A top executive with the company set to take over Asarco LLC says the Tucson-based copper miner will emerge from a grueling four-year bankruptcy court battle modern, competitive, profitable and environmentally sound.
The company's Arizona and Texas mining and refining operations will finally be free from environmental liabilities that drove it into bankruptcy in 2005, said Jorge Lazalde, vice president and general counsel for Grupo Mexico subsidiary Asarco Inc.
In an interview with The Associated Press on Tuesday, Lazalde also said the company assumed a contract that makes its 1,500 unionized workers among the best-paid in the industry and has offered to extend the deal through 2011. Asarco also has about 1,000 nonunion employees.
A United Steelworkers union negotiator said union workers have been waiting since July for Grupo Mexico to respond to its offer for a new long-term contract. Steelworkers district director Bob LaVenture said protecting against any effort to shift jobs to Mexico is important, and Grupo Mexico's attempts to get union concessions earlier this decade have left workers suspicious.
"I think their history has given us good reason for that," LaVenture said. "They were in Arizona before and created some issues, but we're always willing to talk, and we're willing to move forward, but we can't bargain with ourselves."
The company has until mid-January to provide a contract offer, and the union has until mid-February to accept the short-term contract extension.
Grupo Mexico, one of the world's top copper miners, is set to close on its winning bid for Asarco in mid-December. The company trumped India's Sterlite Industries Ltd. in a bankruptcy sale confirmed by a federal judge in Texas this month by offering $2.2 billion to creditors together with an estimated $1.4 billion in cash held by Asarco.
Control of Asarco will return to Americas Mining Corp., a Grupo Mexico subsidiary. Grupo Mexico also will guarantee a one-year $280 million note payable to Asarco's asbestos creditors, forgive $161 million of Asarco tax obligations to Americas Mining, and release Americas Mining's claim to a $60 million tax refund that will remain with Asarco.
Asarco, which runs three Arizona copper mines and refineries in Arizona and Amarillo, Texas, was first bought by Grupo Mexico in 1999. By 2005, costs for asbestos claims and environmental cleanup at its abandoned mines and refineries across the Western U.S. were eating up $50 million to $100 million per month, Lazalde said.
Plunging copper prices and a strike against its Arizona mines were the final straws, forcing Grupo Mexico to file for bankruptcy protection and lose control of its subsidiary during more than four years of court proceedings.
Asarco has paid $1.8 billion to settle its environmental claims with states, including major cleanups in Montana and Nebraska. In addition to the $280 million note to settle future asbestos claims, it paid $500 million cash.
Two years before Asarco filed for bankruptcy, Grupo Mexico arranged a transaction to acquire Asarco's majority position in Southern Peru Holdings, a huge copper operation in Peru. During the bankruptcy case, the judge agreed with Asarco that Grupo Mexico's spinoff of the valuable Peruvian assets was fraudulent and left Asarco with mounting debt and a shortage of cash. Grupo Mexico was ordered to pay more than $6 billion to Asarco, but with its winning bid, Grupo Mexico wiped that bill off the books.
Lazalde said Grupo Mexico was cast as a villain in some quarters for declaring bankruptcy, but the company inherited the liabilities when it bought the company and wasn't aware how bad they were. The real culprits, he said, were the previous owners.
"The former owners of Asarco has managed to run away from these liabilities for years and years and years," Lazalde said.
Moving forward, he said Asarco has positioned itself to be a top mining company.
"We're going to make this company competitive, profitable, a good business in which our workers and employees are happy, as they are in Mexico and Peru. We're going to be role-model citizens, as we are in Peru and Mexico, when it comes to environmental regulations."