Asarco hit by $29.4 million lawsuit, battles debt
Date: 28-Nov-02
Country: USA
Arizona-based Asarco, a subsidiary of Grupo Mexico , told Reuters the company hopes the dispute with Glencore, stemming from missed debt payments on physical copper trades since 2001, can still be negotiated out of court.
"We're aware that we do have an obligation and that now it's a matter of litigation," Asarco spokesman Clay Allen said in an interview. "It's at their discretion whether they stop or continue."
He added, "We're still negotiating with the U.S. (Justice Department) despite their court injunction to block our internal restructure plans, so we can deal with Glencore in the same way."
Glencore declined to comment. "In a legal situation, it is a matter of policy that we do not comment," a spokeswoman told Reuters.
The complaint alleges that Asarco breached a business contract with Glencore for copper purchase and sale agreements, due to Asarco's severe financial problems which coincided with a fall in worldwide copper prices in 2001.
"These agreements involved the outright sale of blister copper by Glencore to Asarco, or the refining and return of refined copper delivered by Glencore to Asarco," Glencore's written complaint said.
In court documents, both parties confirmed the amount owed to Glencore by Asarco was US$29,426,718.66, not including the additional cost of interest incurred since January 2002.
The companies were unable to agree on a payment plan and the miner's debt to Glencore remains unpaid, as Asarco is also trying to fend off other huge cash liabilities.
The Justice Department in August won a restraining order on Asarco's plans to sell its 52.4 percent stake in Southern Peru Copper Corp. to parent Grupo Mexico.
The U.S. government feared that Asarco had undervalued its share in SPCC and so would struggle to meet all of its debt obligations.
Asarco planned to use the proceeds of the sale to pay off $550 million in debt - $450 million on a revolving credit with banks, of which it is currently in default, and a $100 million bond issue. The banks have delayed full repayment on the credit facility until the end of January 2003, while the bond is to be repaid in February.
The company also planned to use SPCC sale proceeds to pay down hundreds of millions of dollars in environmental clean-up costs at old plants across the country.
The Justice Department and Asarco have been in talks to find a compromise.
"We put the environmental costs at a maximum of $200 million but the EPA (Environmental Protection Agency) said $700 to 800 million," said Allen.
The two sides are also a "few hundred million dollars apart" in evaluating Asarco's share in SPCC but are "coming closer together" on both issues, he added.
