Reuters reported that Grupo Mexico is set to report a sharp jump in quarterly results as it benefits from its acquisition of Arizona's Asarco and metal prices recover
Seven analysts consulted by Reuters estimated the company's Q1 net profit at USD 383 million, about 20 times year earlier earnings of USD 19 million.
Grupo Mexico won back control of Asarco in December, pulling the US copper miner out of bankruptcy by winning a drawn out court battle and outbidding India's Sterlite Industries Limited. Asarco is now suing Sterlite for backing out of USD 2.6 billion deal to end the bankruptcy in 2008.
Brokerage Grupo Bursatil Mexicano said that in the Q1 that Asarco's results are fully consolidated, we estimate that Grupo Mexico's total copper sales volumes should be propelled 43% YoY. Asarco produces between 159,000 tonnes and 181,000 tonnes of copper per year.
The poll of analysts showed revenue more than doubling to USD 1.8 billion from USD 824 million in the Q1 of 2009. Grupo Mexico also has mines in Peru run by its listed company Southern Copper which recently sold USD 1.5 billion of debt in a two part sale. Also seen boosting results are copper and molybdenum prices, which have steadily recovered from lows reached during the financial crisis.
Grupo Bursatil Mexicano said that every metal produced by the company experienced a major recovery during the quarter with copper and molybdenum up 111% and 82% YoY respectively. While analysts had a positive outlook for Grupo Mexico this year, the company is still working to resolve a nearly 3 year strike that has paralyzed its largest Mexican mine, Cananea.
A court ruled in favor of the company earlier this year allowing them to fire workers and reopen the mine but the union has refused to back down and is blocking the entrance to the giant pit in northern Mexico.
Mr Rodrigo Heredia analyst of IXE said that the increase in copper prices could be offset by a reduction in our volume of sales estimate due to the uncertainty that hangs over the start of production at Cananea. IXE had expected Cananea to reopen in the Q3 of this year, but Grupo Mexico said that there was no clear date when the union will give up control of the installations.
Cananea has the capacity to produce 190,000 tonnes of copper a year, but billions of dollars in investments to expand output there and at the El Arco project in Baja California have been put on hold because of the strike.
(Sourced from Reuters)
