% stake in Southern Peru Copper (PCU-N), also acquired in the takeover, should fall to US48.1 per lb. This year’s target is US52.2 per lb.

Costs at the major’s two original operations, Cananea and Caridad in Sonora state, are projected to fall to US37 per lb. by 2002.

As a result of the takeover, Grupo Mexico’s overall production and reserves are expected to rise 150% in 2000. Output for the year could reach 800,000 tonnes, making it the world’s third-largest producer. Since the takeover, Grupo Mexico has boosted zinc output from Asarco’s operations by 18%, and lead production at the East Helena smelter in Montana is up 14%.

Capital expenditures for 2000 are targeted at US$168 million, much of which will be applied to the expansion of solvent extraction-electrowinning capacity at Cananea. Funds are also earmarked for modernization of Southern Peru Copper’s Ilo smelter and expansion of the concentrator at Toquepala.

Grupo Mexico plans to integrate Asarco and Southern Peru in the next three months, after which it will seek a listing on the New York Stock Exchange.

The company is also considering separating its mining assets from its railroad assets, and moving its headquarters to either the U.S. or Canada.