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Mexican copper miner and railways operator Grupo Mexico SAB (GMEXICO.MX) would consider a separate listing of its rail business, subject to market conditions, once legal matters related to the acquisition of the Ferrosur railway have been resolved, a company official said Thursday.
Grupo Mexico received a favorable court ruling in May on the acquisition of Ferrosur by its ITM subsidiary, and is waiting to see whether the Federal Competition Commission, or CFC, will appeal the decision, said Octavio Ornelas, chief financial and administrative officer of railway unit Ferromex.
In its second-quarter report, Grupo Mexico said the company hopes the CFC, which opposed Grupo Mexico's acquisition of Ferrosur, won't appeal the court ruling as that would "represent a useless cost of technical and economic resources in a case that has already been resolved."
Ferromex runs Mexico's northwest railway, and Ferrosur runs a smaller railway in southern Mexico. The northeast and central railway is operated by Kansas City Southern (KSU) unit KCSM. Grupo Mexico said in February that it reached agreements with KCSM on interconnection and rights of way and that KCSM agreed to drop its objections to the Ferrosur acquisition.
Analysts consider that a separate listing of Grupo Mexico's transport business would create value for shareholders and give investors more focused investment options.
Last week, Grupo Mexico proposed combining mining units Southern Copper Corporation (SCCO) and Asarco LLC in its subsidiary, Americas Mining Corporation, or AMC. Grupo Mexico owns 80% of Southern Copper and all of Asarco, which operates in Arizona and Texas. The proposal would give Southern Copper minority shareholders a 16.6% stake in AMC.
Grupo Mexico's chief financial officer, Daniel Muniz, said that combining the mining units would result in cost savings at a time when the company is bullish on copper prices. "This is really the right time," he said.
Southern Copper's board approved last week a plan to invest $3.8 billion over five years in Mexico's Sonora state, including $2.1 billion to expand capacity at the Cananea copper mine to 450,000 tons a year from the current 180,000.
Southern Copper recovered Cananea in June from striking workers who had seized the mine and other facilities for nearly three years as the labor dispute wound through the legal system.
With the Tia Maria project in Peru delayed due to an environmental review, Grupo Mexico is focusing on Cananea, Muniz said.
-By Laurence Iliff, Dow Jones Newswires; (52-55) 5980-5184; firstname.lastname@example.org