Mining company seeks billions from parent to pay creditors

BROWNSVILLE - The allegations of Arizona-based mining company Asarco LLC against its Mexican parent are like the tale of a mine: its new owner stripped it of its most valuable assets and left behind a fragile shell.

In his opening argument, G. Irvin Terrell, attorney for Asarco, described parent Grupo Mexico today as a greedy company that did all it could to strip Asarco of its ``crown jewel,'' a controlling stake in Southern Peru Copper Corp.

Asarco has filed a $10.5 billion lawsuit against Americas Mining Co., owned by Grupo Mexico, in turn owned by one of Mexico's richest families, to recoup some of its losses.

The move left a shell of a company and thousands of unpaid creditors, Terrell said.

Terrell said the leaders of Grupo Mexico knew that transferring Asarco's most valuable asset - a controlling stake in two Peruvian copper mines - to Americas Mining Corp. would leave the company with a gaping hole in its cash flow. But rather than sell it through a competitve auction to the highest bidder, it made an insider transfer to its own subsidiary.

Grupo Mexico kept Asarco on life support, he said, until the transfer was complete. Its leaders resigned from its board and left Asarco to flounder into bankruptcy, Terrell said.

On the line in this trial will be a chance for a long list of Asarco's creditors - western states struggling to clean up polluted sites, asbestos victims, bond creditors and more - to get paid.

``Our recovery against Grupo and AMC will assist in paying the extraordinary cost of cleanup in parts of the West,'' said Terrell. ``Asarco had to cannibalize itself to stay alive after the transfer.''

Asarco is seeking billions from Americas Mining Corp. in the form of the return of a stake it had in two lucrative Peruvian copper mines and the $1.7 billion dividends it collected in recent years from those mines.

In addition to mining interests from Mexico to Chile that make it the world's third-largest copper producer, Grupo Mexico, headed by German Larrea, also controls the country's largest railroad. Forbes ranked Larrea at No. 127 on its list of the world's billionaires with a fortune estimated at $7.3 billion.

Larrea, chief executive of Grupo Mexico and AMC, is expected to testify. The trial has been scheduled for four weeks before U.S. District Judge Andrew Hanen.

Asarco claims Grupo Mexico, which acquired Asarco in 1999, knew that it faced potential liabilities exceeding $1 billion over asbestos claims as well as environmental cleanup of 20 Superfund sites around the U.S. So Grupo Mexico transferred one of Asarco's most valuable assets - the Peruvian copper mines - to its mining arm AMC to protect it from being used to pay thousands of creditors.

Asarco alleges that Grupo Mexico used its control of all the parties involved to underpay for the mines and leave Asarco effectively broke. Asarco, which operates three mines and a smelter in Arizona, as well as a copper refinery in Amarillo, filed for bankruptcy in August 2005.

The U.S. Department of Justice initially moved to block the transfer, but eventually negotiated an agreement with Grupo Mexico that required it to pay $765 million, including $100 million to set up an environmental trust fund to pay claims.

Charles Beckham, an attorney representing AMC, declined to comment on the case. But court filings show that AMC will argue that the Justice Department's eventual approval of the deal protects it against charges of wrongdoing. AMC has made a counter claim against Asarco.

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