By Emily Chasan, edited by Andre Grenon

Bankrupt US copper miner Asarco LLC could emerge from bankruptcy protection later this year as a stronger company free of environmental and asbestos liabilities if a US federal judge decides Grupo Mexico can regain control of the company, a Grupo lawyer said on Monday.

Robert Moore, a bankruptcy attorney at US law firm Milbank Tweed Hadley & McCoy who has been leading Grupo Mexico SAB de CV's fight to for Asarco for the past year, said in an interview with Reuters on Monday that he is confident the court will agree with a bankruptcy judge that Grupo Mexico's offer for the company is superior to that offered by India's Sterlite Industries Ltd.

"We just feel very confident as a matter of law," Moore said as he detailed the company's plan to repay creditors in full, plus interest, and retain its equity stake in the company.

Grupo Mexico acquired Asarco in a leveraged buyout in 1999, but lacks board control due to the bankruptcy. While the bankrupt company has said it supports an offer by Sterlite, which would also pay creditors in full, Grupo Mexico contends it still owns the company's equity and that "you can't force a company to sell its assets," Moore said.

If the judge were to go the other way, "I think it would turn the history of corporate law on its head," Moore added.

Judge Andrew Hanen, of the US District Court in Brownsville, Texas is expected to make a decision by Dec. 1 on which of the two will be able to take control of the company.

If Judge Hanen decides in favor of Grupo Mexico, Moore said the company would be required to close the deal in 30 days and the company could be out of bankruptcy by Dec. 31. If Judge Hanen decides in favor of Sterlite, which argues Grupo is using a "worthless" equity position to stranglehold the bankruptcy, Moore said Grupo plans to go back to bankruptcy court to litigate additional issues it has with Sterlite's plan.

Grupo does not have a new agreement with Asarco's union, which Sterlite does have, but Moore said Grupo is the current owner and does not need one. Grupo plans to extend the existing contract and also put a union representative on the company's board, Moore said.

The union still supports Sterlite's bid for Asarco and, while Judge Hanen said at a court hearing last month he would consider union concerns in his decision, Moore feels that would be unlikely to derail the other arguments in favor of its case.

"Should a union be able to dictate who's going to own the company it's working for?" Moore said. "We're the existing owner. We're simply assuming the existing contract."

Asarco filed for bankruptcy protection in 2005 amid a strike and more than $1 billion of asbestos and environmental claims, and the ability that bankruptcy offers to shed Asarco of those claims is still important to Grupo Mexico, the company said.

"The industrial logic and underlying rationale for adding ASARCO to our operation is as compelling today as it was 10 years ago," a Grupo Mexico spokesman said on Monday. "The single impediment to realizing the value inherent in combining our assets was the enormous environmental and asbestos ... the result of the ongoing bankruptcy hearings will result in a stronger, more vibrant ASARCO we believe will help fulfill our original vision liabilities that Grupo inherited in the acquisition."

Grupo said the addition of Asarco to its company will help it diversify, boost its geographic profile and boost the Mexican miner's copper production by 30 percent.

U.S. Bankruptcy Judge Richard Schmidt in Corpus Christi, Texas had twice recommended that the District Court approve Grupo Mexico's $2.4799 billion offer for the company, saying the plan could amount to one of the "most successful major bankruptcy reorganizations in history."

The District Court, however, is deciding the final winner due to certain agreements related to the company's asbestos liabilities.

Sterlite has made numerous attempts to sweeten its offer for Asarco -- as part of its latest $2.565 billion offer it said it would let Grupo Mexico out of an $8 billion potential legal liability stemming from the 2003 transfer of Asarco's stake in Peruvian miner Southern Copper Corp, but Judge Schmidt had said that offer was too late.

The cases are In re: Asarco LLC, U.S. Bankruptcy Court, Southern District of Texas, No. 05-21207 and In re: Asarco LLC, U.S. District Court, Southern District of Texas, No. 09-00177.