With copper generating excitement as prices stabilize from their worst levels of 2008, one would expect copper investors to breathe a sigh of relief.
Meanwhile, in the courts of Mexico's big brother to the north, last week brought a crippling decision against Southern Copper's majority stakeholder, Grupo Mexico. The U.S. federal court ordered Grupo Mexico to return 260 million shares of Southern Copper -- or about 30% of shares outstanding -- to the bankruptcy estate of its own former subsidiary: Asarco.
The ruling found that the transfer of shares out of the group's failing subsidiary had harmed Asarco's creditors, and included damages of $1.9 billion for lost dividends plus interest. For now, it appears that this block of Southern Copper shares will remain locked up in the bankruptcy estate, but eventual liquidation by creditors or sale to a third party could create the potential for market-making moves in a stock with only 20% of outstanding shares held by entities outside of Grupo Mexico. Prompting nary a chuckle, Moody's downgraded Southern Copper's credit rating on April Fool's Day.
I see no need for long-term investors to be spooked by Southern Copper, but quality alternatives abound. Freeport-McMoRan