Correct: Fitch Removes Grupo Mexico from Watch Neg & Takes Action on Subs.

Business Editors

CHICAGO--(BUSINESS WIRE)--March 8, 2004

(In a press release issued earlier, Minera Mexico's foreign currency rating should be senior secured. The amended release follows.)

Fitch Ratings-Chicago-March 8, 2004: Fitch Ratings affirms the 'B-' local and foreign currency ratings assigned to Grupo Mexico S.A. de C.V. (Grupo Mexico) and removes the ratings from Rating Watch Negative. The Rating Outlook is now Stable. In addition, Fitch affirms the following ratings for Grupo Mexico's subsidiaries:

Minera Mexico S.A. de C.V. (Minera Mexico)

-- Senior secured local currency, 'B';

-- Senior secured foreign currency, 'B'.

Southern Peru Copper Corporation (SPCC)

-- Senior unsecured foreign currency, 'BB-'.

Asarco Inc. (Asarco)

-- Senior unsecured rating, 'CCC'.

Grupo Ferroviario Mexicano, S.A. de C.V. (GFM)

-- Senior unsecured local currency, 'BBB-';

-- Senior unsecured foreign currency, 'BBB-'.

In conjunction with these rating actions, Fitch has assigned a 'B' senior unsecured rating to Americas Mining Corporation (AMC), a wholly-owned subsidiary of Grupo Mexico that is the direct parent company of Minera Mexico, Asarco, and Southern Peru Copper Corporation (SPCC).

Grupo Mexico's 'B-' rating reflects the company's high leverage. As of Dec. 31, 2003, Grupo Mexico's consolidated debt totaled about $3.1 billion while total EBITDA was $690 million. In 2003, the company's ratio of total debt-to-EBITDA was 3.5 times(x) while interest coverage, as measured by EBITDA/interest expense, was 4.4x. On a non-consolidated basis, Grupo Mexico has about $80 million of bank debt due in 2004-2005. This holding company debt is serviced primarily by the dividends Grupo Mexico receives from its railway subsidiary, Grupo Ferroviario Mexicano, S.A. de C.V. (GFM), which accounted for about 30% of GM's consolidated EBITDA in 2003.

GFM's 'BBB-' local and foreign currency ratings are supported by the company's solid competitive position, strong cash flows and modest leverage. As a result of the recent financings, GFM's ratio of total debt-to-EBITDA increased to 2.3x at Dec. 31, 2003, from 1.7x at year-end 2002, and EBITDA to interest expense decreased to 6x at Dec. 31, 2003, from 27x in 2002. The level of total debt of about $480 million is not expected to increase significantly in the future, as both GM and Union Pacific Railroad (Union Pacific), a minority shareholder, believe the company is appropriately capitalized. Union Pacific has indicated to Fitch that it will not approve further debt increases. It has the ability to control through a very restrictive shareholders agreement.

Fitch's 'B' rating of AMC, a direct subsidiary of Grupo Mexico, reflects its high leverage as measured by the ratio of total consolidated debt-to-EBITDA of about 5.2x. This company's debt obligations are met primarily with dividends from SPCC. SPCC is the financially strongest and lowest-cost mining asset held by AMC due to its low leverage and very competitive cost structure. This enables SPCC to support AMC's debt obligations with dividends during troughs in the price cycle for copper. AMC is rated one notch higher than its parent, Grupo Mexico, since AMC's largest debt obligation is secured by its 54% stake in SPCC. As of Dec. 31, 2003, AMC's total consolidated debt, including that of its mining subsidiaries, totaled approximately $2.6 billion while consolidated EBITDA totaled approximately $500 million. Debt at the AMC level only, totaled approximately $502 million.

During 2003, a year in which copper prices averaged 82 cents per pound, SPCC generated $290 million of EBITDA. The company ended 2003 with $295 million of cash and marketable securities and $350 million of total debt. SPCC's ratio of total debt-to-EBITDA was 1.2x at Dec. 31, 2003 and the ratio of EBITDA-to-interest expense was 16.5x. SPCC should continue to generate healthy cash flows in 2004, especially under the current environment of high prices, as every one-cent rise in copper generates about $8 million in additional EBITDA for the company. Fitch rates SPCC's foreign currency debt 'BB-'. This rating is constrained by the 'BB-' foreign currency rating of Peru.

Fitch's 'B' rating of Minera Mexico's obligations continue to reflect the company's high leverage post its debt restructuring in April 2003. At year-end 2003, the company's total debt was approximately $1.3 billion. Minera Mexico's EBITDA improved to $190 million in 2003 from $106 million in 2002. As a result, its ratio of total debt-to-EBITDA decreased to 7.3x from 13x in 2002, while interest coverage, as measured by EBITDA/interest expense increased to 1.8x from 1x in 2002. On average, it is expected that Minera Mexico's EBITDA will increase by about $7 million for every one-cent increase in average copper prices vis-?-vis 2003.

On Feb. 3, 2004, Grupo Mexico announced that it had presented a proposal to SPCC shareholders to sell all of its interest in Minera Mexico to SPCC in return for additional shares in SPCC. The proposal is pending discussion and approval by SPCC shareholders and is expected to be a cashless stock-for-stock transaction.

The possible acquisition of Minera Mexico by SPCC holds the potential to improve the credit profile of Minera Mexico by facilitating the refinancing of Minera Mexico's currently restrictive debt agreements that were the result of the restructuring completed early last year. Refinancing of this debt, given the current high copper price environment, would provide Minera Mexico with increased financial flexibility and allow it to both reduce its debt and to invest in projects that enhance free cash flow. If the proposed merger transaction were not cashless, and Minera Mexico's debt were rebalanced between it and SPCC, SPCC's underlying credit quality would be weakened considerably. It is not expected that it would be weakened enough, however, to result in a downgrade of the company's foreign currency rating.

Fitch's 'CCC' rating of Asarco's debt obligations reflects the substantial uncertainty regarding the company's potential environmental lawsuits, as well as its inability to generate significant cash flow due to its high cash cost of production. In 2003, Asarco generated revenues and EBITDA of $360 million and $17 million, respectively. For each additional one-cent increase in copper prices, Asarco's EBITDA should increase by about $4 million.

Currently copper is above $1.30/lb. and has averaged about $1.17/lb. in the first two months of 2004, a dramatic increase over the 2003 average of $0.81/lb. and the 2002 average of just $0.71/lb.