Asarco Seeks Billions From Grupo Mexico in Dispute

US copper miner Asarco plans to seek around $8bn in damages from Grupo Mexico after a court ruling found the Mexican miner harmed Asarco's creditors in a 2003 transfer of a Peruvian mining unit, a lawyer for the company said on Wednesday.

In a ruling on 30 August, US district judge Andrew Hanen, found directors at Asarco's parent had breached their fiduciary duty in the transaction and that Grupo Mexico made a "fraudulent transfer" of Asarco's stake in Southern Peru Copper Corp.

But in a complex ruling, Hanen also said Grupo Mexico had not acted with malice and threw out punitive damages Asarco was seeking in the case.

"We're asking that they disgorge or give back the stocks and the dividends," said Irv Terrell, a lawyer at Baker Botts who represents Asarco in the case.

Hanen, who sits in US District Court in Brownsville, Texas, has asked for a briefing on damages by 15 September and expects to rule shortly thereafter.

Southern Peru Copper Corp is now Southern Copper, a profitable unit of Grupo Mexico with a market value of more than $6bn. Terrell said additional damages were worth close to $2bn.

Lawyers for Asarco had argued in the case that Grupo Mexico schemed to strip Asarco of one of its most valuable assets, pushing the company toward insolvency.

Asarco, which owns three copper mines in Arizona, filed for Chapter 11 bankruptcy protection in 2005 after it was sued for $1bn over environmental clean-up and asbestos claims. Its total asbestos and environmental liabilities are estimated to be at least $3bn.

Differeing views

But Grupo Mexico took a different tack on damages, saying what the company could end up paying is "far away" from the billions of dollars Asarco seeks, Alberto de la Parra, the Mexican miners' General Counsel said in an investor conference call on Wednesday.

"The worst case scenario will be in the range of $50m to a couple $100m, but not more than that," said De la Parra.

But analysts said the low end of Grupo Mexico's estimate is unlikely.

"We believe that $83m would be the floor that the company would have to pay," said Dahlman Rose & Company in a research note.

"We cannot rule out the possibility that the judge would rule that Grupo Mexico would have to pay as much as $6.6bn, as that would be the approximate present day value of the shares," said the note.

The analysts said they could not recommend shares in Southern Copper, Grupo Mexico's Peruvian unit, given the uncertainty of the court case and the possibility of a massive payout.

Grupo Mexico is in a separate legal battle to win back control over Asarco, which is run by an independent board due to the bankruptcy and is trying to stop Sterlite Industries Ltd's $2.6bn bid for the US miner.

Sterlite Industries, an Indian unit of London-listed Vedanta Resources Plc, was the highest bidder in an auction for Asarco's assets in May and has said it would buy the operating assets of Asarco in an all-cash deal.