G-Mexico Mine Spill May Cost Hundreds of Millions, Haro Says

Aug 26, 2014 4:39 pm ET

Aug. 26 (Bloomberg) -- A Grupo Mexico SAB chemical spill in two rivers looms as the worst environmental incident in Mexico’s recent mining history and damages could reach hundreds of millions of dollars, authorities said.

Mexico will seek “maximum sanctions” against the nation’s biggest mining company, Environment Minister Juan Jose Guerra Abud said today at an event in Mexico City. Damages from the spill in northern Mexico could reach billions of pesos, Guillermo Haro, head of the agency that investigates environmental crimes, said at the same event. Three telephone calls seeking comment from Grupo Mexico’s press and investor relations offices weren’t immediately returned.

The Aug. 6 spill of thousands of cubic meters of copper sulfate solution at Grupo Mexico’s Buenavista del Cobre mine in Sonora state caused shares to post the second-biggest decline on the nation’s benchmark stock index since then through yesterday’s close. The head of Mexico’s agency for sanitary emergencies, known as Cofepris, said an investigation started against Grupo Mexico on Aug. 22.

“We have been informed by experts on this subject that this could be considered the worst environmental disaster in the mining industry in the recent history of the country,” Guerra Abud said.

Mexican congressional commissions are asking for operations to be suspended and that the Economy Ministry consider canceling the mine’s concession. The country’s environmental prosecutor, known as Profepa, filed a criminal complaint against the company.

Reducing Acidity

Grupo Mexico doesn’t expect the mine operations to be suspended, Juan Pablo Becerra, the company’s head of investor relations, said by telephone from Mexico City yesterday. The company is working with the Environment Ministry and Conagua to reduce the rivers’ acidity levels, he said.

The 40,000 cubic meters of solution that spilled into the rivers isn’t hazardous, Grupo Mexico’s Chief Financial Officer Daniel Muniz Quintanilla said in an Aug. 12 telephone interview. The company regrets the incident, which was a result of heavy rain in July and early August, according to an Aug. 20 e-mailed statement from Grupo Mexico.

Guerra Abud reiterated that a broken pipe caused the spill, refuting Grupo Mexico’s claim.

Conagua, Mexico’s water regulatory agency, temporarily closed the Molinito dam in Sonora state, which provides water for the state capital of Hermosillo, where about 715,000 people reside, Guerra Abud said, adding that five people show symptoms of contamination.

Grupo Mexico rose 1.3 percent to close at 47.25 pesos in Mexico City.