Oct. 15--A surprising turn of events Tuesday means Tucson copper producer Asarco LLC may once again end up in the hands of its former parent company, Mexico City-based Grupo Mexico.

But Asarco, which is in bankruptcy, won't go back without a fight.

Sterlite Industries Ltd. "cannot and will not" go forward with plans to acquire Asarco for the $2.6 billion bid it made in May, Asarco announced Tuesday.

The company cited the ongoing credit crisis and falling copper prices as the reason for abandoning the offer to bring Asarco out of bankruptcy.

"Sterlite is prioritizing use of its available liquidity for operations and capital rather than acquisition at this time," according to a statement from Asarco.

Copper prices have fallen sharply in recent weeks to around $2.21 from a high of nearly $4 earlier this year.

Asarco intends to hold Sterlite to the $2.6 billion contract.

"Sterlite has not alleged that the purchase contract is unenforceable or that it lacks the cash to close the transaction," Asarco said.

"Asarco advised Sterlite and told the court that it is reserving all of its rights under the contract," Joseph F. Lapinsky, Asarco's president and CEO, said in a prepared statement.

Tuesday's announcement was likely welcome news for Grupo Mexico, which has been trying to regain control of Asarco since a bankruptcy judge gave it only one-third control of the company in 2005, following Asarco's Chapter 11 bankruptcy filing. Since that time, Asarco has been operating with an independent board appointed by the bankruptcy judge and trying to sever its relationship with the Mexican parent.

Grupo Mexico had no comment on Tuesday's announcement, said a New York City-based spokesman.

The Mexican mining conglomerate's U.S. subsidiary, Americas Mining Corp., was ordered Friday into mediation with Asarco to hash out a settlement over Grupo's fraudulent transfer of Asarco's share of Peruvian mines. On Aug. 30, a federal judge ruled that Grupo Mexico's decision to take Southern Peru Copper away from Asarco left it strapped for cash and taking drastic measures to survive.

After the ruling, Asarco asked the judge to award damages in the amount of $10.2 billion in cash and stocks. Grupo scoffed and said the Peruvian shares should not be returned to Asarco.

Instead of ruling on damages, U.S. District Judge Andrew S. Hanen appointed another judge to sit in mediation hearings with the parties on Oct. 30.

Sterlite has agreed to attend the mediation hearing and Judge Richard Schmidt has scheduled a bankruptcy court hearing for Nov. 4 in Corpus Christi, Texas.