Asarco Shareholders Elect Seven Directors; Chairman Reports on 1997 Accomplishments.

NEW YORK, N.Y.--(BUSINESS WIRE)--April 29, 1998--

Reviews Positive Outlook for Copper Market

ASARCO Incorporated (NYSE:AR) shareholders today elected seven directors and approved the selection of Coopers & Lybrand as the Company's independent auditors at the company's annual meeting here.

Elected to three-year terms on the board were Vincent A. Calarco, chairman, president and chief executive officer of Crompton & Knowles Corporation; Francis R. McAllister, president and chief operating officer of Asarco; Michael T. Nelligan, chairman and chief executive officer of Don Ward Transport, Inc., and John D. Ong, chairman emeritus of The BFGoodrich Company.

Elected to a two-year term was James W. Kinnear, retired president and chief executive of Texaco Inc. Manuel T. Pacheco, president of the University of Missouri, and Kevin R. Morano, executive vice president and chief financial officer of Asarco, were elected to one-year terms on the board.

Richard de J. Osborne, Asarco chairman and chief executive officer, reviewed the Company's recent achievements, current strategic goals and the positive outlook for the copper market. Asarco's president, McAllister, reviewed Company operations and progress on achieving its strategic goals and Asarco's chief financial officer, Morano, reviewed financial results.

The Company announced at the meeting that the Asarco board today had declared a quarterly dividend of 20 cents per share, payable on June 2, 1998 to shareholders of record at the close of business on May 12, 1998.

Recent Achievements

During 1997, Osborne said, Asarco accomplished most of its long-term strategic goals, including: sale of its unrestricted shares in Grupo Mexico; repurchase of $100 million of Asarco common stock; strong growth from its specialty chemicals and aggregates businesses, both of which achieved record earnings; good progress on its plans to expand low-cost copper production, and strengthening of the company's balance sheet.

Osborne also noted the Company's recent announcement of the sale of its Missouri lead business and an important new acquisition in Germany for its specialty chemicals business.

Osborne said Asarco sold all of its available-for-sale shares in Grupo Mexico in 1997 for $323 million. The company still owns 56 million B shares subject to a fixed price option with a value of $79 million. The option, he said, expires in 2001 and since it is priced at a deep discount to the current market, Asarco expects it to be exercised by the expiration date.

Following the initial sale of the Grupo shares Asarco began a $100 million stock repurchase program. The program, completed in December, reduced shares outstanding by 3.3 million or about 7.7%. Asarco now has less than 40 million shares outstanding.

Osborne also noted that Asarco's specialty chemicals and aggregates businesses achieved record profits in 1997. "Results have been good and earnings from these businesses are becoming significant to us. Operating income has grown from $9 million in 1988 to $43.2 million in 1997, a compound annual growth rate of over 19%," he said.

Osborne said that Asarco continued its programs in 1997 to expand low-cost copper mining capability with three projects that will increase Asarco's beneficial interest in mined copper production by about 118 million pounds, or 12% on an annual basis, at cash costs of about 50 cents a pound.

Having accomplished its long-term strategic goals, Osborne said Asarco's strategy for the future is to implement its recently-announced major cost reduction programs at Asarco and SPCC; develop additional low-cost copper production in order to continue to reduce costs and increase earnings; continue growth of its specialty chemicals and aggregates businesses; focus its exploration program on projects which have good potential for near-term mine development, and maintain its strong financial position.

Progress on Strategic Programs

Asarco's president, Frank McAllister, reported to shareholders on Company operations and progress on current strategic programs at Asarco and SPCC.

McAllister said Asarco's cost reduction programs include "reductions in personnel, general and administrative expense and purchased services, equipment upgrades and other operating cost reductions" at both Asarco and Southern Peru. The programs will result in annual pre-tax savings of $50 million at Asarco and $30 million at SPCC. "The combined programs," McAllister said, "will affect Asarco's earnings by 90 cents per share in 1998 and $1.05 per share in 1999."

McAllister reviewed the growth in Asarco's mine production of copper and its copper ore reserves. 1998 mine production will exceed 1 billion pounds and the Company's ore reserve position is very strong with 38 years of reserves at both Asarco and SPCC.

McAllister noted that the first stage of a major expansion project at SPCC, to be completed in 1999, will cost $245 million and increase SPCC's mined output of low-cost copper by 19%. In addition to the first stage expansion at the Cuajone mine, SPCC has begun a second stage which involves an approximately $800 million modernization and expansion of SPCC's Ilo smelter. Smelter capacity will be increased to 1.25 million tons of concentrates to match SPCC's expanded mine output. When the modernization and expansion are completed, the Ilo plant will be one of the world's largest, modern smelters will full environmental controls.

An optional third stage expansion project at SPCC appears to be very attractive, according to McAllister. The third stage involves a second, larger expansion at the Cuajone mine and a further expansion of the Ilo smelter. Estimated cost of the third stage of expansion is $750 million. When the project is finished SPCC will produce at a rate of 930 million pounds of mined copper per year, 1.4 times the 1997 production level.

Asarco has focused its exploration program on advanced stage copper and precious metals projects outside of the United States and Southern Peru has an active exploration program for copper and gold in Peru, McAllister said. Three projects, he said, are in the early feasibility study stage: a gold project at Camp Caiman in French Guiana; a modest-sized SX/EW copper project in Chile, and a new silver project at Potosi, Bolivia. McAllister said the three projects are advancing rapidly and look promising.

The sale last week of Asarco's Missouri Lead Division -- two underground mines and a smelter and refinery -- will result in the Company realizing proceeds in excess of $55 million in cash and a royalty interest in the property.

"This transaction," he said, "will allow Asarco to redeploy resources into businesses with long-term growth prospects such as development of additional low-cost sources of copper production and the continued growth of the specialty chemicals and aggregates businesses."

1997 Earnings

Morano told shareholders that, as reported earlier, the Company's net earnings in 1997 were $143.4 million, or $3.42 per share including non-recurring gains on the sale of shares in Grupo Mexico S.A. de C.V. (Grupo).

For the first quarter of 1998 Asarco reported a net loss of $31.8 million, or 80 cents per share on a diluted basis, compared with net earnings of $40.6 million, or diluted earnings per share of 94 cents, for the first quarter of 1997. Results for the first quarter of 1998 include non-recurring after-tax charges of $16.0 million, or 40 cents per share, related to a pending sale of the Company's Missouri lead business and for severance costs associated with a cost reduction program. Morano noted that lower prices in the first quarter of 1998 reduced earnings by $56.0 million.

Copper market outlook

Osborne also reviewed the outlook for the copper market for 1998 noting that most observers have overlooked the effect announced mine closures, Chinese import requirements and the reduced availability of scrap copper will have on copper supply in 1998.

He predicted that new mine supply of copper will grow by 889,000 tons, or 8.6% in 1998. However, total refined supply is only expected to increase by 186,000 tons of 11,792,000 tons in 1998. Offsetting the growth in new mine supply are already announced mine shutdowns and curtailments of 278,000 tons, a decline in Western World copper scrap availability of 192,000 tons and a decline of 233,000 tons resulting from higher concentrate exports to China.

"Overall then, we see a supply growth of 186,000 tons in 1998, substantially below the growth in mine supply," Osborne said.

"We believe that the 122,000 ton decline in copper inventory levels that we have seen since the end of February reflects the end of the inventory shift that began last summer when consumption in the Asian market declined, much stronger than expected consumption in the United States and Europe and the return of the Chinese to the market to meet their current consumption requirements.

"However, prices have not recovered. Inventory levels now stand at 3.9 weeks of consumption. The last time we saw prices this low," he said, "inventory levels were 80% higher and stood at 6.8 weeks of consumption."

A build-up of copper inventories last fall and early this year resulted not from a decline in overall worldwide demand but in a shift of inventory from China and from copper in transit from South America to Southeast Asia, Chairman Osborne said in his copper market review.

Chinese Impact

"Over 200,000 tons of consumption in China was met from the drawdown of internal inventories rather than from the import of copper from the West as we had expected," he said. "While the decline in consumption in Asia appears to have been offset by a much greater than expected rise in European and U.S. demand, the shift freed up a substantial amount of copper normally carried in the long in-transit pipeline between South America and Asia."

Overall, Osborne said that Asarco expects a 2.3% growth in Western World consumption of copper in 1998 to 12,517,000 tons, compared with a 3% growth in 1997. This estimate is based on assumed growth in the U.S. of 3.6% compared with 5% growth in 1997, and 3.2% growth in Europe compared with 3.8% in 1997. We are using these estimates despite current evidence of much stronger demand in the U.S. and Europe.

"We are currently oversold and we have bought 15,000 tons of physical copper to meet our customers' requirements," he said.

In Asia, excluding Japan, Asarco expects an absolute decline in copper consumption of 35,000 tons in 1998 from 1997 levels. We expect no growth in Japanese consumption.

"The real story of China," Osborne said, "is its large and growing shortfall of internally produced copper. China produces only 521,000 tons of copper from its own mines and from internally generated scrap. The rest of its requirements must come from outside the country.

Osborne said that concentrates are now in short supply in the world and the Chinese requirement for concentrates may be difficult to fulfill. Scrap also is currently in tight supply in the West, according to Osborne. "In the last few months, we have noted a significant decline in scrap availability in Europe and the U.S. Supplies of scrap to China will be affected by the same pressures that are causing refinery curtailments and shut-downs in the West. In East-West trade, we believe refined copper exports from Poland and the CIS will remain flat at 995,000 tons and that net imports by China will be 351,000 tons," Osborne said.

"Overall, we see a total Western World refined supply of 12,436,000 tons and a deficit between production and consumption of refined copper of 81,000 tons."

Osborne said the deficit could grow substantially larger, if Asarco's consumption estimates prove too conservative, as current demand in Europe and the U.S. indicate they may be; China fully restocks its 1997 inventory drawdowns; current trends in scrap lead to greater reliance on refined copper, and current prices lead to additional capacity curtailments and closures.

"We think that the outlook for copper is good despite the recent decline in prices," Osborne concluded.

ASARCO Incorporated is one of the world's leading integrated producers of copper, as well as a producer of other metals, specialty chemicals and aggregates.

CONTACT: Jerry Cooper, Corporate Communications,

ASARCO Incorporated,

212-510-1810