Grupo Mexico sees improvements in Q1

Financial results appear to be improving for copper giant Grupo Mexico as cutbacks in production make their effect felt across the organization.

Grupo Mexico booked a net loss of US$20.9 million on revenue of US$631 million for the three months ended March 31. The loss, which works out to US3 per share, compares with a loss of US$48.8 million on revenue of US$779 million in the first quarter of 2001.

Costs declined more drastically than did revenue as the company cut back production through most of its mining units. The group’s U.S. unit, Asarco, lost US$7 million on revenue of US$138 million, a significantly better result than in the first quarter of 2001, when the Asarco operations lost US$54 million on revenue of US$266 million. The most telling result at Asarco was a turnaround in operating results, from a loss of US$30.2 million in the first quarter of 2001 to an operating profit of US$10.4 million this year.

First-quarter costs at Asarco fell to US$114 million from US$275 million the year before, reflecting Asarco’s suspension of production at its zinc and lead smelter in East Helena, Mont. Lower copper prices, combined with smaller sales of refined copper sourced from other companies, contributed to a 48% decrease in revenue. Copper mine production, however, increased 22% as a result of a new mine plan at the Ray open pit at Hayden, Ariz.; Ray produced just over 36,000 tonnes of copper in concentrate.

The Mission mine, near Sahuarita, Ariz., cut back mill throughput by 32%, but increased metal recovery in the mill meant that, year over year, copper production fell by only 27% to just over 10,000 tonnes. Direct unit production costs at the Asarco mines were down about 40%.

The group’s Mexican operations, under the banner of Minera Mexico, showed cost improvements as well, though there was no wholesale suspension of production like that at Asarco. Production and sales volumes were down, partly as a result of strikes at the La Caridad, San Martin and Charcas mines and at the zinc plant at San Luis Potosi.

Minera Mexico reduced its break-even operating cost to US$1,155 per tonne (US52.4 per lb.) in the quarter, down from US$1,295 per tonne (US58.7 per lb.) a year earlier.

Overall, though net sales were down 19%, direct costs fell by more than 29%, general and administrative items were down by 2%, and net financing costs decreased by 22%.

Revenue from Grupo Mexico’s rail division, Grupo Ferroviario Mexicano, totalled US$148 million, an improvement over the corresponding quarter of 2001, when revenue was US$121 million. Net first-quarter income from the rail unit was US$24.2 million, up from US$12.6 million a year before.

The group capitalized about US$74 million in expenses during the quarter, including its share of major smelter and solvent-extraction expansion programs at Southern Peru Copper (PCU-N), in which Grupo Mexico owns a 54% interest. There were no major project expenditures at the U.S. operations, but a new electrolytic copper plant at the Cananea mine was commissioned during the quarter.