Amidst high copper prices, the Asarco win, an end to Cananea strike, Peru startup could make 2010 a good year for Grupo Mexico

By Elizabeth Ferguson
CNNExpansión.com

Regaining control of the Asarco mine in Arizona, the possibility of an end to the Cananea mine strike and the start of operations in Peru might give Grupo Mexico a very good 2010.

Operations are expected to occur amidst an increase in the price of copper, which could put the company in a sound financial position over the next year despite having to spend large sums to regain control of Asarco and, if the strike ends, rehabilitate Cananea and put it back into operation.

"The recovery in copper prices and the company's ability to raise production by 40 percent are two key catalysts that make Grupo Mexico one of our favorites for investment," said Actinver Casa de Bolsa analyst Francisco Suarez.

Copper prices have been driven by record imports and low inventories in China.

Grupo México is Mexico's largest mining corporation and the third largest copper producer in the world.

The company was founded by Raul Antonio Escobedo and Germán Larrea Mota-Velasco in 1988. After the government of Carlos Salinas declared the state mining company bankrupt, Larrea, now chief executive and one of Mexico's richest people,  purchased key copper mines in Cananea and Nacozari, Sonora, as well as numerous other mining sites.

In 2004, Grupo México purchased a controlling interest in the Southern Peru Copper Corp.

Grupo México has been in continual conflict with Local 65, the traditionally militant Cananea branch of the Mexican Mine Workers' Union (SNTMMSRM). During miners' strikes in January 2003 and October 2004, Grupo México responded with threats to close the Cananea mines.

If the company can settle the dispute and restart operations at Cananea in 2010, it could in three months time increase its installed capacity by 26 percent, said a report by the Ixe Financial Group.

"Grupo Mexico has all the conditions for a good story in the sense of investment," said Actinver's Suarez. "We're going to see the company targeting what it always has done well, which is to reduce the unit cost of production and establish itself as one of the largest producers (of copper) in the world instead of being distracted by legal issues."

www.cnnexpansion.com/negocios/2009/11/26/gmexico-tendra-final-feliz-en-2010