SOUTHERN COPPER CORP/ - Quarter Report: 2021 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-14066

SOUTHERN COPPER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		13-3849074
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1440 East Missouri Avenue Suite 160 Phoenix, AZ		85014
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (602) 264-1375

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol

Name of each exchange on which registered:

Common stock, par value $0.01 per share

SCCO

New York Stock Exchange

Lima Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	⌧	Accelerated filer	◻
Non-accelerated filer	◻	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧

As of April 30, 2021 there were outstanding 773,073,269 shares of Southern Copper Corporation common stock, par value $0.01 per share.

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Southern Copper Corporation (“SCC”)

INDEX TO FORM 10-Q


		Page No.
Part I. Financial Information:

Item. 1	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Statements of Earnings for the three months ended March 31, 2021 and 2020	3

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020	4

	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	5

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	6

	Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements	8-35

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36-54

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	54-56

Item 4.	Controls and procedures	56

	Report of Independent Registered Public Accounting Firm	57

Part II. Other Information:		58

Item 1.	Legal Proceedings	58

Item 1A.	Risk Factors	58

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	58

Item 4.	Mine Safety Disclosures	58

Item 6.	Exhibits	59-60

	List of Exhibits	61-63

	Signatures	64

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PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


	Three Months Ended
	March 31,
	2021		2020
(in millions, except for per share amounts)
Net sales (including sales to related parties, see note 5)	$	2,532.5	$	1,719.7
Operating cost and expenses:
Cost of sales (exclusive of depreciation, amortization and depletion shown separately below)		943.8		955.8
Selling, general and administrative		30.1		29.1
Depreciation, amortization and depletion		200.6		192.9
Exploration		6.4		8.6
Total operating costs and expenses		1,180.9		1,186.4

Operating income		1,351.6		533.3

Interest expense		(96.8)		(101.9)
Capitalized interest		7.2		5.1
Other income (expense)		2.3		(7.4)
Interest income		2.4		7.8
Income before income taxes		1,266.7		436.9
Income taxes (including royalty taxes, see Note 4)		507.5		221.7
Net income before equity earnings of affiliate		759.2		215.2
Equity earnings (loss) of affiliate, net of income tax		7.9		1.0
Net income		767.1		216.2
Less: Net income attributable to the non-controlling interest		3.3		1.4
Net income attributable to SCC	$	763.8	$	214.8

Per common share amounts attributable to SCC:
Net earnings-basic and diluted	$	0.99	$	0.28
Weighted average shares outstanding-basic and diluted		773.1		773.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended
	March 31,
	2021		2020
(in millions)
Net income and comprehensive income	$	767.1	$	216.2
Comprehensive income attributable to the non-controlling interest		3.3		1.4
Comprehensive income attributable to SCC	$	763.8	$	214.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Southern Copper Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31,		December 31,
	2021		2020

	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2,267.3	$	2,183.6
Short-term investments		415.9		410.8
Accounts receivable trade		1,232.2		1,068.9
Accounts receivable other (including related parties 2021- $46.5 and 2020 - $23.3)		92.2		67.7
Inventories		880.7		950.2
Prepaid taxes		123.8		104.8
Other current assets		24.2		29.2
Total current assets		5,036.3		4,815.2

Property and mine development, net		9,454.4		9,458.7
Ore stockpiles on leach pads		1,156.3		1,125.0
Intangible assets, net		141.5		143.0
Right-of-use assets		961.9		979.0
Deferred income tax		254.4		230.0
Equity method investment		118.2		114.3
Other non-current assets		94.8		81.3
Total assets	$	17,217.8	$	16,946.5

LIABILITIES
Current liabilities:
Accounts payable (including related parties 2021- $107.1 and 2020- $104.3)	$	549.0	$	594.6
Accrued income taxes		284.4		340.9
Accrued workers’ participation		299.9		247.8
Accrued interest		131.3		98.6
Lease liabilities current		71.3		70.6
Other accrued liabilities		39.0		32.3
Total current liabilities		1,374.9		1,384.8

Long-term debt		6,545.0		6,544.2
Lease liabilities		890.5		908.4
Deferred income taxes		144.2		159.4
Other liabilities and reserves		134.0		128.7
Asset retirement obligation		550.9		545.0
Total non-current liabilities		8,264.6		8,285.7

Commitments and contingencies (Note 9)
STOCKHOLDERS’ EQUITY (NOTE 10)
Common stock par value $0.01; shares authorized, 2021 and 2020–2,000; shares issued, 2021 and 2020–884.6		8.8		8.8
Additional paid-in capital		3,439.5		3,441.5
Retained earnings		7,146.4		6,846.4
Accumulated other comprehensive income		(8.4)		(8.4)
Treasury stock, at cost, common shares		(3,061.2)		(3,063.5)
Total Southern Copper Corporation stockholders’ equity		7,525.1		7,224.8
Non-controlling interest		53.2		51.2
Total equity		7,578.3		7,276.0
Total liabilities and equity	$	17,217.8	$	16,946.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
	March 31,
(in millions)	2021		2020

OPERATING ACTIVITIES
Net income	$	767.1	$	216.2
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation, amortization and depletion		200.6		192.9
Equity earnings of affiliate, net of dividends received		(4.0)		(1.0)
Loss on foreign currency transaction effect		(19.7)		(28.0)
(Benefit) provision for deferred income taxes		(38.9)		7.5
Other, net		6.7		6.9
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable		(163.3)		123.2
Decrease in inventories		38.2		70.4
Decrease in accounts payable and accrued liabilities		(1.3)		(102.4)
Increase in other operating assets and liabilities		(2.8)		(10.6)
Net cash provided by operating activities		782.6		475.1
INVESTING ACTIVITIES
Capital expenditures		(232.6)		(101.0)
Proceeds from (purchase) sale of short-term investments, net		(5.2)		40.0
Other		—		0.4
Net cash used in investing activities		(237.8)		(60.6)
FINANCING ACTIVITIES
Cash dividends paid to common stockholders		(463.8)		(309.2)
Other, net		(1.3)		(2.2)
Net cash used in financing activities		(465.1)		(311.4)
Effect of exchange rate changes on cash and cash equivalents		4.0		23.4
Increase in cash and cash equivalents		83.7		126.5
Cash and cash equivalents, at beginning of period		2,183.6		1,925.1
Cash and cash equivalents, at end of period	$	2,267.3	$	2,051.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Three Months Ended
	March 31,
(in millions)	2021		2020

TOTAL EQUITY, beginning of period	$	7,276.0	$	6,858.2
STOCKHOLDERS’ EQUITY, beginning of period		7,224.8		6,810.3
CAPITAL STOCK:
Balance at beginning and end of period:		8.8		8.8
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period		3,441.5		3,424.9
Other activity of the period		(2.0)		(14.4)
Balance at end of period		3,439.5		3,410.5
TREASURY STOCK:
Southern Copper common shares
Balance at beginning and end of the period		(2,767.5)		(2,767.9)
Parent Company common shares
Balance at beginning of period		(296.0)		(281.0)
Other activity, including dividend, interest and foreign currency transaction effect		2.3		14.7
Balance at end of period		(293.7)		(266.3)
Treasury stock balance at end of period		(3,061.2)		(3,034.2)
RETAINED EARNINGS:
Balance at beginning of period		6,846.4		6,435.6
Net earnings		763.8		214.8
Dividends declared and paid, common stock, per share, 2021- $0.6, 2020– $0.4		(463.8)		(309.2)
Balance at end of period		7,146.4		6,341.2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning and end of period		(8.4)		(10.1)
STOCKHOLDERS’ EQUITY, end of period		7,525.1		6,716.2
NON-CONTROLLING INTEREST, beginning of period		51.2		47.9
Net earnings		3.3		1.4
Distributions paid		(1.3)		(2.3)
NON-CONTROLLING INTEREST, end of period		53.2		47.0
TOTAL EQUITY, end of period	$	7,578.3	$	6,763.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Southern Copper Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1— DESCRIPTION OF THE BUSINESS:

The Company is a majority-owned, indirect subsidiary of Grupo Mexico S.A.B. de C.V. (“Grupo Mexico”). As of March 31, 2021, Grupo Mexico, through its wholly-owned subsidiary Americas Mining Corporation (“AMC”) owned 88.9% of the Company’s capital stock. The condensed consolidated financial statements presented herein consist of the accounts of Southern Copper Corporation (“Southern Copper”, "SCC" or the “Company”), a Delaware corporation, and its subsidiaries. The Company is an integrated producer of copper and other minerals, and operates mining, smelting and refining facilities in Peru and Mexico. The Company conducts its primary operations in Peru through a registered branch (the "Peruvian Branch" or “Branch” or “SPCC Peru Branch”). The Peruvian Branch is not a corporation separate from the Company. The Company's Mexican operations are conducted through subsidiaries. The Company also conducts exploration activities in Argentina, Chile, Ecuador, Mexico and Peru.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the Company’s financial position as of March 31, 2021 and the results of operations, comprehensive income, cash flows and changes in equity for the three months ended March 31, 2021 and 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year. The December 31, 2020 balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements at December 31, 2020 and notes included in the Company’s 2020 annual report on Form 10-K.

COVID – 19 PANDEMIC

Since the World Health Organization (“WHO”) declared the COVID-19 virus outbreak as a global pandemic, all the countries where the Company operates and conducts exploration activities, as well as the countries where its main customers and suppliers are located, have published health and safety rules and restrictions on individuals and business activities.

As of March 31, 2021, the Company‘s production facilities in Mexico and Peru were working at approximately 98% of their production capacity. The Company has developed a rigorous COVID-19 emergency protocol and the workforce is gradually returning to work at all of our facilities. At March 31, 2021, approximately 95% of the workforce in Mexico, was working on site or at home under strict safety measures; the remaining 5% of the workforce was not working, including all individuals at high risk due to age and/or preexisting medical conditions. At our Peruvian operations, approximately 80% of the workforce was working on site or at home under strict safety measures, while the remaining 20% was not working, including all individuals at high risk due to age and/or preexisting medical conditions.

The Company has restarted exploration activities at all of its locations. Activities resumed in Ecuador in September 2020; at the end of the second quarter of 2020 in Argentina; and in February 2021 in Chile.

The financial reporting process and the information required to prepare the Company’s financial statements suffered no interruption and the financial statements were prepared without restrictions or difficulties.

SCC´s Corporate Crisis Committee as well as its Crisis Committees in Mexico and Peru continue to closely monitor the impact of the pandemic and to analyze and quickly resolve any issues that may arise. As of March 31, 2021, there were no major delays in the supply of materials and services critical for the operations and sales. Also, shipments and collections have registered no known major delays.

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After completing the first stage of its capital programs at Buenavista in Mexico and Toquepala in Peru, the Company currently does not have major capital expenditures commitments (see Note 10 - Commitments and Contingencies). The Company paid the first tranche of its 2010 bonds of $400 million on April 15, 2020. The Company has no other major debt maturity until 2022.

The Company performed a qualitative analysis and as of March 31, 2021 identified no indicators of impairment. As the Company reported in its 2020 Annual report on Form 10-K, the results of its impairment sensitivity analysis showed projected discounted cash flows in excess of the carrying amounts of long lived assets by margins ranging from 1.3 to 4.3 times such carrying amount. This analysis included a stress test using a copper price assumption of $2.00 per pound and a molybdenum price assumption of $4.00 per pound. (Please see, Management´s Discussion and Analysis, Critical Policies and Estimates, Asset Impairments on the 2020 Form 10-K).

NOTE 2 — SHORT-TERM INVESTMENTS:

Short-term investments were as follows (in millions):


	At March 31,			At December 31,
	2021			2020
Trading securities	$	415.4		$	410.2
Weighted average interest rate		0.3	%		0.4	%

Available-for-sale	$	0.5		$	0.6
Weighted average interest rate		0.7	%		0.7	%
Total	$	415.9		$	410.8

Trading securities consist of bonds issued by public companies and are publicly traded. Each financial instrument is independent of the others. The Company has the intention to sell these bonds in the short-term.

Available-for-sale investments consist of securities issued by public companies. Each security is independent of the others and as of March 31, 2021 and December 31, 2020, included corporate bonds and asset and mortgage backed obligations. As of March 31, 2021 and December 31, 2020, gross unrealized gains and losses on available-for-sale securities were not material.

The Company earned interest related to these investments, which was recorded as interest income in the condensed consolidated statement of earnings. Also, the Company redeemed some of these securities and recognized gains (losses) due to changes in fair value, which were recorded as other income (expense) in the condensed consolidated statement of earnings.

The following table summarizes the activity of these investments by category (in millions):


	Three months ended
	March 31,
	2021		2020
Trading:
Interest earned	$	0.4	$	0.7
Unrealized gain (loss) at the end of the period	$	0.1	$	(*)

Available-for-sale:
Interest earned		(*)		(*)
Investment redeemed	$	0.1	$	0.1

(*) Less than $0.1 million.

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NOTE 3 — INVENTORIES:

Inventories were as follows:


	At March 31,		At December 31,
(in millions)	2021		2020
Inventory, current:
Metals at average cost:
Finished goods	$	57.9	$	50.8
Work-in-process		229.5		248.9
Ore stockpiles on leach pads		250.4		298.5
Supplies at average cost		342.9		352.0
Total current inventory	$	880.7	$	950.2
Inventory, long-term:
Ore stockpiles on leach pads	$	1,156.3	$	1,125.0

During the three months ended March 31, 2021 and 2020, total leaching costs capitalized as non-current inventory of ore stockpiles on leach pads amounted to $54.8 million and $50.7 million, respectively. Leaching inventories recognized in cost of sales amounted to $71.6 million and $105.9 million for the three months ended March 31, 2021 and 2020, respectively.

NOTE 4 — INCOME TAXES:

The income tax provision and the effective income tax rate for the first three months of 2021 and 2020 consisted of (in millions):


	2021			2020
Statutory income tax provision	$	427.3		$	207.4
Peruvian royalty		11.6			2.0
Mexican royalty		47.4			8.1
Peruvian special mining tax		21.2			4.2
Total income tax provision	$	507.5		$	221.7

Effective income tax rate		40.1	%		50.8	%

These provisions include income taxes for Peru, Mexico and the United States. The Mexican royalty, the Peruvian royalty and the Peruvian special mining tax are included in the income tax provision. The decrease in the effective income tax rate in 2021, compared to the same period in 2020 was primarily attributable to a movement in exchange gains and losses from the strong depreciation of the Mexican peso against the U.S. dollar in 2020.

Peruvian royalty and special mining tax: The Company has accrued $21.3 million and $9.3 million of royalty charge in the first quarter of 2021 and 2020, respectively, of which $11.6 million and $2.0 million were included in income taxes in 2021 and 2020, respectively.

The Company has accrued $21.2 million and $4.2 million of special mining tax as part of the income tax provision for the first quarter of 2021 and 2020, respectively.

Mexican mining royalty: The Company has accrued $47.4 million and $8.1 million of royalty taxes as part of the income tax provision for the first quarter of 2021 and 2020, respectively.

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Accounting for uncertainty in income taxes: In the first quarter of 2021, there were no changes in the Company’s uncertain tax positions.

NOTE 5 — RELATED PARTY TRANSACTIONS:

The Company has entered into certain transactions in the ordinary course of business with parties that are controlling shareholders or their affiliates. These transactions include the lease of office space, air and railroad transportation, construction services, energy supply, and other products and services related to mining and refining. The Company lends and borrows funds among affiliates for acquisitions and other corporate purposes. These financial transactions bear interest and are subject to review and approval by senior management, as are all related party transactions. Article Nine of the Amended and Restated Certificate of Incorporation of the Company prohibits the Company from engaging in a Material Affiliate Transaction that was not the subject of prior review by a committee of the Board of Directors with at least three members, each of whom is independent, and defines a Material Affiliate Transaction as a transaction or series of related transactions between Grupo Mexico or one of its affiliates (other than the Company or its subsidiaries), on the one hand, and the Company or one of its subsidiaries, on the other hand, that involves consideration of more than $10.0 million in the aggregate. It is the Company’s policy that (i) a Material Affiliate Transaction not be entered into or continued without the review and approval by the Audit Committee or its subcommittee of related party transactions comprised of independent directors,(ii) any potential related party transaction process with aggregate consideration between $8.0 million and $10.0 million be authorized by the General Counsel and Chief Financial Officer of the Company and (iii) that all related party transactions, including any Material Affiliate Transaction, be reported to the Audit Committee of the Board of Directors or to its subcommittee of related party transactions.

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Receivable and payable balances with related parties are shown below (in millions):


	At March 31,		At December 31,
	2021		2020
Related parties receivable current:
Grupo Mexico and affiliates:
Asarco LLC	$	8.0	$	5.3
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates		0.3		0.3
Grupo Mexico		2.7		2.7
Mexico Generadora de Energia S. de R.L. ("MGE")		34.7		14.4
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.		0.2		0.2
Related to the controlling group:
Boutique Bowling de Mexico, S.A. de C.V.		0.2		0.2
Mexico Transportes Aereos, S.A. de C.V. ("Mextransport")		0.2		—
Operadora de Cinemas, S.A. de C.V.		0.2		0.2
	$	46.5	$	23.3

Related parties payable:
Grupo Mexico and affiliates:
Asarco LLC	$	19.6	$	13.9
Eolica El Retiro, S.A.P.I. de C.V.		—		0.3
Ferrocarril Mexicano, S.A. de C.V.		3.5		4.7
Grupo Mexico		—		0.9
Grupo Mexico Servicios		4.7		19.6
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.		0.5		0.7
MGE		62.0		40.8
Mexico Compania Constructora S.A de C.V.		16.1		22.9
Related to the controlling group:
Boutique Bowling de Mexico, S.A. de C.V.		0.4		0.3
Mexico Transportes Aereos, S.A. de C.V. (“Mextransport”)		0.1		0.1
Operadora de Cinemas, S.A. de C.V.		0.2		0.1
	$	107.1	$	104.3

Purchase and sale activity:

Grupo Mexico and affiliates:

The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the first quarter of 2021 and 2020 (in millions):


	2021		2020
Purchase activity
Asarco LLC	$	3.7	$	62.5
Eolica El Retiro, S.A.P.I. de C.V.		0.2		0.1
Ferrocarril Mexicano, S.A. de C.V.		10.9		12.0
Grupo Mexico		—		2.5
Grupo Mexico Servicios		7.1		4.4
MGE		77.7		51.6
Mexico Proyectos y Desarrollos S.A. de C.V. and affiliates		14.4		14.3
Total purchases	$	114.0	$	147.4
Sales activity
Asarco LLC	$	6.9	$	5.9
MGE		37.9		9.8
Total sales	$	44.8	$	15.7

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Grupo Mexico, the parent and the majority indirect stockholder of the Company, and its affiliates provide various services to the Company. These services are primarily related to accounting, legal, tax, financial, treasury, human resources, price risk assessment and hedging, purchasing, procurement and logistics, sales and administrative and other support services. The Company pays Grupo Mexico and Grupo Mexico Servicios, a subsidiary of Grupo Mexico, for these services and expects to continue requiring these services in the future.

In the first quarter of 2021, the Company made donations of $0.5 million to Fundacion Grupo Mexico, A.C., an organization dedicated to promoting the social and economic development of the communities close to the Company’s Mexican operations. In the first quarter of 2020, the Company did not make donations to this organization.

The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano, S.A de C.V. and for construction services provided by Mexico Compania Constructora S.A. de C.V., which are all subsidiaries of Grupo Mexico. Additionally, the Company´s Peruvian and Mexican operations paid fees for engineering services provided by Grupo Mexico Servicios de Ingenieria, S.A. de C.V., a subsidiary of Grupo Mexico.

The Company’s Mexican operations purchased copper concentrates and rod from Asarco LLC and also paid fees for tolling services. Additionally, the Company´s Mexican operations purchased power from MGE. Both companies are subsidiaries of Grupo Mexico.

In 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply some of the Company’s Mexican operations with power through 2032. MGE has two natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts and has been supplying power to the Company since December 2013. Currently, MGE is supplying 2.7% of its power output to third-party energy users, compared to 1% as of March 31, 2020.

In 2014, Mexico Generadora de Energia Eolica, S. de R.L. de C.V, an indirect subsidiary of Grupo Mexico, located in Oaxaca, Mexico, acquired Eolica el Retiro. Eolica el Retiro is a windfarm with 37 wind turbines. This company started operations in January 2014 and began to sell power to Industrial Minera Mexico, S.A. de C.V. and subsidiaries (IMMSA) and other subsidiaries of Grupo Mexico in the third quarter of 2014. Currently, Eolica el Retiro supplies 9.3% of its power output to IMMSA and Mexcobre, compared to 9.6% as of March 31, 2020.

The Company sold copper concentrate as well as sulfuric acid, silver and gold to Asarco LLC. In addition, the Company received rental fees from Grupo Mexico Servicios.

In September 2019, Asarco LLC signed a promissory agreement to pay to the Company´s Mexican operations $62.0 million plus interest no later than October 31, 2021, with quarterly payments of $0.5 million. The annual interest rate of the note was Libor plus 200 basis points, which would be reviewed annually. In November 2020, Asarco repaid this agreement. Related to this agreement, the Company recorded interest income of $0.6 million in the first quarter of 2020.

The Company also received fees for natural gas and services provided to MGE, a subsidiary of Grupo Mexico. In May 2020, MGE signed a promissory note to pay to the Company´s Mexican operations 97.2 million Mexican pesos (approximately $5.1 million) plus interest no later than November 30, 2020. The annual interest rate of the note was 8.28% with monthly payments. MGE repaid this note in December 2020.

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Companies with relationships to the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in the first quarter of 2021 and 2020 (in millions):


	2021		2020
Purchase activity
Boutique Bowling de Mexico S.A. de C.V.	$	0.1	$	0.1
Mextransport		0.4		1.9
Operadora de Cinemas S.A. de C.V.		0.1		0.1
Total purchases	$	0.6	$	2.1

Sales activity
Boutique Bowling de Mexico S.A. de C.V.	$	(*)	$	(*)
Mextransport		0.4		0.4
Operadora de Cinemas S.A. de C.V.		(*)		(*)
Total sales	$	0.4	$	0.4

The Larrea family controls a majority of the capital stock of Grupo Mexico and has extensive interests in other businesses, including transportation, real estate and entertainment. The Company engages in certain transactions in the ordinary course of business with other entities controlled by the Larrea family relating to the lease of office space, air transportation and entertainment.

The Company’s Mexican operations paid fees for entertainment services provided by Boutique Bowling de Mexico, S.A de C.V. and Operadora de Cinemas, S.A. de C.V. Both companies are controlled by the Larrea family.

Mextransport provides aviation services to the Company´s Mexican operations. This is a company controlled by the Larrea family.

In addition, the Company received fees for building rental and maintenance provided to Boutique Bowling de Mexico, S.A. de C.V. and Operadora de Cinemas, S.A. de C.V. The Company´s Mexican operations received fees from Mextransport for reimbursement of maintenance expenses and for rental services.

Equity Investment in Affiliate: The Company has a 44.2% participation in Compania Minera Coimolache S.A. (“Coimolache”), which it accounts for on the equity method. Coimolache owns Tantahuatay, a gold mine located in the northern part of Peru.

In addition, the Company has a 30.0% participation in Apu Coropuna S.R.L. (“Apu Coropuna”), which it accounts for on the equity method. Apu Coropuna is a company that performs exploration activities in the Pucay prospect, located in Arequipa, Peru.

It is anticipated that in the future the Company will enter into similar transactions with these same parties.

In the first quarter of 2021, the Company engaged in no purchase or sales activities with companies that have relationships with SCC executive officers.

NOTE 6 — LEASES:

The Company has operating leases for power generating facilities, vehicles and properties. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Some of the Company’s leases include both lease and non-lease components which are accounted for separately. The Company’s leases have remaining lease terms of two years to 12 years, and do not include options to extend the leases. The Company’s lease agreements do not contain options to purchase the leased assets or to terminate the leases before the expiration date. In addition, the Company’s lease contracts have no material residual value guarantees or material restrictive covenants. As none of the

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Company’s leases stipulates an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The weighted average remaining lease term for the Company’s leases is 9 years, and the weighted average discount rate for these leases is 3.64%.

The operating lease expense recognized in the first quarter of 2021 and 2020 was classified as follows (in millions):


Classification	2021		2020
Cost of sales (exclusive of depreciation, amortization and depletion)	$	28.6	$	28.9
Selling, general and administrative		(*)		0.1
Exploration		(*)		(*)
Total lease expense	$	28.6	$	29.0

The Company’s short-term lease costs for the first quarter of 2021 were $0.1 million.

Maturities of lease liabilities are as follows:


	Lease liabilities
Year	(in millions)
2021	$	85.9
2022		113.7
2023		112.2
2024		104.8
2025		103.7
After 2025		723.0
Total lease payments	$	1,243.3
Less: interest on lease liabilities		(281.5)
Present value of lease payments	$	961.8

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NOTE 7 — ASSET RETIREMENT OBLIGATION:

Peruvian operations:

The Company maintains an asset retirement obligation for its mining properties in Peru, as required by the Peruvian Mine Closure Law. In accordance with the requirements of this law, the Company’s closure plans were approved by the Peruvian Ministry of Energy and Mines (“MINEM”). As part of the closure plans, the Company is required to provide annual guarantees over the estimated life of the mines, based on a present value approach, and to furnish the funds for the asset retirement obligation. This law requires a review of closing plans every five years.

On June 24, 2019, MINEM approved a change to the guarantees required for the mining closure plans. The new regulation specifies that annual guarantees can be secured with real estate up to a maximum of 50% of the total required and the remaining amount can be covered by credit instruments. Currently, the Company has pledged the value of its Lima office complex to back 50% of the guarantee and has a stand-by letter of credit for the other 50% as a security for this obligation.Through January 2021, the Company has provided total guarantees of $56.5 million.

The closure cost recognized for this liability includes the cost, as outlined in its closure plans, of dismantling the Toquepala and Cuajone concentrators, the Ilo smelter and refinery, and the shops and auxiliary facilities at the three units. In March 2016, MINEM approved the Mining Closure Plan for the Toquepala expansion project and the revised closure plans for the Cuajone mine and the Ilo facilities were approved in January and October 2019 respectively. Based on these new estimates, the Company increased the asset retirement obligation by $28.1 million in 2019. The closure plan for the Tia Maria project was approved in February 2017. However, the Company has not recorded a retirement obligation for the Tia Maria project because work on the project is still on hold. The Company believes that under these circumstances, the recording of a retirement obligation is not appropriate.

Mexican operations:

The Company has recognized an estimated asset retirement obligation for its mining properties in Mexico as part of its environmental commitment. Even though there is currently no enacted law, statute, ordinance, written or oral contract requiring the Company to carry out mine closure and environmental remediation activities, the Company believes that a constructive obligation presently exists based on the remediation requirements caused by the closure of any facility. The overall cost recognized for mining closure in Mexico includes the estimated costs of dismantling concentrators, smelter and refinery plants, shops and other facilities.

During 2020, the Company made a change in the estimate for the asset retirement obligation for its Mexican operations, mainly due to a detailed review of the closing activities required for each facility. The effect of this change was an increase in the asset retirement obligation of $269.3 million, which was recorded in December 2020.

The following table summarizes the asset retirement obligation activity for the first quarter of 2021 and 2020 (in millions):


	2021		2020
Balance as of January 1	$	545.0	$	262.3
Changes in estimates		—		—
Closure payments		(0.2)		(0.6)
Accretion expense		6.1		3.8
Balance as of March 31,	$	550.9	$	265.5

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NOTE 8 — BENEFIT PLANS:

Post retirement defined benefit plans:

The Company has two noncontributory defined benefit pension plans covering former salaried employees in the United States and certain former expatriate employees in Peru. Effective October 31, 2000, the Board of Directors amended the qualified pension plan to suspend the accrual of benefits.

In addition, the Company’s Mexican subsidiaries have a defined contribution pension plan for salaried employees and a non-contributory defined benefit pension plan for union employees.

The components of net periodic benefit costs for the first quarter of 2021 and 2020 are as follows (in millions):


(in millions)	2021		2020
Service cost	$	0.4	$	0.4
Interest cost		0.3		0.5
Expected return on plan assets		(0.8)		(0.7)
Amortization of prior service cost / (credit)		(*)		(*)
Amortization of net loss/(gain)		0.1		(*)
Net periodic benefit cost	$	—	$	0.2

(*) amount is lower than $0.1 million

Post-retirement health care plans:

United States: The Company adopted a post-retirement health care plan for retired salaried employees eligible for Medicare in 1996. The Company manages the plan and is currently providing health benefits to retirees. The plan is accounted for in accordance with ASC 715 “Compensation retirement benefits”.

In Mexico, health services are provided by the Mexican Social Security Institute.

The components of net periodic benefit cost for the first quarter of 2021 and 2020 are as follows (in millions):


(in millions)	2021		2020
Interest cost	$	0.4	$	0.3
Amortization of net loss (gain)		(*)		(*)
Amortization of prior service cost/ (credit)		0.1		(*)
Net periodic benefit cost	$	0.5	$	0.3

(*) amount is lower than $0.1 million

NOTE 9 — COMMITMENTS AND CONTINGENCIES:

Environmental matters:

The Company has instituted extensive environmental conservation programs at its mining facilities in Peru and Mexico. The Company’s environmental programs include, among others, water recovery systems to conserve water and minimize the impact on nearby streams, reforestation programs to stabilize the surface of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions.

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Environmental capital investments in the first quarter of 2021 and 2020 were as follows (in millions):


	2021		2020
Peruvian operations	$	0.1	$	2.5
Mexican operations		5.4		9.9
	$	5.5	$	12.4

Peruvian operations: The Company’s operations are subject to applicable Peruvian environmental laws and regulations. The Peruvian government, through the Ministry of Environment (“MINAM”) conducts annual audits of the Company’s Peruvian mining and metallurgical operations. Through these environmental audits, matters related to environmental obligations, compliance with legal requirements, atmospheric emissions, effluent monitoring and waste management are reviewed. The Company believes that it is in material compliance with applicable Peruvian environmental laws and regulations. Peruvian law requires that companies in the mining industry provide assurances for future mine closure and remediation. In accordance with the requirements of this law, the Company’s closure plans were approved by MINEM.

Air Quality Standards (“AQS”): In June 2017, MINAM enacted a supreme decree that defined new AQS for daily sulfur dioxide in the air (250 µg/m3). As of March 31, 2021, the Company maintains a lower daily average level of µg/m3 (micrograms per cubic meter) of SO2, than those required by the AQS.

Soil Environmental Quality Standards (“SQS”): In 2013, the Peruvian government enacted Soil Quality Standards. In accordance with the regulatory requirements of the law, the Company prepared Soil Descontamination Plans (“SDP”) for environmentally impacted sites in each of its operation units (Toquepala, Cuajone and Ilo) with the assistance of consulting companies. The cost of these SDPs are not material, either individually or in aggregated form, for the financial statements of the Company.

Climate change: On April 17, 2018, the Peruvian government enacted Law N. 30754, establishing a Climate Change

Framework. Through this law, promoting public and private investments in climate change management is declared to be of national interest. The law proposes to create an institutional framework to address climate change in Peru, outlining new measures, particularly with respect to climate change mitigation. It includes, for example, provisions dealing with: increasing carbon capture and use of carbon sinks; afforestation and reforestation practices; land use changes; and sustainable systems of transportation, solid waste management, and energy systems. It is the first Latin American climate change framework law to incorporate obligations from the Paris Agreement. Regulations to this law were enacted by Supreme Decree 013-2019 published on December 31, 2019 and are applicable to all Peruvian institutions and agencies. It is expected that further Peruvian regulations will be applicable to non-governmental entities. The Company anticipates initiating a multi-year process to adopt applicable reporting recommendations of the Task-Force on Climate Related Financial Disclosures (TCFD) once new Peruvian climate change regulations applicable to non-governmental entities are implemented. The Company is committed to the environment and to managing climate-related impacts. The Company’s focus is to seek continuous improvement in the responsible use of natural resources while complying with strict applicable legal standards for prevention, mitigation, control and remediation of environmental impacts. Implementing continuous improvement in the Company’s processes improves efficiency in the use and consumption of energy, water, and other natural resources.

Mexican operations: The Company’s operations are subject to applicable Mexican federal, state and municipal environmental laws, to Mexican official standards, and to regulations for the protection of the environment, including regulations relating to water supply, water quality, air quality, noise levels and hazardous and solid waste.

The principal legislation applicable to the Company’s Mexican operations is the Federal General Law of Ecological Balance and Environmental Protection (the “General Law”), which is enforced by the Federal Bureau of Environmental Protection (“PROFEPA”). PROFEPA monitors compliance with environmental legislation and enforces Mexican environmental laws, regulations and official standards. It may also initiate administrative proceedings against companies that violate environmental laws, which in the most extreme cases may result in the temporary or permanent shutdown of non-complying facilities, the revocation of operating licenses and/or other sanctions or fines.

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In 2011, the General Law was amended to provide an individual or entity the ability to contest administrative acts, including environmental authorizations, permits or concessions granted, without the need to demonstrate the actual existence of harm to the environment as long as it can be argued that the harm may be caused. In addition, in 2011, amendments to the Civil Federal Procedures Code (“CFPC”) were enacted, which established three categories of collective actions under which a group of 30 or more individuals can be considered sufficient to prove a “legitimate interest” to file civil actions for injuries derived from alleged violations of environmental, consumer protection, financial services and economic competition laws and to seek restitution or economic compensation for the alleged injuries or the suspension of the activities which allegedly generated the injuries in question. The amendments to the CFPC may result in more litigation, with plaintiffs seeking remedies, including suspension of the activities alleged to cause harm.

In 2013, the Environmental Liability Federal Law was enacted. The law establishes general guidelines for actions to be considered to likely cause environmental harm. If a possible determination regarding harm occurs, environmental clean-up and remedial actions sufficient to restore environment to a pre-existing condition should be taken. Under this law, if restoration is not possible, compensation measures should be provided. Criminal penalties and monetary fines can be imposed under this law.

Guaymas sulfuric acid spill:

On July 9, 2019, there was an incident at the Company´s Marine Terminal in Guaymas, Sonora, that caused the discharge of approximately three cubic meters of sulfuric acid into the sea in the industrial port area.

The Guaymas bay has an estimated water volume of 340 million cubic meters. The spill, upon entering in contact with the sea’s alkaline conditions, led to quick dilution of the discharge and the sulfuric acid was naturally and immediately neutralized. As a result, the discharge was considered harmless; the report from the Ministry of Navy found that neither the flora nor fauna of the port area were affected.

On July 10, 2019, PROFEPA made a first inspection of the area, concluding that the Company executed all the appropiate procedures in order to contain the discharge, and no reference was made to the existence of negative impacts on the environment resulting from the incident.

On Friday, July 19, 2019, PROFEPA revisited the facilities to carry out a second inspection, declaring a partial temporary shutdown that affected only the storage process and transportation of sulfuric acid at the terminal, arguing the absence of an authorization of environmental impact. It is important to note that these facilities have been in operation since 1979, prior to the 1988 Mexican General Law of Ecological Balance and the Protection of the Environment. Companies that were operating before the aforementioned law are exempt from the permit requirement. In addition, in 2009, PROFEPA awarded a certification of “Clean Industry and Environmental Quality” to the facility which was subsequently renewed four times (for a two-year period each time).

The Company is not aware of the reasons or causes for this partial and temporary closure, but will continue working with the environmental authorities to provide certainty that the operation is in strict compliance with environmental regulations. The Company expects the environmental authorities to suspend the partial temporary shutdown, once they resolve their concerns. Currently, the Company does not expect any impact on its operations. As of March 31, 2021, the matter is pending resolution.

Climate change:

Grupo Mexico, the indirect parent of SCC has issued sustainability reports under the Global Reporting Initiative (GRI) for more than 10 years. Grupo Mexico also participates in different Mexican and international reporting programs such as the Greenhouse Gases (GHG) Mexico Program and the Carbon Disclosure Program (CDP). In 2013, GHG and CDP have signed a memorandum of understanding to work on aligning their reporting frameworks. Grupo Mexico’s 2018 CDP questionnaire included responses to the Task Force on Climate-Related Disclosure or TCFD concerns. In compliance with the 2012 Mexican Climate Change Law, Grupo Mexico’s GHG emissions are reported and verified independently. On October 18, 2017, Grupo Mexico was selected to join the S&P Sustainability Indices MILA Pacific

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Alliance (DJSI MILA). In 2017, this regional sustainability index included 42 leading companies in sustainability from the countries that form part of the Pacific Alliance: Mexico, Chile, Colombia and Peru.

The Company believes that all of its facilities in Peru and Mexico are in material compliance with applicable environmental, mining and other applicable laws and regulations. The Company also believes that continued compliance with environmental laws of Mexico and Peru will have no material adverse effects on the Company’s business, properties, or operating results.

Litigation matters:

Peruvian operations

The Tia Maria Mining Project

There are five lawsuits filed against the Peruvian Branch of the Company related to the Tia Maria project. The lawsuits seek (i) to declare null and void the resolution that approved the Environmental Impact Assessment of the project; (ii) the cancellation of the project and the withdrawal of mining activities in the area; (iii) to declare null and void the mining concession application for the Tia Maria project; and (iv) to declare null and void the resolution that approved the construction license. The lawsuits were filed by Messrs. Jorge Isaac del Carpio Lazo (filed May 22, 2015), Ernesto Mendoza Padilla (filed May 26, 2015), Juan Alberto Guillen Lopez (filed June 18, 2015), Junta de Usuarios del Valle del Tambo (filed April 30, 2015), and Gobierno Regional de Arequipa (filed December 16, 2019).

The del Carpio Lazio case was rejected by the court of first instance on November 14, 2016. The plaintiff filed an appeal before the Superior Court on January 3, 2017. On January 9, 2018, the lawyers of both parties presented their respective positions before the Appellate Court. On March 8, 2018, the Appellate Court issued its final decision, which upheld the first instance ruling. On April 27, 2018, the plaintiff filed an extraordinary appeal before the Supreme Court. As of March 31, 2021, the case remains pending resolution.

The Mendoza Padilla case was initially rejected by the lower court on July 8, 2015. This ruling was confirmed by the Superior Court on June 14, 2016. On July 12, 2016, the case was appealed before the Constitutional Court. On November 20, 2018, the Constitutional Court reversed the previous decisions and remanded the case to the lower court for further action. In the third quarter of 2020, the Company was notified that the complaint had been reinstated. The Company answered the complaint on September 15, 2020. On December 2, 2020, the lower court issued a resolution, considering the complaint answered. As of March 31, 2021, the case remains pending resolution.

The Guillen Lopez case is currently before the lower court. On July 19, 2019, the oral arguments took place. On January 7, 2020, the Judge decided to suspend the proceeding until the del Carpio Lazio case is concluded. Therefore, as of March 31, 2021, the case remains pending resolution.

The Junta de Usuarios del Valle del Tambo case is currently before the lower court. On May 2016, the Company was included in the process, after the Ministry of Energy and Mines filed a civil complaint. On March 6, 2019, the Company was formally notified of the lawsuit and answered the complaint on March 20, 2019. On July 8, 2019, the Company requested the suspension of the proceeding until the del Carpio Lazio case is concluded. As of March 31, 2021, the case remains pending resolution.

The Gobierno Regional de Arequipa case is currently before the lower court and the Company answered the complaint on September 15, 2020. As of March 31, 2021, the case remains pending resolution.

The Company asserts that these lawsuits are without merit and is vigorously defending against them. The potential contingency amount for these cases cannot be reasonably estimated by management at this time.

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Special Regional Pasto Grande Project (“Pasto Grande Project”)

In 2012, the Pasto Grande Project, an entity of the Regional Government of Moquegua, filed a lawsuit against SCC’s Peruvian Branch alleging property rights over a certain area used by the Peruvian Branch and seeking the demolition of the tailings dam where SCC’s Peruvian Branch has deposited its tailings from the Toquepala and Cuajone operations since 1995. The Peruvian Branch has had title to use the area in question since 1960 and has, since 1995, constructed and operated the tailings dams with proper governmental authorization. Upon a motion filed by the Peruvian Branch, the lower court has included MINEM as a defendant in this lawsuit. MINEM has answered the complaint and denied the validity of the claim. As March 31, 2021, the case was pending resolution without further developments. SCC’s Peruvian Branch asserts that the lawsuit is without merit and is vigorously defending against it. The amount of this contingency cannot be reasonably estimated by management at this time.

Mexican operations

The Accidental Spill at Buenavista Mine of 2014

In relation to the 2014 accidental spill of copper sulfate solution that occurred at a leaching pond in the Buenavista mine, the following legal procedures are pending against the Company:

On August 19, 2014, PROFEPA, as part of the administrative proceeding initiated after the spill, announced the filing of a criminal complaint against Buenavista del Cobre S.A. de C.V. (“BVC”), a subsidiary of the Company, in order to determine those responsible for environmental damages. During the second quarter of 2018, the criminal complaint was dismissed. This decision was appealed and was pending resolution as of March 31, 2021.

Through the first half of 2015, six collective action lawsuits were filed in federal courts in Mexico City and Sonora against two subsidiaries of the Company seeking economic compensation, clean up and remedial activities in order to restore the environment to its pre-existing conditions. Three of the collective action lawsuits have been dismissed by the court. As of March 31, 2021, three lawsuits were in process: two were filed by Acciones Colectivas de Sinaloa, A.C. and one, by Defensa Colectiva, A.C., requesting precautionary measures about construction of facilities for monitoring public health services and prohibiting the closure of the Rio Sonora Trust.

Similarly, in 2015, eight civil action lawsuits were filed against BVC in the state courts of Sonora seeking damages for alleged injuries and for moral damages as a consequence of the spill. The plaintiffs in the state court lawsuits are: Jose Vicente Arriola Nunez et al; Santana Ruiz Molina et al; Andres Nogales Romero et al; Teodoro Javier Robles et al; Gildardo Vasquez Carvajal et al; Rafael Noriega Souffle et al; Grupo Banamichi Unido de Sonora El Dorado, S.C. de R.L. de C.V; and Marcelino Mercado Cruz. In 2016, three additional civil action lawsuits, claiming similar damages, were filed by Juan Melquicedec Lebaron; Blanca Lidia Valenzuela Rivera et al and Ramona Franco Quijada et al. In 2017, BVC was served with thirty-three additional civil action lawsuits, claiming similar damages. The lawsuits were filed by Francisco Javier Molina Peralta et al; Anacleto Cohen Machini et al; Francisco Rafael Alvarez Ruiz et al; Jose Alberto Martinez Bracamonte et al; Gloria del Carmen Ramirez Duarte et al; Flor Margarita Sabori et al; Blanca Esthela Ruiz Toledo et al; Julio Alfonso Corral Domínguez et al; Maria Eduwiges Bracamonte Villa et al; Francisca Marquez Dominguez et al; Jose Juan Romo Bravo et al; Jose Alfredo Garcia Leyva et al; Gloria Irma Dominguez Perez et al; Maria del Refugio Romero et al; Miguel Rivas Medina et al; Yolanda Valenzuela Garrobo et al; Maria Elena Garcia Leyva et al; Manuel Alfonso Ortiz Valenzuela et al; Francisco Alberto Arvayo Romero et al; Maria del Carmen Villanueva Lopez et al; Manuel Martin Garcia Salazar; Miguel Garcia Arguelles et al; Dora Elena Rodriguez Ochoa et al; Honora Eduwiges Ortiz Rodriguez et al; Francisco Jose Martinez Lopez et al; Maria Eduwiges Lopez Bustamante; Rodolfo Barron Villa et al, Jose Carlos Martinez Fernandez et al, Maria de los Angeles Fabela et al; Rafaela Edith Haro et al; Luz Mercedes Cruz et al; Juan Pedro Montaño et al; and Juana Irma Alday Villa. During the first quarter of 2018, BVC was served with another civil action lawsuit, claiming similar damages. The lawsuit was filed by Alma Angelina Del Cid Rivera et al. In the last quarter of 2018, BVC was served with other three civil action lawsuits, claiming similar damages. These lawsuits were filed by Los Corrales de la Estancia, S.C. de R.L.; Jose Antonio Navarro; Jesus Maria Peña Molina, et al; these actions were dismissed by the court, because they have expired. As of March 31, 2021, forty-five cases were pending resolution.

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In 2015, four constitutional lawsuits (juicios de amparo) were filed before Federal Courts against various authorities and against a subsidiary of the Company, arguing; (i) the alleged lack of a waste management program approved by SEMARNAT; (ii) the alleged lack of a remediation plan approved by SEMARNAT with regard to the August 2014 spill; (iii) the alleged lack of community approval regarding the environmental impact authorizations granted by SEMARNAT to one subsidiary of the Company; and (iv) the alleged inactivity of the authorities with regard to the spill in August 2014. The plaintiffs of these lawsuits are: Francisca Garcia Enriquez, et al filed two lawsuits, Francisco Ramon Miranda, et al and Jesus David Lopez Peralta et al. In the third quarter of 2016, four additional constitutional lawsuits, claiming similar damages were filed by Mario Alberto Salcido et al; Maria Elena Heredia Bustamante et al; Martin Eligio Ortiz Gamez et al; and Maria de los Angeles Enriquez Bacame et al. In the third quarter of 2017, BVC was served with another constitutional lawsuit filed by Francisca García Enriquez et al. In 2018, BVC was served with two additional constitutional lawsuits that were filed against SEMARNAT by Norberto Bustamante et al. Regarding the constitutional lawsuit filed by Maria Elena Heredia Bustamante et al; in which it was claimed the lack of community approval regarding the authorization granted by SEMARNAT to build the new BVC tailings dam, on September 5, 2018, the Supreme Court of Justice issued a resolution establishing that such authorization was granted to BVC in compliance with the applicable legislation. However, SEMARNAT must carry out a public meeting to inform the community of the technical aspects required to build the dam, potential impacts and prevention measures, with no material effects to BVC’s operations. SEMARNAT has carried out the consultation ordered by the Supreme Court. As a result, has informed the corresponding Judge about its compliance with the resolution, in which BVC was imposed additional measures of environmental impact prevention, such as: (i) the building of at least three monitoring wells downstream from the curtain of the contingency dam in a period of six months; (ii) monitoring of the groundwater level and water quality every six months; (iii) carrying out rain collection work in order to restore water to the Sonora River basin, for which six months are granted to present the execution program; (iv) determine the location of wildlife conservation and protection areas and define the need to establish biological corridors; (v) obtain photographic or videographic evidence every six months; (vi) submitting to SEMARNAT two years before the closure and abandonment of the site, or earlier if necessary, the closure program that includes the cleaning and restoration of the soil including Mexican regulation NOM-141; (vii) include the measures in the Environmental Monitoring Program according to the environmental components impacted; and (viii) hiring an external environmental consultant to validate compliance with the current and new conditions that are imposed. The foregoing does not impact BVC’s operations. Likewise, it is noted that the lawsuits filed by Maria de los Angeles Enriquez Bacame and Norberto Bustamante have been dismissed and closed without prejudice to the Company. As of March 31, 2021, the remaining cases were still pending resolution.

It is currently not possible to determine the extent of the damages sought in these state and federal lawsuits but the Company believes that these lawsuits are without merit. Accordingly, the Company is vigorously defending against them. Nevertheless, the Company believes that none of the legal proceedings resulting from the spill, individually or in the aggregate, would have a material effect on its financial position or results of operations.

Corporate operations

Carla Lacey, on behalf of herself and all other similarly situated stockholders of Southern Copper Corporation, and derivatively on behalf of Southern Copper Corporation

In April 2019, a derivative lawsuit was filed against the Company, certain current and former Directors, and Grupo Mexico in the Delaware Court of Chancery relating to certain construction contracts, contracts for the purchase and sale of minerals, and transportation contracts entered into between the Company’s subsidiaries and subsidiaries of Grupo Mexico.

In October 2019, the plaintiff amended the complaint to include claims related to certain administrative services contracts between the Company’s subsidiaries and Grupo Mexico. The amended complaint alleges, among other things, that the construction contracts, the mineral contracts, the transportation contracts, and the administrative services contracts were unfair as a result of breaches of fiduciary duties and the Company’s charter. The amended complaint also added Americas Mining Corporation (“AMC”) as a defendant, alleging that AMC breached its fiduciary duties as a controlling stockholder of the Company. The amended complaint seeks, among other things, unspecified monetary damages. In January 2020, the Company, the current and former Directors, and Grupo Mexico responded to the complaint by filing motions to dismiss. The Plaintiff filed a brief in response to the motions on March 13, 2020. On July

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16, 2020, the Court denied the motions to dismiss the breach of fiduciary duty claims against the Directors. On October 6, 2020, the Court dismissed the Plaintiff’s claims against Grupo Mexico for lack of personal jurisdiction. On February 11, 2021, the Court granted the Directors’ motion to dismiss plaintiff’s breach of contract claim. The Court also granted AMC’s motion to dismiss all claims against AMC other than those related to the mineral contracts.

As of March 31, 2021, because the Company has not reached a conclusion as to whether an unfavorable outcome is either probable or remote, the Company expresses no opinion as to the likelihood of an unfavorable outcome or the amount or range of any possible loss to the Company.

Labor matters:

Peruvian operations: 65.5% of the Company’s 4,724 Peruvian employees were unionized as of March 31, 2021. Currently, there are six separate unions, one large union and five small unions. In June 2018, the Company signed a three-year collective bargaining agreement with one of the smaller unions. This agreement includes, among other things, annual salary increases of 5% for each year starting September 2018, and a signing bonus of S/45,000 (approximately $13,600) which was recorded as a labor expense. In August 2018, the Company signed a three-year collective bargaining agreement with three additional unions. This agreement includes, among other things, annual salary increases of 5% for each year starting December 2018, and a signing bonus of S/45,000 (approximately $13,600), which was recorded as labor expense. In March 2019, the Company resolved pending issues by means of an arbitration with one additional union. The arbitral award included annual salary increases of 5% for each year starting September 2018, and a signing bonus of S/45,000 (approximately $13,600), which was recorded as a labor expense in the first quarter of 2019.

In May 2019, an arbitration resolved pending issues with the remaining union. The arbitral award included a salary increase of 5.5% beginning in September 2018 and a bonus of S/16,000 (approximately $4,800) for the one-year agreement, which was recorded as labor expense in the second quarter of 2019. In November 2019, the Company signed a collective bargaining agreement for three years with the same union. This agreement included, among other things, a salary increase of 5% for each year starting in September 2019 and a bonus of S/45,000 (approximately $13,300), which was recorded as labor expenses in the fourth quarter of 2019.

Mexican operations: In recent years, the Mexican operations have experienced a positive improvement in their labor environment, as workers opted to change their affiliation from the Sindicato Nacional de Trabajadores Mineros, Metalurgicos y Similares de la Republica Mexicana (the “National Mining Union”) to other less politicized unions.

The workers of the San Martin mine began a strike in July 2007. On February 28, 2018, the striking workers of the San Martín mine of IMMSA held an election to vote on the union that would hold the collective bargaining agreement at the San Martín mine. The Federacion Nacional de Sindicatos Independientes (the National Federation of Independent Unions) won the vote by a majority. Nevertheless, the vote was challenged by the National Mining Union. On June 26, 2018, the Federal Mediation and Arbitration Board issued a ruling recognizing the election results. Due to the agreement between workers and the Company to end the protracted strike, on August 22, 2018, the Federal Mediation and Arbitration Board authorized the restart of operations of the San Martín mine. Such authorization was challenged by the National Mining Union. On April 4, 2019, the Federal Mediation and Arbitration Board recognized, once again, the election results from February 28, 2018, by which the National Federation of Independent Unions won by a majority. In the last quarter of 2019, a Federal Court issued a resolution that established that the Labor Court should analyze the list of workers with the right to vote in the union election. The Company and the National Federation of Independent Unions challenged such determination before the Supreme Court of Justice and the case was still pending resolution as of March 31, 2020. As of March 2021, the Company has almost completed the rehabilitation plan to restore operations at the San Martin mine with a total expense of approximately $87.8 million and has reached full operating capacity.

In the case of the Taxco mine, its workers have been on strike since July 2007. After several legal procedures, in August 2015, the Supreme Court decided to assert jurisdiction over the case and to rule on it directly. As of March 31, 2021, the case was pending resolution without further developments.

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It is expected that operations at the Taxco mine will remain suspended until the labor issues are resolved. In view of the lengthy strike, the Company has reviewed the carrying value of the Taxco mine to ascertain whether impairment exists. The Company concluded that there is a non-material impairment of the assets located at this mine.

In 2020, a small group of workers at the Charcas mine claimed an additional workers’ participation payment and a minor incident was reported. This claim lacked legal basis given that the Company had already completely fulfilled said obligation with the workers in question. Consequently, the Company took legal action and through conciliation and mediation with labor authorities, the incident concluded with no further repercussions for the Company.

Other legal matters:

The Company is involved in various other legal proceedings incidental to its operations, but the Company does not believe that decisions adverse to it in any such proceedings, individually or in the aggregate, would have a material effect on its financial position or results of operations.

Other commitments:

Peruvian Operations

Tia Maria:

On August 1, 2014, the Company received final approval for Tia Maria´s Environmental Impact Assessment (“EIA”). On July 8, 2019, the Company received the construction permit for this 120,000 ton annual SX-EW copper greenfield project with a total capital budget of $1,400 million. This permit was obtained after completing an exhaustive review process, complying with all established regulatory requirements and addressing all observations raised.

On July 15, 2019, anti-mining groups staged a violent demonstration affecting economic as well as other activities in the Islay province. These actions were followed by the filing of three complaints, sponsored by groups opposing the Tia Maria project, with the Mining Council, which is the Peruvian administrative authority responsible for ruling on these complaints. The Mining Council temporarily suspended the construction permit on August 8, 2019. On October 7, 2019, as part of the process, the Mining Council conducted a hearing to hear the complaints and the Company´s position. On October 30, 2019, the Mining Council of the Peruvian Ministry of Energy and Mines ratified the construction permit for the Tia Maria project.

The Company has been working to promote the welfare of the Islay province population. As part of these efforts, the Company has implemented social programs in education, healthcare and productive development to improve the quality-of-life in the region. The Company also has promoted agricultural and livestock activities in the Tambo Valley and supported growth in manufacturing, fishing and tourism in Islay.

During the construction and operation phase, the Company will make it a priority to hire local labor to fill the 9,000 jobs (3,600 direct and 5,400 indirect) that the Company expects to generate during Tia Maria’s construction phase. When operating, the Company expects Tia Maria to directly employ 600 workers and indirectly provide jobs for another 4,200. Additionally, from day one of its operations, the Company will generate significant contributions to revenues in the Arequipa region via royalties and taxes.

Tia Maria´s project budget is approximately $1.4 billion, of which $338.9 million has been invested through March 31, 2021. This project will use state-of-the-art SX-EW technology with the highest international environmental standards. SX-EW facilities are the most environmentally friendly in the industry as they do not require a smelting process and therefore, do not release any emissions into the atmosphere.

Michiquillay:

In June 2018, the Company signed a contract for the acquisition of the Michiquillay copper project in Cajamarca, Peru, at a purchase price of $400 million. Michiquillay is a world class mining project with estimated mineralized material of

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1,150 million tons and a copper grade of 0.63%. It is expected to produce 225,000 tons of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years.

The Company paid $12.5 million at the signing of the contract. The balance of $387.5 million will be paid if the Company decides to develop the project, which is not a present obligation.

Corporate Social Responsibility:

The Company has a corporate social responsibility policy to maintain and promote the continuity of its mining operations and obtain the best results. The main objective of this policy is to integrate the Company´s operations with local communities in the areas of influence of its operations by creating permanent positive relationships to develop optimum social conditions and promote sustainable development in the area. Accordingly, the Company has made the following commitments:

Tacna Region: In connection with the Toquepala concentrator expansion, the Company has committed to fund various social and infrastructure improvement projects in Toquepala’s neighboring communities. The total amount committed for these purposes is S/445.0 million (approximately $118.4 million).

As the Toquepala expansion project has been completed, the Company considers that these commitments constitute present obligations of the Company and consequently has recorded a liability of $39.5 million in its condensed consolidated financial statements as of March 31, 2021.

In addition, the Company has committed S/69.7 million (approximately $18.5 million) for the construction of a high-performance school in the Tacna region under the “social investment for taxes” (obras por impuestos) program, which allows the Company to use these amounts as an advance payment of taxes.

Moquegua Region: In the Moquegua region, the Company participates in a “development roundtable” with local municipal authorities and community representatives to discuss the social needs and the way the Company could contribute to sustainable development in the region. Currently, the roundtable is discussing the creation of a Moquegua Region Development Fund for which the Company has offered a contribution of S/1,000 million (approximately $266.1 million). While final funding is not yet settled, the Company has committed to contribute S/108.4 million (approximately $28.8 million) as an advance, which is being utilized to fund an educational project. In addition, there is a commitment to finance the construction of a residual water treatment plant in Ilo for S/78.0 million (approximately $20.8 million).

In addition, the Company has committed S/86.9 million (approximately $23.1 million) for the construction of two infrastructure projects in the Moquegua region under the “social investment for taxes” (obras por impuestos) program, which allows the Company to use these amounts as an advance payment of taxes.

Power purchase agreements:

●	Electroperu S.A.: In June 2014, the Company entered into a power purchase agreement for 120 megawatts (“MW”) with the state power company Electroperu S.A., under which Electroperu S.A. began supplying energy for the Peruvian operations for twenty years starting on April 17, 2017.

●

Kallpa Generacion S.A. (“Kallpa”): In July 2014, the Company entered into a power purchase agreement for 120MW with Kallpa, an independent Israeli owned power company, under which Kallpa will supply energy for the Peruvian operations for ten years starting on April 17, 2017 and ending on April 30, 2027. In May 2016, the Company signed an additional power purchase agreement for a maximum of 80MW with Kallpa, under which Kallpa began supplying energy for the Peruvian operations related to the Toquepala Expansion and other minor projects starting on May 1, 2017 and ending on October 31, 2029.

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Mexican operations

Power purchase agreements:

●	MGE: In 2012, the Company signed a power purchase agreement with MGE, an indirect subsidiary of Grupo Mexico, to supply power to some of the Company’s Mexican operations through 2032. For further information, please see Note 5 “Related party transactions”.

●

Eolica el Retiro, S.A.P.I. de C.V.: In 2013, the Company signed a power purchase agreement with Eolica el Retiro, S.A.P.I. de C.V. a windfarm energy producer that is an indirect subsidiary of Grupo Mexico, to supply power to some of the Company´s Mexican operations. For further information, please see Note 5 “Related party transactions”.

●

Parque Eolico de Fenicias, S. de R.L. de C.V.: On February 20, 2020, the Company signed a power purchase agreement with Parque Eolico de Fenicias, S. de R.L. de C.V., and indirect subsidiary of Grupo Mexico, to supply 611,400 MWh of power per year to some of the Company´s Mexican operations for 20 years. This agreement will start in July 2021.

Corporate operations

Commitment for capital projects:

As of March 31, 2021, the Company has committed approximately $322.7 million to the development of its capital investment projects at its operations.

Tax contingency matters:

Tax contingencies are provided for under ASC 740-10-50-15 Uncertain tax position (see Note 4 “Income taxes”).

NOTE 10 — STOCKHOLDERS’EQUITY:

Treasury Stock:

Activity in treasury stock in the three-month period ended March 31, 2021 and 2020 is as follows (in millions):


	2021		2020
Southern Copper common shares
Balance as of January 1,	$	2,767.5	$	2,767.9
Used for corporate purposes		—		—
Balance as of March 31,		2,767.5		2,767.9

Parent Company (Grupo Mexico) common shares
Balance as of January 1,		296.0		281.0
Other activity, including dividend, interest and foreign currency transaction effect		(2.3)		(14.7)
Balance as of March 31,		293.7		266.3
Treasury stock balance as of March 31,	$	3,061.2	$	3,034.2

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Southern Copper Common Shares:

At March 31, 2021 and at December 31, 2020, there were in treasury 111,522,817 shares of SCC’s common stock.

SCC share repurchase program:

In 2008, the Company’s Board of Directors (“BOD”) authorized a $500 million share repurchase program that has since been increased by the BOD and is currently authorized to $3 billion. Pursuant to this program, the Company has purchased 119.5 million shares of common stock at a cost of $2.9 billion. These shares are available for general corporate purposes. The Company may purchase additional shares of its common stock from time to time, based on market conditions and other factors. This repurchase program has no expiration date and may be modified or discontinued at any time.

The NYSE closing price of SCC common shares as of March 31, 2021 was $67.87 and the maximum number of shares that the Company could purchase at that price is 1.2 million shares.

As a result of the repurchase of shares of SCC’s common stock, Grupo Mexico’s direct and indirect ownership was 88.9% as of March 31, 2021. There has been no activity in the SCC share repurchase program since the third quarter of 2016.

Directors’ Stock Award Plan:

The Company established a stock award compensation plan for certain directors who are not compensated as employees of the Company. Under this plan, participants currently receive 1,600 shares of common stock upon election and 1,600 additional shares following each annual meeting of stockholders thereafter. 600,000 shares of Southern Copper common stock have been reserved for this plan. On April 26, 2018, the Company's stockholders approved a five-year extension of the Plan until January 29, 2023 and an increase of the shares award from 1,200 to 1,600. The fair value of the award is measured each year at the date of the grant. Commencing with the 2021 grant, the 1,600 shares shall be granted quarterly and conditioned upon the attendance of each director to each Board meeting. The award is not subject to vesting requirements.

Parent Company common shares:

At March 31, 2021 and at December 31, 2020 there were in treasury 85,955,794 and 87,598,097 of Grupo Mexico’s common shares, respectively.

Employee Stock Purchase Plan:

2015 Plan: In January 2015, the Company offered to eligible employees a new stock purchase plan through a trust that acquires series B shares of Grupo Mexico stock for sale to its employees, and employees of subsidiaries, and certain affiliated companies. The purchase price was set at 38.44 Mexican pesos (approximately $2.63) for the initial subscription, which expires in January 2023. Every two years employees will be able to acquire title to 50% of the shares paid in the previous two years. The employees will pay for shares purchased through monthly payroll deductions over the eight year period of the plan. At the end of the eight year period, the Company will grant the participant a bonus of 1 share for every 10 shares purchased by the employee. Any future subscription will be at the average market price at the date of acquisition or the grant date.

If Grupo Mexico pays dividends on shares during the eight year period, the participants will be entitled to receive the dividend in cash for all shares that have been fully purchased and paid as of the date that the dividend is paid. If the participant has only partially paid for shares, the entitled dividends will be used to reduce the remaining liability owed for purchased shares.

In the case of voluntary or involuntary resignation/termination of the employee, the Company will pay to the employee the fair market sales price at the date of resignation of the fully paid shares, net of costs and taxes. When the fair market

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sales value of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the employee based on a decreasing schedule specified in the plan.

In case of retirement or death of the employee, the Company will render the buyer or his legal beneficiary, the fair market sales value as of the date of retirement or death of the shares effectively paid, net of costs and taxes.

The stock based compensation expense for the first quarter of 2021 and 2020 and the unrecognized compensation expense under this plan were as follows (in millions):


	2021		2020
Stock based compensation expense	$	0.2	$	0.2
Unrecognized compensation expense	$	1.2	$	1.8

The following table presents the activity of this plan for the three months ended March 31, 2021 and 2020:


		Unit Weighted Average
	Shares	Grant Date Fair Value
Outstanding shares at January 1, 2021	1,264,410	$	2.63
Granted	—		—
Exercised	(293,041)	$	2.63
Forfeited	—		—
Outstanding shares at March 31, 2021	971,369	$	2.63
Outstanding shares at January 1, 2020	1,379,734	$	2.63
Granted	—		—
Exercised	(54,221)	$	2.63
Forfeited	—		—
Outstanding shares at March 31, 2020	1,325,513	$	2.63

2018 Plan: In November 2018, the Company offered a new stock purchase plan (the “New Employee Stock Purchase Plan”) to eligible employees through a trust that acquires series B shares of Grupo Mexico stock for sale to its employees, and employees of subsidiaries, and certain affiliated companies. The purchase price was established at 37.89 Mexican pesos (approximately $1.86) for the initial subscription, which expires in October 2026. Every two years employees will be able to acquire title to 50% of the shares paid in the previous two years. The employees will pay for shares purchased through monthly payroll deductions over the eight-year period of the plan. At the end of the eight-year period, the Company will grant the participant a bonus of 1 share for every 10 shares purchased by the employee. Any future subscription will be at the average market price at the date of acquisition or the grant date.

If Grupo Mexico pays dividends on shares during the eight-year period, the participants will be entitled to receive the dividend in cash for all shares that have been fully purchased and paid as of the date that the dividend is paid. If the participant has only partially paid for shares, the entitled dividends will be used to reduce the remaining liability owed for purchased shares.

In the case of voluntary or involuntary resignation/termination of the employee, the Company will pay to the employee the fair market sales price on the date of resignation of the fully paid shares, net of costs and taxes. When the fair market sales value of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the employee based on a decreasing schedule specified in the plan.

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The stock based compensation expense for the three months ended March 31, 2021 and 2020 and the unrecognized compensation expense under this plan were as follows (in millions):


	2021		2020
Stock based compensation expense	$	0.2	$	0.2
Unrecognized compensation expense	$	3.6	$	4.3

The following table presents the stock award activity of this plan for the three months ended March 31, 2021 and 2020:


			Unit Weighted Average
	Shares		Grant Date Fair Value
Outstanding shares at January 1, 2021	3,918,458	$	1.86
Granted	—	$	—
Exercised	(592,768)		1.86
Forfeited	—		—
Outstanding shares at March 31, 2021	3,325,690	$	1.86
Outstanding shares at January 1, 2020	4,002,898	$	1.86
Granted	—		—
Exercised	—		—
Forfeited	—		—
Outstanding shares at March 31, 2020	4,002,898	$	1.86

Non-controlling interest:

The following table presents the non-controlling interest activity for the three months ended March 31, 2021 and 2020 (in millions):


	2021		2020
Balance as of January 1,	$	51.2	$	47.9
Net earnings		3.3		1.4
Dividend paid		(1.3)		(2.3)
Balance as of March 31,	$	53.2	$	47.0

NOTE 11 — FAIR VALUE MEASUREMENT:

Subtopic 820-10 of ASC “Fair value measurement and disclosures — Overall” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under Subtopic 820-10 are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs. (i.e., quoted prices for similar assets or liabilities).

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable (other than accounts receivable associated with provisionally priced sales) and accounts payable approximate fair value due to their short maturities. Consequently, such financial instruments are not included in the following table, which provides

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information about the carrying amounts and estimated fair values of other financial instruments that are not measured at fair value in the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020 (in millions):


	At March 31, 2021				At December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Long-term debt level 1		6,194.3		7,925.0		6,193.6		8,692.1
Long-term debt level 2		350.7		381.1		350.6		385.7
Total long-term debt	$	6,545.0	$	8,306.1	$	6,544.2	$	9,077.8

Long-term debt is carried at amortized cost and its estimated fair value is based on quoted market prices classified as Level 1 in the fair value hierarchy except for the cases of the Yankee bonds and the notes due 2022, which qualify as Level 2 in the fair value hierarchy as they are based on quoted prices in markets that are not active.

Fair values of assets and liabilities measured at fair value on a recurring basis were calculated as follows as of March 31, 2021 and December 31, 2020 (in millions):


	Fair Value at Measurement Date Using:
					Significant
	Fair Value		Quoted prices in		other		Significant
	as of		active markets for		observable		unobservable
	March 31,		identical assets		inputs		inputs
Description	2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Short term investment:
—Trading securities	$	415.4	$	415.4	$	—	$	—
—Available-for-sale debt securities:
Corporate bonds		—		—		—		—
Asset backed securities		0.3		—		0.3		—
Mortgage backed securities		0.2		—		0.2		—
Accounts receivable:
—Embedded derivatives—Not classified as hedges:
Provisionally priced sales:
Copper		541.1		541.1		—		—
Molybdenum		122.0		122.0		—		—
Total	$	1,079.0	$	1,078.5	$	0.5	$	—


	Fair Value at Measurement Date Using:
					Significant
	Fair Value		Quoted prices in		other		Significant
	as of		active markets for		observable		unobservable
	December 31,		identical assets		inputs		inputs
Description	2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Short term investment:
—Trading securities	$	410.2	$	410.2	$	—	$	—
—Available-for-sale debt securities:
Corporate bonds		—		—		—		—
Asset backed securities		0.3		—		0.3		—
Mortgage backed securities		0.3		—		0.3		—
Accounts receivable:
—Embedded derivatives-Not classified as hedges:
Provisionally priced sales:
Copper		491.9		491.9		—		—
Molybdenum		129.2		129.2		—		—
Total	$	1,031.9	$	1,031.3	$	0.6	$	—

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The Company’s short-term trading securities investments are classified as Level 1 because they are valued using quoted prices of the same securities as they consist of bonds issued by public companies and are publicly traded. The Company’s short-term available-for-sale investments are classified as Level 2 because they are valued using quoted prices for similar investments.

The Company’s accounts receivables associated with provisionally priced copper sales are valued using quoted market prices based on the forward price on the LME or on the COMEX. Such value is classified within Level 1 of the fair value hierarchy. Molybdenum prices are established by reference to the publication Platts Metals Week and are considered Level 1 in the fair value hierarchy.

NOTE 12 — REVENUE:

The Company’s net sales were $2,532.5 million in the three months ended March 31, 2021, compared to $1,719.7 million in the same period of 2020. The geographic breakdown of the Company’s sales is as follows (in millions):


	Three Months Ended March 31, 2021
			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	453.4	$	66.6	$	—	$	(26.1)	$	493.9
United States		389.4		17.0		19.1		—		425.5
Peru		—		—		147.4		—		147.4
Brazil		—		2.0		97.0		—		99.0
Chile		1.9		—		56.1		—		58.0
Other American countries		10.3		0.7		1.8		—		12.8
Europe:
Switzerland		294.5		7.0		92.3		—		393.8
Italy		—		0.9		73.2		—		74.1
Spain		91.0		—		19.9		—		110.9
Other European countries		73.4		26.5		81.0		—		180.9
Asia:
Singapore		71.6		3.6		127.1		—		202.3
Japan		21.4		—		162.6		—		184.0
Other Asian countries		71.6		—		78.3		—		149.9
Total	$	1,478.5	$	124.3	$	955.8	$	(26.1)	$	2,532.5

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	Three Months Ended March 31, 2020
			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	363.6	$	99.2	$	—	$	(26.8)	$	436.0
United States		258.2		0.2		40.9		—		299.3
Peru		—		3.0		73.1		—		76.1
Brazil		—		3.5		54.5		—		58.0
Chile		1.9		—		48.2		—		50.1
Other American countries		8.3		0.9		0.2		—		9.4
Europe:
Switzerland		172.5		14.9		66.5		—		253.9
Italy		—		3.4		66.8		—		70.2
Spain		46.6		—		—		—		46.6
Other European countries		20.3		6.1		52.9		—		79.3
Asia:
Singapore		61.7		3.2		135.8		—		200.7
Japan		9.4		—		98.7		—		108.1
Other Asian countries		11.2		0.1		20.7		—		32.0
Total	$	953.7	$	134.5	$	658.3	$	(26.8)	$	1,719.7

The following table presents information regarding the sales value by reporting segment of the Company’s significant products for the three months ended March 31, 2021 and 2020 (in millions):


	Three Months Ended March 31, 2021
			Mexican
	Mexican		IMMSA		Peruvian		Corporate, Other &		Total
	Open-pit		Unit		Operations		Eliminations		Consolidated
Copper	$	1,280.5	$	23.8	$	826.8	$	(13.7)	$	2,117.4
Molybdenum		91.1		—		78.5		—		169.6
Silver		72.7		48.5		29.5		(11.7)		139.0
Zinc		—		35.2		—		0.5		35.7
Other		34.2		16.8		21.0		(1.2)		70.8
Total	$	1,478.5	$	124.3	$	955.8	$	(26.1)	$	2,532.5


	Three Months Ended March 31, 2020
			Mexican
	Mexican		IMMSA		Peruvian		Corporate, Other &		Total
	Open-pit		Unit		Operations		Eliminations		Consolidated
Copper	$	799.7	$	18.0	$	561.0	$	(12.9)	$	1,365.8
Molybdenum		72.0		—		54.1		—		126.1
Zinc		44.6		35.4		20.0		(11.9)		88.1
Silver		—		65.4		—		(0.5)		64.9
Other		37.4		15.7		23.2		(1.5)		74.8
Total	$	953.7	$	134.5	$	658.3	$	(26.8)	$	1,719.7

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The opening and closing balances of receivables by reporting segment of the Company were as follows (in millions):


			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated

As of March 31, 2021:
Trade receivables	$	657.7	$	42.7	$	531.8	$	—	$	1,232.2
Related parties, current		38.0		—		0.9		7.6		46.5

As of December 31, 2020:
Trade receivables	$	566.0	$	57.8	$	445.1	$	—	$	1,068.9
Related parties, current		15.4		—		0.8		7.1		23.3

As of March 31, 2021, the Company has long-term contracts with promises to deliver the following products in 2021:


Copper concentrates (in tons)		198,000
Copper cathodes (in tons)		48,000
Molybdenum concentrates (in tons)		41,414
Sulfuric acid (in tons)		485,236

Provisionally priced sales: At March 31, 2021, the Company has recorded provisionally priced sales of copper at average forward prices per pound, and molybdenum at the March 31, 2021 market price per pound. These sales are subject to final pricing based on the average monthly London Metal Exchange (“LME”), or New York Commodities Exchange (“COMEX”), copper prices and Dealer Oxide molybdenum prices in the future month of settlement.

Following are the provisionally priced copper and molybdenum sales outstanding at March 31, 2021:


	Sales volume	Priced at
	(million lbs.)	(per pound)	Month of settlement
Copper	135.6	3.99	April 2021 through September 2021
Molybdenum	11.0	11.05	April 2021 through June 2021

The provisional sales price adjustment included in accounts receivable and net sales as of March 31, 2021 includes a negative adjustment of $0.1 million for copper and a positive adjustment of $2.3 million for molybdenum.

Management believes that the final pricing of these sales will not have a material effect on the Company’s financial position or on operating results.

NOTE 13 — SEGMENT AND RELATED INFORMATION:

Company management views Southern Copper as having three reportable segments and manages it on the basis of these segments. The reportable segments identified by the Company are: the Peruvian operations, the Mexican open-pit operations and the Mexican underground mining operations segment identified as the IMMSA unit.

The three reportable segments identified are groups of mines, each of which constitute an operating segment, with similar economic characteristics, types of products, processes and support facilities, similar regulatory environments, similar employee bargaining contracts and similar currency risks. In addition, each mine within the individual group earns revenues from similar types of customers for their products and services and each group incurs expenses independently, including commercial transactions between groups.

Financial information is regularly prepared for each of the three segments and the results of the Company’s operations are regularly reported to the Chief Operating Decision Maker (“CODM”) on the segment basis. The CODM of the Company focuses on operating income and on total assets as measures of performance to evaluate different segments and to make decisions to allocate resources to the reported segments. These are common measures in the mining industry.

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Financial information relating to Southern Copper’s segments is as follows:


	Three Months Ended March 31, 2021
	(in millions)
			Mexican				Corporate, other
	Mexican		IMMSA		Peruvian		and
	Open-pit		Unit		Operations		eliminations		Consolidated
Net sales outside of segments	$	1,478.5	$	98.2	$	955.8	$	—	$	2,532.5
Intersegment sales		—		26.1		—		(26.1)		—
Cost of sales (exclusive of depreciation, amortization and depletion)		509.9		80.4		385.0		(31.5)		943.8
Selling, general and administrative		15.9		2.1		9.4		2.7		30.1
Depreciation, amortization and depletion		95.6		13.9		81.4		9.7		200.6
Exploration		0.5		1.3		4.0		0.6		6.4
Operating income	$	856.6	$	26.6	$	476.0	$	(7.6)		1,351.6
Less:
Interest, net										(87.2)
Other income (expense)										2.3
Income taxes										(507.5)
Equity earnings of affiliate										7.9
Non-controlling interest										(3.3)
Net income attributable to SCC									$	763.8
Capital investment	$	149.6	$	14.3	$	66.5	$	2.2	$	232.6
Property and mine development, net	$	4,653.8	$	548.4	$	3,707.3	$	544.9	$	9,454.4
Total assets	$	7,698.0	$	965.1	$	4,915.5	$	3,639.2	$	17,217.8


	Three Months Ended March 31, 2020
	(in millions)
			Mexican				Corporate, other
	Mexican		IMMSA		Peruvian		and
	Open-pit		Unit		Operations		eliminations		Consolidated
Net sales outside of segments	$	953.7	$	107.7	$	658.3	$	—	$	1,719.7
Intersegment sales		—		26.8		—		(26.8)		—
Cost of sales (exclusive of depreciation, amortization and depletion)		465.1		112.2		411.0		(32.5)		955.8
Selling, general and administrative		16.7		2.4		9.1		0.9		29.1
Depreciation, amortization and depletion		91.4		10.6		81.3		9.6		192.9
Exploration		0.7		2.9		1.6		3.4		8.6
Operating income	$	379.8	$	6.4	$	155.3	$	(8.2)		533.3
Less:
Interest, net										(89.0)
Other income (expense)										(7.4)
Income taxes										(221.7)
Equity earnings of affiliate										1.0
Non-controlling interest										(1.4)
Net income attributable to SCC									$	214.8
Capital investment	$	38.2	$	25.3	$	35.2	$	2.3	$	101.0
Property and mine development, net	$	4,420.7	$	505.7	$	3,832.5	$	529.8	$	9,288.7
Total assets	$	7,057.2	$	815.9	$	4,687.5	$	3,651.5	$	16,212.1

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NOTE 14 — SUBSEQUENT EVENTS:

Dividends:

On April 22, 2021, the Board of Directors authorized a dividend of $0.70 per share payable on May 25, 2021 to shareholders of record at the close of business on May 11, 2021.

Closure of IRS 2014-2016 Exam Cycle

The Company effectively settled the 2014 through 2016 IRS audit on April 14, 2021. Any subsequent increase or decrease in unrecognized tax benefits from the audit settlement is not expected to have a material effect on the Company’s financial statements.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information that management believes is relevant to an assessment and understanding of the condensed consolidated financial condition and results of operations of Southern Copper Corporation and its subsidiaries (collectively, “SCC”, “the Company”, “our”, and “we”). This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report. Additionally, the following discussion and analysis should be read in conjunction with the Management Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements included in Part II of our annual report on Form 10-K for the year ended December 31, 2020.

EXECUTIVE OVERVIEW

Business: Our business is primarily the production and sale of copper. In the process of producing copper, a number of valuable metallurgical by-products are recovered, which we also produce and sell. Market forces outside of our control largely determine the sale prices for our products. Our management, therefore, focuses on value creation through copper production, cost control, production enhancement and maintaining a prudent capital structure to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our aim is to remain profitable during periods of low copper prices and to maximize financial performance in periods of high copper prices.

We are one of the world’s largest copper mining companies in terms of production and sales and our principal operations are in Peru and Mexico. We also have exploration programs in Chile, Argentina and Ecuador. In addition to copper, we produce significant amounts of other metals, either as a by-product of the copper process or through a number of dedicated mining facilities in Mexico.

Outlook: Various key factors will affect our outcome. These include, but are not limited to, the following:

●	Sales structure: In the first quarter of 2021, approximately 83.6% of our revenue came from the sale of copper; 6.7% from molybdenum; 5.5% from silver; 1.4% from zinc; and 2.8% from various other products, including gold, sulfuric acid and other materials.

●	Copper: In the first quarter of 2021, the LME copper price increased from an average of $3.25 per pound in the fourth quarter of 2020 to $3.85 (+18.5%). Currently, we are seeing prices over $4.30 per pound, which bodes a

positive outlook for the 2021 copper market. We believe the following factors are influencing the market:

●

The automobile industry’s global recovery was reflected in an 89% increase in production in the first quarter of 2021.

●

The $2.0 trillion infrastructure package announced by the U.S. President will significantly increase the demand for copper, which is a fundamental element at green energy facilities.

●

The combined inventories of the LME, Comex, Shanghai and Bonded warehouses remain at relatively low levels, particularly given the number days of consumption considered.

●

The most important market intelligence houses for the copper market are expecting a market deficit this year due to a significant recovery in demand, which should be between 3.5% and 5.5%.

●	Molybdenum: Represented 6.7% of our sales in the first quarter of 2021 and is currently our most significant by-product. Molybdenum prices averaged $11.19 per pound in the first quarter of 2021, compared to $9.56 in the same period of 2020. This represented a 17.1% increase.

Molybdenum is mainly used in the production of special alloys for stainless steel that require significant hardness and corrosion and heat resistance. A new use for this metal is in lubricants and sulfur filtering of heavy oils and shale gas production.

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●	Silver: Represented 5.5% of our sales in the first quarter of 2021. We believe that the prices for silver will be supported by its level of industrial use and the fact that, like gold, it represents value shelter in times of economic turmoil.

●	Zinc: Represented 1.4% of our sales in the first quarter of 2021. We consider zinc has very good long term fundamentals due to high levels of industrial consumption and expected production.

●	Production: In 2021 and 2022, we expect to produce 943,000 tons of copper given that production during these

periods will be affected by a temporary reduction in ore grade and recovery at our Peruvian operations.

We expect our copper production to recover by 2023 and reach 1,031,000 tons of production as we get Peruvian

production back on track and generate new production on our Pilares, El Pilar and Buenavista-Zinc Concentrator

projects.

We also expect to produce 21.4 million ounces of silver in 2021, in line with 2020 production. In 2021, we expect to

produce 76,200 tons of zinc from our mines, up 10.5% from 2020 production level. Additionally, we expect to produce 26,800 tons of molybdenum, which represents a decrease of 11.3% compared to 2020 production levels.

●	Capital Investments: In the first quarter of 2021, we spent $232.6 million on capital investments; this represented an increase of 130.3% with regard to the figure registered for the same period in 2020, and represented 30.5% of net income.

CYBERSECURITY EVENT

On March 1, 2021, at approximately 02:00 hours Mexico City time, we experienced a Ransomware cyber-attack, which was operated by humans. Therefore, our antivirus software could not contain it. This cyber-attack encrypted a total of 479 servers, 367 of which were located in Mexico and 112 in the United States. It also encrypted 303 pieces of personal equipment, 257 of which were located in Mexico and 46 in the United States. However, due to the quick response of our IT team, our Enterprise Resource Planning software was not affected by the aforementioned attack.

After the attack we immediately began a remediation and recovery process, and as of the reporting date the affected servers have been completely restored. So far, the forensic investigation has not identified any concrete evidence of information stolen during the attack. We are implementing an information security strategy to ensure business continuity based on processes (controls and corporate governance framework), technology and human capital (organizational culture). The areas of compliance, internal control, information technology and internal audit are working together to integrate the reference frameworks, the risk management models and the necessary controls to implement the strategy and programs of information security.

As of March 31, 2021, we have recorded $0.1 million in costs related to this incident, but we expect to incur additional costs derived from the strategy and controls being implemented.

COVID-19

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on a rapid increase in global transmission rates. The full impact of the COVID-19 outbreak will continue and the magnitude of the impact on the Company’s financial condition, liquidity and future operating results is uncertain. Senior Management is actively monitoring the global situation´s effect on the Company´s financial condition, liquidity, operations, suppliers, industry and workforce and is focusing principally on the health, safety and well-being of our employees, their families and the communities where we have operations. As of March 31, 2021, there have been no major delays in the supply of the materials and services critical for operations and sales. In addition, the supply of non-critical materials and services for the operations has been restored. Additionally, shipments of products and collections experienced no known major delays in the first quarter of 2021.

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As of March 31, 2021, we see a positive trend in copper price that closed at $4.01 per pound (LME) after the drop to $2.18 per pound that it experienced at the end of the first quarter of 2020. Considering the market outlook previously described, we have a positive view for the 2021 copper market.

The Company maintains a solid financial position and performance level. We believe this has allowed and will continue to allow us to deal with the effects of the pandemic in a way that prevents adverse material effects on our operations and financial results. The table below compares some of our financial information as follows:


	Mar-21	Dec-20	Mar-20
($ in millions, except ratios)
Cash and cash equivalents	2,267.3	2,183.6	2,051.6
Accounts receivable	1,324.4	1,136.6	789.7
Total assets	17,218.4	16,946.5	16,212.1
Long term debt	6,545.1	6,544.2	6,541.8
Sales	2,532.5	7,984.9	1,719.7

RATIOS
Current assets to current liabilities	3.66	3.49	2.98
Accounts receivable turnover (1)	1.91	7.03	2.18
Total debt ratio (2)	0.38	0.39	0.43
Net income margin (3)	30.2%	19.7%	12.5%

(1)

Represents net sales divided by accounts receivable.

(2)

Represents total debt divided by total assets.

(3)

Represents net income divided by net sales, as a percentage.

Governmental authorities in Mexico and Peru have declared that essential economic activities must continue during the COVID-19 health emergency. These activities include industrial mining and/or any other activity necessary to ensure the provision of essential services such as electricity; provide elements to install medical and hospital infrastructure; and manufacture health-related supplies and technological equipment. We believe that industrial mining stands as the most efficient and timely supplier of inputs that are critical to the productive chain to fight the pandemic.

Given the nature of mining operations, which are highly automated, conducted in remote locations and with mandatory use of personal safety equipment at all the mines, it is easier to implement and comply with COVID-19 protective measures, such as physical isolation and control of access to facilities. Industrial mining uses advanced and reliable machinery and does not require high physical concentration of employees. In many cases, workers fulfill their duties maintaining distances of more than 100 meters from their closest coworkers.

At the present time, our operations are in compliance with all sanitary and government regulations and maintain proper environmental safeguards. Our COVID-19 emergency protocol has reinforced preventive measures such as disinfecting, clinical monitoring before work, cleaning and sanitizing of work areas and respect for social distancing. We have also restricted the access of contractors, suppliers and personnel to our facilities if visits are not indispensable and enforced multiple actions to limit workforce exposure to COVID-19 by imposing travel restrictions, prohibiting face-to-face meetings and urging frequent hand washing, as well as adhering to all other health, safety and social distancing measures required by governmental authorities. At March 31, 2021, approximately 95% of the workforce in Mexico was working on site or at home under strict safety measures; the remaining 5% of the workforce was not working, including all individuals at high risk due to age and/or preexisting medical conditions. At our Peruvian operations, approximately 80% of the workforce was working onsite or at home under strict safety measures while the remaining 20% was not working, including all individuals at high risk due to age and/or preexisting medical conditions.

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KEY MATTERS

Below, we discuss several matters that we believe are important to understand the results of our operations and financial condition. These matters include, (i) our earnings, (ii) our production, (iii) our “operating cash costs” as a measure of our performance, (iv) metal prices, (v) business segments, (vi) the effect of inflation and other local currency issues, and (vii) our capital investment and exploration program.

Earnings: The table below highlights key financial and operational data of our Company for the three months ended March 31, 2021 and 2020 (in millions, except copper price, percentages and per share amounts):


		Three months ended March 31,
	2021		2020		Variance		% Change
Copper price LME		3.85		2.56		1.29	50.4	%
Pounds of copper sold		529.6		554.5		(24.9)	(4.5)	%
Net sales	$	2,532.5	$	1,719.7	$	812.8	47.3	%
Operating income	$	1,351.6	$	533.3	$	818.3	153.4	%
Net income attributable to SCC	$	763.8	$	214.8	$	549.0	255.6	%
Earnings per share	$	0.99	$	0.28	$	0.71	253.6	%
Dividends per share	$	0.60	$	0.40	$	0.20	50.0	%

Net sales in the first quarter of 2021 were 47.3% higher than in the same period of 2020, which was primarily attributable to higher metal prices for copper (+50.4% LME), silver (+55.8%), molybdenum (+17.1%) and zinc (+28.9%). This was slightly offset by lower sales volume of copper (-4.5%), molybdenum (-0.1%), silver (-0.2%) and zinc (-36.1%).

Net income attributable to SCC in the first quarter of 2021 was 255.6% higher than in the same period of 2020. This growth was mainly attributable to the increase in metal prices mentioned above and to stable operating costs (-0.5%).

Production: The table below highlights our mine production data for the three months ended March 31, 2021 and 2020:


	Three months ended March 31,
	2021	2020	Variance	% Change
Copper (in million pounds)	525.6	533.5	(7.9)	(1.5)	%
Molybdenum (in million pounds)	15.9	15.8	0.1	0.2	%
Silver (in million ounces)	5.0	5.3	(0.3)	(6.3)	%
Zinc (in million pounds)	36.3	42.5	(6.2)	(14.5)	%

The table below highlights our copper production data for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
Copper (in million pounds):	2021	2020	Variance	% Change
Toquepala	128.5	133.5	(5.0)	(3.8)	%
Cuajone	87.5	89.1	(1.6)	(1.8)	%
La Caridad	72.3	73.6	(1.3)	(1.8)	%
Buenavista	231.9	232.3	(0.4)	(0.2)	%
IMMSA	5.4	5.0	0.4	8.0	%
Total mined copper	525.6	533.5	(7.9)	(1.5)	%

Mined copper production in the first quarter of 2021 fell slightly by 1.5% to situate at 525.6 million pounds compared to 533.5 million pounds in the first quarter of 2020. This was mainly attributable to:

●	Lower production at our Peruvian and Mexican operations due to lower ore grades. This was slightly offset by

●	Higher production at our IMMSA operations due to higher ore grades.

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Molybdenum production increased 0.2% in the first quarter of 2021 with regard to the levels registered in the first quarter of 2020. This was attributable to an increase in production at our Peruvian mines (+10.1%) due to higher grades and recoveries and to growth in production at the La Caridad mine (+1.2%). This effect was partially offset by a decrease in production at the Buenavista mine (-21.9%) due to lower grades.

Silver mine production decreased 6.3% in the first quarter of 2021 due to a drop in production at the Toquepala (-9.0%), Buenavista (-13.4%) and IMMSA (-9.4%) operations. This was offset by higher production at Cuajone (+13.7%) and La Caridad (+8.6%) mines.

Zinc production decreased 14.5% in the first quarter of 2021 compared with the same period of 2021. This decrease was mainly attributable to lower production at Santa Barbara, Charcas and San Martin mines.

Operating Cash Costs: An overall benchmark used by us and a common industry metric to measure performance is operating cash costs per pound of copper produced. Operating cash cost is a non-GAAP measure that does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies. This non-GAAP information should not be considered in isolation or as substitute for measures of performance determined in accordance with GAAP. A reconciliation of our operating cash cost per pound of copper produced to the cost of sales (exclusive of depreciation, amortization and depletion) as presented in the consolidated statement of earnings is presented under the subheading, “Non-GAAP Information Reconciliation” on page 54. We disclose operating cash cost per pound of copper produced, both before and net of by-product revenues.

We define operating cash cost per pound of copper produced before by-product revenues as cost of sales (exclusive of depreciation, amortization and depletion), plus selling, general and administrative charges, treatment and refining charges net of sales premiums; less the cost of purchased concentrates, workers’ participation and other miscellaneous charges, including royalty charges, and the change in inventory levels; divided by total pounds of copper produced by our own mines.

In our calculation of operating cash cost per pound of copper produced, we exclude depreciation, amortization and depletion, which are considered non-cash expenses. Exploration is considered a discretionary expenditure and is also excluded. Workers’ participation provisions are determined on the basis of pre-tax earnings and are also excluded. Additional exclusions from operating cash costs are items of a non-recurring nature and the mining royalty charge as it is based on various calculations of taxable income, depending on which jurisdiction, Peru or Mexico, is imposing the charge. We believe these adjustments will allow our management and stakeholders to see a presentation of our controllable cash cost, which we believe is one of the lowest of all copper-producing companies of similar size.

We define operating cash cost per pound of copper produced net of by-product revenues as operating cash cost per pound of copper produced, as defined in the previous paragraph, less by-product revenues and net revenue (loss) on sale of metal purchased from third parties.

In our calculation of operating cash cost per pound of copper produced, net of by-product revenues, we credit against our costs the revenues from the sale of all our by-products, including, molybdenum, zinc, silver, gold, etc. and the net revenue (loss) on sale of metals purchased from third parties. We disclose this measure including the by-product revenues in this way because we consider our principal business to be the production and sale of copper. As part of our copper production process, much of our by-products are recovered. These by-products, as well as the processing of copper purchased from third parties, are a supplemental part of our production process and their sales value contribute to covering part of our incurred fixed costs. We believe that our Company is viewed by the investment community as a copper company, and is valued, in large part, by the investment community’s view of the copper market and our ability to produce copper at a reasonable cost.

We believe that both of these measures are useful tools for our management and our stakeholders. Our cash costs before by-product revenues allow us to monitor our cost structure and address areas of concern within operating management. The measure operating cash cost per pound of copper produced net of by-product revenues is a common measure used in the copper industry and is a useful management tool that allows us to track our performance and better allocate our resources. This measure is also used in our investment project evaluation process to determine a project’s potential

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contribution to our operations, its competitiveness and its relative strength in different price scenarios. The expected contribution of by-products is generally a significant factor used by the copper industry to determine whether to move forward or not in the development of a new mining project. As the price of our by-product commodities can have significant fluctuations from period to period, the value of its contribution to our costs can be volatile.

Our operating cash cost per pound of copper produced, before and net of by-product revenues, is presented in the table below for the three months ended March 31, 2021 and 2020:

Operating cash cost per pound of copper produced (1)

(In millions, except cost per pound and percentages)


		Three Months Ended March 31,
	2021		2020		Variance		% Change
Total operating cash cost before by‑product revenues	$	771.3	$	732.9	$	38.4	5.2	%
Total by‑product revenues	$	(393.7)	$	(332.2)	$	(61.5)	18.5	%
Total operating cash cost net of by‑product revenues	$	377.6	$	400.7	$	(23.1)	(5.8)	%
Total pounds of copper produced(2)		510.8		517.9		(7.1)	(1.4)	%
Operating cash cost per pound before by‑product revenues	$	1.51	$	1.42	$	0.10	6.7	%
By‑products per pound revenues	$	(0.77)	$	(0.64)	$	(0.13)	20.1	%
Operating cash cost per pound net of by‑product revenues	$	0.74	$	0.77	$	(0.03)	(3.9)	%

(1)	These are non-GAAP measures. Please see page 54 for reconciliation to GAAP measure.

(2)	Net of metallurgical losses.

As seen in the table above, our per pound cash cost before by-product revenues in the first quarter of 2021 was 6.7% higher compared with the same period of 2020. This increase is mainly attributable to an increase in production costs and to the unit cost effect of lower production. Our cash cost per pound net of by-product revenues for 2021 decreased 3.9% when compared with the same period of 2020. This was mainly attributable to a significant increase in by-product revenues.

Metal Prices: The profitability of our operations is dependent on, and our financial performance is significantly affected by, the international market prices for the products we produce, especially for copper, molybdenum, zinc and silver.

We are subject to market risks arising from the volatility of copper and other metal prices. For the remaining nine months of 2021, assuming that expected metal production and sales are achieved, tax rates remain unchanged and no effects are generated by potential hedging programs, metal price sensitivity factors would indicate the following change in estimated net income attributable to SCC resulting from metal price changes:


	Copper		Molybdenum		Zinc		Silver
Change in metal prices (per pound except silver—per ounce)	$	0.10	$	1.00	$	0.10	$	1.00
Change in net earnings (in millions)	$	124.2	$	36.6	$	12.3	$	13.6

Business Segments: We view our Company as having three reportable segments and manage it on the basis of these segments. These segments are (1) our Peruvian operations, (2) our Mexican open-pit operations and (3) our Mexican underground operations, known as our IMMSA unit. Our Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities that service both mines. The Peruvian operations produce copper, with significant by-product production of molybdenum, silver and other material. Our Mexican open-pit operations include La Caridad and Buenavista mine complexes, the smelting and refining plants and support facilities, which service both mines. The Mexican open pit operations produce copper, with significant by-product production of molybdenum, silver and other material. Our IMMSA unit includes five underground mines that produce zinc, lead, copper, silver and gold, and several industrial processing facilities for zinc, copper and silver.

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Segment information is included in our review of “Results of Operations” in this item and also in Note 13 “Segment and Related Information” of our condensed consolidated financial statements.

Inflation and Exchange Rate Effect of the Peruvian Sol and the Mexican Peso: Our functional currency is the U.S. dollar and our revenues are primarily denominated in U.S. dollars. Significant portions of our operating costs are denominated in Peruvian sol and Mexican pesos. Accordingly, when inflation and currency devaluation/appreciation of the Peruvian currency and Mexican currency occur, our operating results can be affected. In recent years, we believe such changes have not had a material effect on our results and financial position. Please see Item 3. “Quantitative and Qualitative Disclosures about Market Risk” for more detailed information.

Capital Investment Programs: We made capital investments of $232.6 million in the three months ended March 31, 2021, compared to $101.0 million in the same period of 2020. In general, the capital investments and investment projects described below are intended to increase production, decrease costs or address social and environmental commitments.

Set forth below are descriptions of some of our current expected capital investment programs. We expect to meet the cash requirements for these projects from cash on hand, internally generated funds and from additional external financing, including funding received in September 2019. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy, market conditions or the COVID-19 pandemic.

Projects in Mexico:

Buenavista Zinc - Sonora: This project is located within the Buenavista facility and includes the development of a new concentrator to produce approximately 100,000 tons of zinc and 20,000 tons of copper per year. We have completed the basic engineering study and the detailed engineering study has reached 89% completion. In order to continue with the project, stronger preventive measures to combat COVID-19 have been put in place. Purchase orders have been placed for major equipment, some of which is currently being manufactured. As part of this process, the mill manufacturing process has been completed and the respective elements are being shipped. The project has all the necessary permits. The project´s budget is $413 million, and we expect to initiate operations in 2023. When completed, we anticipate that this new facility will double the Company’s zinc production capacity and will provide 490 direct jobs and 1,470 indirect jobs.

Pilares - Sonora: This project, located six kilometers from La Caridad, will be developed as an open-pit mine operation with an annual production capacity of 35,000 tons of copper in concentrate. The ore will be transported from the pit to the primary crushers of the La Caridad copper concentrator through a new 25-meter wide off-road facility for mining trucks, which is under construction, and will significantly improve the overall mineral ore grade (combining the 0.78% expected from Pilares with 0.34% from La Caridad). The budget for Pilares is $159 million and we expect the project to begin production in the first quarter of 2022.

El Pilar - Sonora: This is a low-capital intensity copper development project strategically located in Sonora, Mexico, approximately 45 kilometers from our Buenavista mine. Its copper oxide mineralization contains estimated proven and probable reserves of 281 million tons of ore with an average copper grade of 0.301%. El Pilar will operate as a conventional open-pit mine with an annual production capacity of 36,000 tons of copper cathodes. This operation will use highly cost efficient and environmentally friendly SX-EW technology. We estimate a development investment of approximately $310 million. The results from experimental pads in leaching process have confirmed adequate levels of copper recovery. We expect this project to start production in 2023 with an expected mine life of 13 years. The Company has started the project basic engineering and site species collection.

The San Martin mine recovery program. After eleven years of illegal stoppage, we resumed control of the San Martin mine in August 2018. The San Martin facilities deteriorated during this period but we made a major renovation and restarted operations during the second quarter of 2019. Currently, the mine has 200,000 tons of ore and the concentrator has initiated production. In 2020, we produced 14,361 tons of zinc, 2.8 million ounces of silver, 3,601 tons of copper, and 1,425 tons of lead. As of March 2021, the Company has almost completed the rehabilitation plan to restore operations at the San Martin mine with a total expense of approximately $87.8 million and has reached full operating capacity.

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Projects in Peru:

Quebrada Honda dam expansion – Tacna: This project aims to enlarge the main and lateral dams in Quebrada Honda and includes the relocation of some facilities due to dam growth and implementation of other facilities for water recovery, among other factors. As of March 31, 2021, the engineering study was complete. The majority of the main equipment and materials have been procured and are arriving according to schedule. Construction is in progress with work on three fronts. This project has a total budget of $140.0 million, of which we had invested $46.4 million as of March 31, 2021.

Tia Maria - Arequipa: On July 8, 2019, we were granted the construction permit for this 120,000 ton annual SX-EW copper greenfield project with a total capital budget of $1,400 million. The Government awarded the permit after completing an exhaustive review process, complying with all established regulatory requirements and addressing all observations raised. The challenges surrounding the construction permit were overcome when on October 30, 2019, the Mining Council of the Peruvian Ministry of Energy and Mines ratified the construction permit for the Tia Maria project.

The Company has been consistently working to promote the welfare of the Islay province population. As part of these efforts, we have implemented successful social programs in education, healthcare and productive development to improve the quality-of-life in the region. We also have promoted agricultural and livestock activities in the Tambo Valley and supported growth in manufacturing, fishing and tourism in Islay.

On January 7, 2021, the mayor of the Islay province (Arequipa, Peru) awarded a City Diploma to SPCC in recognition of the Company’s efforts to assist the population of Islay during the COVID-19 pandemic. SPCC provided medical assistance, tests, oxygen, personal protection equipment and food stuffs to the population in the area of influence of the Tia Maria project.

We consider that the initiation of construction activities at Tia Maria will generate significant economic opportunities for the Islay province and the Arequipa region. During the construction and operation phase, we will make it a priority to hire local labor to fill the 9,000 jobs (3,600 direct and 5,400 indirect) that we expect to generate during Tia Maria’s construction phase. When operating, we expect Tia Maria to directly employ 600 workers and indirectly provide jobs for another 4,200. Additionally, from day one of our operations, we will generate significant contributions to revenues in the Arequipa region via royalties and taxes.

This greenfield project, located in Arequipa, Peru, will use state of the art SX-EW technology with the highest international environmental standards. SX-EW facilities are the most environmentally friendly in the industry due to their technical process with no emissions released into the atmosphere.

Potential projects

We have a number of other projects that we may develop in the future. We continuously evaluate new projects on the basis of our long-term corporate objectives, expected return on investment, environmental concerns, required investment and estimated production, among other considerations. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy, market conditions or the COVID-19 pandemic.

El Arco - Baja California: This is a world-class copper deposit located in the central part of the Baja California peninsula, with ore reserves of over 2.4 billion tons with an ore grade of 0.422%, 0.3 billion tons of leach material with an ore grade of 0.288% and 0.11 grams of gold per ton. This project envisions an open-pit mine with a combined concentrator and SX-EW operations, with an estimated production capacity of 190,000 tons of copper and 105,000 ounces of gold annually. The project has an estimated capital budget of $2.9 billion. The Company has started the baseline study and it is reviewing the basic engineering analysis to request the environmental impact permit. We are currently in the final stage of the land acquisition process for the project.

Los Chancas - Apurimac: This greenfield project, located in Apurimac, Peru, is a copper and molybdenum porphyry deposit. Current estimates indicate the presence of 545 million tons of mineralized material with a copper content of 0.59%, molybdenum content of 0.04% and 0.039 grams of gold per ton, as well as 181 million tons of mineralized leachable material with a total copper content of 0.357%. Los Chancas project envisions an open-pit mine with a

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combined operation of concentrator and SX-EW processes to produce 130,000 tons of copper and 7,500 tons of molybdenum anually. The estimated capital investment is $2,600 million and the project is expected to be in operation in 2027. In 2019, we continued to engage in social and environmental improvements for the local communities. In 2020,

we continued to work on these activities and plan to conclude the environmental impact assessment for the project in

2021.

Michiquillay Project - Cajamarca: On June 12, 2018, Southern Copper signed a contract and made an initial payment of $12.5 million for the acquisition of the Michiquillay project in Cajamarca, Peru. The Company has created a multidisciplinary management team to plan the development of this project. As part of this plan, the Company has established contact with the local and regional authorities and communities in order to promote programs for the sustainable development of the area. In 2020, we continued to develop social and environmental programs for the local communities. In February 2021, we completed a semi-detailed environmental impact assessment and submitted it to the Peruvian authorities for approval. This will allow us to begin a 50,000 meter diamond drilling program in 2021 to verify and update the project´s estimated mineralized materials.

Michiquillay is a world class mining project with estimated mineralized material of 1,150 million tons with an estimated copper grade of 0.63%. When developed, we expect Michiquillay to produce 225,000 tons of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years, at a competitive cash-cost. We estimate an investment of approximately $2.5 billion will be required and expect production start-up by 2028 and that Michiquillay will become one of Peru´s largest copper mines. The project will create significant business opportunities in the Cajamarca region, generate new jobs for the local communities and contribute with taxes and royalties to the local, regional and national governments.

The above information is based on estimates only. We cannot make any assurances that we will undertake any of these projects or that the information noted is accurate.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

We are committed to improving our ESG record by adopting best practices. In this regard, our sustainable development policies were recently updated. These policies, applicable to SCC and its subsidiaries, formalize our vision, commitments and objectives to promote sustainable development and generate shared value for our stakeholders. For further information on our disclosure on Human Capital Resources, see the section included in Part I, Item 1 of our Annual report on Form 10-K for the year ended December 31, 2020. Also, see our disclosure on our COVID-19 response, environmental disclosure and support of our local communities elsewhere in this report.

In 2020, and for the second consecutive year, SCC was listed on SCC Dow Jones Sustainability Index MILA. Additionally, our score on S&P Global's annual sustainability assessment increased to 50 points during the same period; this represents a 5-point increase over 2019’s level.

In Peru, in coordination with the Peruvian government and our main oxygen supplier, we have adapted our Ilo Oxygen Plant N°2 in record time to produce 140 tons per week of liquid oxygen. The production is being used to supply hospitals and medical facilities in Peru’s central and southern regions, where medicinal oxygen is extremely scarce. We have committed to donating 2,500 tons of liquid oxygen, which is the equivalent of 194,000 oxygen tanks of 10 cubic meters each. As of March 31, 2021, we had delivered 1,346 tons of liquid oxygen, or 53% of the committed donation.

In addition to this effort, in March 2021 we donated two mobile oxygen plants, each with a capacity of 720 cubic meters per day of medical oxygen. These plants will be transported to towns that lack sufficient oxygen supplies to fight against COVID-19.

In 2020, the 3,667 students from 11 educational centers sponsored by us in Mexico and Peru were able to continue their school programs remotely. To cope with the global pandemic, our programs, which are developed under the Community Development Model, migrated to virtual platforms. Last year, 4,634 online workshops were held, consolidating a community of over 290 thousand users on social networks, which represents an increase of 63% compared to 2019. In the first quarter of 2021, we continued to roll out remote school programs to provide education to 3,756 school-age

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children. Alongside these efforts, we offered virtual workshops to the community, which have been reproduced more than 10 million times since the beginning of the pandemic.

Last year was marked by a good performance in terms of occupational safety since no fatalities were registered, and accident rates and lost days in the mining division dropped by 44% and 78% respectively compared to 2019. Minera México obtained, for the second consecutive year, three of the six distinctions (“Casco de Plata”) awarded by the Mining Chamber of Mexico for occupational health and safety performance. The survey conducted by the Mining Chamber of Mexico, which determines award recipients, includes approximately 120 mining companies of different sizes that are grouped into diverse categories, such as open and underground mining, smelting and refining.

CLIMATE CHANGE

Peruvian operations: On April 17, 2018, the Peruvian government enacted Law N. 30754, establishing a Climate Change Framework. Through this law, promoting public and private investments in climate change management is declared to be of national interest. The law proposes to create an institutional framework to address climate change in Peru, outlining new measures, particularly with respect to climate change mitigation. It includes, for example, provisions regarding: increasing carbon capture and use of carbon sinks; afforestation and reforestation practices; land use changes; and sustainable systems of transportation, solid waste management, and energy systems. This is the first climate change framework law in Latin America to incorporate obligations from the Paris Agreement. Regulations to this law were enacted by Supreme Decree 013-2019, which was published on December 31, 2019 and are applicable to all Peruvian institutions and agencies. It is expected that further Peruvian regulations will be applicable to non-governmental entities. The Company anticipates initiating a multi-year process to adopt applicable reporting recommendations of the Task-Force on Climate Related Financial Disclosures (TCFD) once new Peruvian climate change regulations applicable to non-governmental entities are implemented. The Company is committed to the environment and to managing climate-related impacts. The Company’s focus is to seek continuous improvement in the responsible use of natural resources while complying with strict applicable legal standards for prevention, mitigation, control and remediation of environmental impacts. Implementing continuous improvement in the Company’s processes improves efficiency in the use and consumption of energy, water, and other natural resources.

Mexican operations: Grupo Mexico, the indirect parent of SCC has issued sustainability reports under the Global Reporting Initiative (GRI) for more than 10 years. Grupo Mexico also participates in different Mexican and international reporting programs such as the Greenhouse Gases (GHG) Mexico Program and CDP (formerly the Carbon Disclosure Project). In 2013, GHG and CDP signed a memorandum of understanding to work on aligning their reporting frameworks. Grupo Mexico’s 2018 CDP questionnaire included responses to the Task Force on Climate-Related Disclosure or TCFD concerns. In compliance with the 2012 Mexican Climate Change Law, Grupo Mexico’s GHG emissions are reported and verified independently. Grupo Mexico’s Sustainability Reports, which disclose inventories of GHG emissions, can be found at “https://www.gmexico.com/en/Pages/development.aspx”. On October 18, 2017, Grupo Mexico was selected to join the S&P Sustainability Indices MILA Pacific Alliance (DJSI MILA). In 2017, this regional sustainability index included 42 leading companies in sustainability from the countries that form part of the Pacific Alliance: Mexico, Chile, Colombia and Peru.

ACCOUNTING ESTIMATES

Our discussion and analysis of financial condition and results of operations, as well as quantitative and qualitative disclosures about market risks, are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We make our best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: ore reserves, revenue recognition, ore stockpiles on leach pads and related amortization, estimated impairment of assets, asset retirement obligations, determination of discount rates related to the

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financial lease liabilities, classification of operating leases versus financial leases, valuation allowances for deferred tax assets, unrecognized tax benefits and fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

RESULTS OF OPERATIONS

The following highlights key financial results for the three months ended March 31, 2021 and 2020 (in millions):


	Three Months Ended
	March 31,
Statement of Earnings Data	2021		2020		Variance		% Change
Net sales	$	2,532.5	$	1,719.7	$	812.8	$	47.3	%
Operating costs and expenses		(1,180.9)		(1,186.4)		5.5		(0.5)	%
Operating income		1,351.6		533.3		818.3		153.4	%
Non‑operating income (expense)		(84.9)		(96.4)		11.5		(11.9)	%
Income before income taxes		1,266.7		436.9		829.8		189.9	%
Income taxes		(507.5)		(221.7)		(285.8)		128.9	%
Equity earnings of affiliate		7.9		1.0		6.9		690.0	%
Net income attributable to non‑controlling interest		(3.3)		(1.4)		(1.9)		135.7	%
Net income attributable to SCC	$	763.8	$	214.8	$	549.0	$	255.6	%

NET SALES

Net sales in the first quarter of 2021 were 47.3% higher than in the same period of 2020 due to a increase in copper (+50.4% - LME), molybdenum (17.1%), silver (+55.8%) and zinc (28.9%) prices. This effect was slightly offset by lower sales volume of copper (-4.5%), molybdenum (-0.1%), silver (-0.2%) and zinc (-36.1%).


	Three Months Ended March 31,
	2021		2020		% Change
Copper price ($per pound—LME)	$	3.85	$	2.56	50.4	%
Copper price ($per pound—COMEX)	$	3.86	$	2.57	50.2	%
Molybdenum price ($per pound)(1)	$	11.19	$	9.56	17.1	%
Zinc price ($per pound—LME)	$	1.25	$	0.97	28.9	%
Silver price ($per ounce—COMEX)	$	26.29	$	16.87	55.8	%

(1)	Platts Metals Week Dealer Oxide

The table below provides our metal sales as a percentage of our total net sales for the three months ended March 31, 2021 and 2020:


	Three Months Ended
	March 31,
Sales as a percentage of total net sales	2021		2020
Copper	83.6	%	79.4	%
Molybdenum	6.7	%	7.3	%
Silver	5.5	%	5.1	%
Zinc	1.4	%	3.8	%
Other by‑products	2.8	%	4.4	%
Total	100.0	%	100.0	%

The table below provides our copper sales by type of product for the three months ended March 31, 2021 and 2020. The difference in value between products is the level of processing. At the market price, concentrates take a discount since

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they require smelting and refining processes, while refined and rod copper receive premiums due to their purity and presentation.


	Three Months Ended March 31,
Copper Sales (million pounds)	2021	2020	Variance	% Change
Refined (including SX‑EW)	236.1	275.7	(39.6)	(14.4)	%
Rod	123.5	101.7	21.8	21.4	%
Concentrates and other	170.0	177.1	(7.1)	(4.0)	%
Total	529.6	554.5	(24.9)	(4.5)	%

The table below provides our copper sales volume by type of product as a percentage of our total copper sales volume for the three months ended March 31, 2021 and 2020:


	Three months ended March 31,
Copper Sales by product type	2021		2020
Refined (including SX‑EW)	44.6	%	49.7	%
Rod	23.3	%	18.3	%
Concentrates and other	32.1	%	32.0	%
Total	100.0	%	100.0	%

OPERATING COSTS AND EXPENSES

The table below summarizes the production cost structure by major components as a percentage of total production cost:


	Three months ended March 31,
	2021		2020
Power	19.7	%	16.0	%
Labor	11.9	%	13.6	%
Fuel	14.1	%	12.7	%
Maintenance	20.6	%	22.2	%
Operating material	16.8	%	17.6	%
Other	16.9	%	17.9	%
Total	100.0	%	100.0	%

Operating costs and expenses were $1,180.9 million in the first quarter of 2021 compared to $1,186.4 million in the same period of 2020. The decrease of $5.5 million was primarily due to:


Operating cost and expenses for the first quarter of 2020		$	1,186.4
Less:
•	Decrease in cost of metals purchased from third parties.		(88.2)
•	Decrease in exploration expenses.		(2.2)
Plus:
•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly attributable to increases in the workers' participation expense, power and fuel costs; the aforementioned was partially offset by an increase in capitalized leachable material.		76.2
•	Increase in depreciation, amortization and depletion, which was primarily attributable to our expansion efforts and growth in maintenance capital investments.		7.7
•	Increase in selling, general and administrative expenses.		1.0
Operating cost and expenses for the first quarter of 2021		$	1,180.9

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NON-OPERATING INCOME (EXPENSES)

Non-operating income (expense) represented a net expense of $84.9 million in the three months ended March 31, 2021 compared to a net expense of $96.4 million in the three months ended March 31, 2020.

The $11.5 million decrease in the expense level was principally due to:

●	$9.7 million decrease in miscellaneous expense, net,

●	$5.1 million decrease in interest expense,

●	$2.1 million increase in capitalized interest; partially offset by a

●	$5.4 million decrease in interest income.

INCOME TAXES


	Three Months Ended
	March 31,
	2021			2020
Provision for income taxes ($ in millions)	$	507.5		$	221.7
Effective income tax rate		40.1	%		50.8	%

SEGMENT RESULT ANALYSIS

We have three segments: the Peruvian operations, the Mexican open-pit operations and the Mexican underground mining operations.

The table below presents information regarding the volume of our copper sales by segment for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
Copper Sales (million pounds)	2021	2020	Variance	% Change
Peruvian operations	213.9	228.1	(14.2)	(6.2)	%
Mexican open‑pit	312.5	321.8	(9.3)	(2.9)	%
Mexican IMMSA unit	6.4	8.7	(2.3)	(26.4)	%
Other and intersegment elimination	(3.3)	(4.1)	0.8	(19.5)	%
Total copper sales	529.5	554.5	(25.0)	(4.5)	%

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The table below presents information regarding the volume of sales by segment of our significant by-products for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
By‑product Sales (million pounds, except silver—million ounces)	2021	2020	Variance	% Change
Peruvian operations:
Molybdenum contained in concentrate	7.6	6.9	0.7	10.1	%
Silver	1.2	1.3	(0.1)	(7.7)	%
Mexican open‑pit operations:
Molybdenum contained in concentrate	8.3	9.1	(0.8)	(8.8)	%
Silver	2.7	2.8	(0.1)	(3.6)	%
IMMSA unit
Zinc‑refined and in concentrate	27.6	63.7	(36.1)	(56.7)	%
Silver	1.9	2.1	(0.2)	(9.5)	%
Other and intersegment elimination
Silver	(0.5)	(0.7)	0.2	(28.6)	%
Total by‑product sales
Molybdenum contained in concentrate	15.9	16.0	(0.1)	(0.6)	%
Zinc‑refined and in concentrate	27.6	63.7	(36.1)	(56.7)	%
Silver	5.3	5.5	(0.2)	(3.6)	%

Peruvian Operations:


	Three Months Ended March 31,
	2021		2020		Variance		% Change
Net sales	$	955.8	$	658.3	$	297.5		45.2	%
Operating costs and expenses		(479.8)		(503.0)		23.2		(4.6)	%
Operating income	$	476.0	$	155.3	$	320.7		206.5	%

Net sales in the first quarter of 2021 were $955.8 million compared to $658.3 million in the first quarter of 2020. The increase in net sales was mainly driven by higher copper (+50.4%), molybdenum (+17.1%) and silver (+55.8%) prices, which was partially offset by a lower copper (-6.2%) and silver (-7.9%) sales volumes.

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Operating costs and expenses in the first quarter of 2021 decreased by $23.2 million to situate at $479.8 million compared to $503.0 million in the first quarter of 2020. This was primarily due to:


Operating costs and expenses for the first quarter of 2020		$	503.0
Less:
•	Decrease in cost of metals purchased from third parties.		(36.8)
Plus:
•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly due to increases in the worker's participation expense, inventory consumption and fuel costs. The aforementioned was partially offset by an increase in capitalized leachable material.		10.8
•	Increase in exploration expenses.		2.4
•	Increase in selling, general and administrative expenses.		0.3
•	Increase in depreciation, amortization and depletion expense.		0.1
Operating costs and expenses for the first quarter of 2021		$	479.8

Mexican Open-pit Operations:


	Three Months Ended March 31,
	2021		2020		Variance		% Change
Net sales	$	1,478.5	$	953.7	$	524.8		55.0	%
Operating costs and expenses		(621.9)		(573.9)		(48.0)		8.4	%
Operating income	$	856.6	$	379.8	$	476.8		125.5	%

Net sales in the first quarter of 2021 were $1,478.5 million, compared to $953.7 million in the first quarter of 2020. The increase of $524.8 million was principally due to higher copper (+50.4%), molybdenum (+17.1%) and silver (+55.8%) prices. This effect was slightly offset by a decrease in copper (-2.9%), silver (-2.3%) and molybdenum (-8.2%) sales volumes.

Operating costs and expenses in the first quarter of 2021 increased by $48.0 million to situate at $621.9 million versus $573.9 million in the same 2020 period, primarily due to:


Operating costs and expenses for the first quarter of 2020		$	573.9
Plus:
•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was primarily due to increases in inventory consumption, power costs and in theworkers' participation expense. The aforementioned was partially offset by an increase in capitalized leachable material.		97.5
•	Increase in depreciation, amortization and depletion expense.		4.2
Less:
•	Decrease in cost of metals purchased from third parties.		(52.7)
•	Decrease in selling, general and administrative expenses.		(0.8)
•	Decrease in exploration expenses.		(0.2)
Operating costs and expenses for the first quarter of 2021		$	621.9

Mexican Underground Operations (IMMSA):


	Three Months Ended March 31,
	2021		2020		Variance		% Change
Net sales	$	124.3	$	134.5	$	(10.2)		(7.6)	%
Operating costs and expenses		(97.7)		(128.1)		30.4		(23.7)	%
Operating income	$	26.6	$	6.4	$	20.2		315.6	%

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Net sales in the first quarter of 2021 were $124.3 million, compared to $134.5 million in the first quarter of 2020. This decrease of $10.2 million was primarily due lower zinc (-56.7%), copper (-26.4%) and silver (-12.3%) sales volumes and was partially offset by higher metal prices for zinc (+28.9%), copper (+50.4%) and silver (+55.8%).

Operating costs and expenses in the first quarter of 2021 decreased by $31.1 million situating at $97.7 million versus $128.1 million in the first quarter of 2020. This was primarily due to:


Operating costs and expenses for the first quarter of 2020		$	128.1
Less:
•	Decrease in cost of sales (exclusive of depreciation, amortization and depletion) mainly due to a drop in inventory consumption, which was partially offset by an increase in the cost of metals purchased from third parties.		(31.8)
•	Decrease in exploration expenses.		(1.6)
•	Decrease in selling, general and administrative expenses.		(0.3)
Plus:
•	Increase in depreciation, amortization and depletion expense.		3.3
Operating costs and expenses for the first quarter of 2021		$	97.7

Intersegment Eliminations and Adjustments:

The net sales, operating costs and expenses and operating income discussed above will not be directly equal to amounts in our condensed consolidated statement of earnings because the adjustments of intersegment operating revenues and expenses must be taken into account. Please see Note 13 “Segment and Related Information” of the condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow:

The following table shows the cash flow for the first three months of 2021 and 2020 (in millions):


	2021		2020		Variance
Net cash provided by operating activities	$	782.6	$	475.1	$	307.5
Net cash used in investing activities	$	(237.8)	$	(60.6)	$	(177.2)
Net cash provided by (used in) financing activities	$	(465.1)	$	(311.4)	$	(153.7)

Net cash provided by operating activities:

The change in net cash from operating activities for the first three months of 2021 and 2020 include (in millions):


	2021		2020		Variance		% Change
Net income	$	767.1	$	216.2	$	550.9		254.8	%
Depreciation, amortization and depletion		200.6		192.9		7.7		4.0	%
Provision (benefit) for deferred income taxes		(38.9)		7.5		(46.4)		(618.7)	%
Loss (gain) on foreign currency transaction effect		(19.7)		(28.0)		8.3		(29.6)	%
Other adjustments to net income		2.7		5.9		(3.2)		(54.2)	%
Operating assets and liabilities		(129.2)		80.6		(209.8)		(260.3)	%
Net cash provided by operating activities	$	782.6	$	475.1	$	307.5		64.7	%

Significant items added to (deducted from) net income to arrive at operating cash flow include depreciation, amortization and depletion, deferred tax amounts, foreign currency fluctuations and changes in operating assets and liabilities.

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Three months ended March 31, 2021: Net income was $767.1 million, which represented approximately 98.0% of the net operating cash flow. Operating cash flow decreased by $129.2 million due to the following variances in operating assets and liabilities:

●	$(163.3) million increase in trade accounts receivable, which was mainly attributable to the increase in metal prices in the first quarter of 2021.

●	$38.2 million net decrease in inventory, which was primarily driven by a $16.8 million of decrease in the leaching inventory and a $19.4 million drop in the work in process inventory.

●	$(1.3) million decrease in accounts payable and accrued liabilities.

●	$(2.8) million increase in other operating assets and liabilities.

Three months ended March 31, 2020: Net income was $216.2 million, approximately 45.5% of the net operating cash flow. Operating cash flow increased by $80.6 million due to variances in operating assets and liabilities as follows:

●	$123.2 million decrease in trade accounts receivable mainly as a result of the decrease in copper prices during the first quarter of 2020.

●	$70.4 million of net decrease in inventory, which included $54.6 million of lower leaching inventory mainly at our Peruvian operations, as well as $14.9 million of lower supplies inventory.

●	$(102.4) million decrease in accounts payable and accrued liabilities, which included principally income taxes payments at our operations, as well as workers’ participation payments at our Peruvian segment.

●	$(10.6) million increase in other operating assets and liabilities.

Net cash used in investing activities:

Three months ended March 31, 2021: Net cash used in investing activities included $232.6 million for capital investments. The capital investments included:

●	$166.1 million of investments at our Mexican operations:

●

$56.1 million for the Buenavista-Zinc project,

●

$16.1 million for land acquisitions for new projects,

●

$12.7 million for the Pilares project,

●

$10.6 million for the new tailing disposal deposit at the Buenavista mine,

●

$15.0 million at our IMMSA unit,

●

$42.1 million for various replacement and maintenance expenditures, mainly at our Buenavista and La Caridad mines, and

●

$13.5 million decrease in capital expenditures incurred but not yet paid.

●	$66.5 million of investments at our Peruvian operations:

●

$14.9 million for the Quebrada Honda dam expansion,

●

$14.2 million for the Toquepala concentrator expansion project,

●

$2.6 million for projects at the Ilo facilities,

●

$2.4 million for the relocation of facilities at Toquepala,

●

$23.1 million for various other replacement and maintenance expenditures, and

●

$9.3 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the first three months of 2021 include $5.2 million of net purchases of short-term investments.

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Three months ended March 31, 2020: Net cash used for investing activities included $101.0 million for capital investments. The capital investments included:

●	$65.8 million of investments at our Mexican operations:

●

$37.4 million for various other replacement and maintenance expenditures, mainly at our Buenavista and La Caridad mines.

●

$2.9 million for the new tailing disposal deposit at the Buenavista mine,

●

$1.3 million for the Pilares project,

●

$6.3 million for the over elevation of tailings deposit N° 7 at the La Caridad Mine,

●

$25.3 million at our IMMSA unit, and

●

$(7.4) million increase in capital expenditures incurred but not yet paid.

●	$35.2 million of investments at our Peruvian operations:

●

$8.1 million for the Toquepala concentrator expansion project,

●

$3.6 million for the building of the containment dike N°4 at Quebrada Santallana,

●

$2.0 million for the pumping system neutralization plant at Toquepala,

●

$1.6 million for the new substation at Quebrada Honda,

●

$26.2 million for various other replacement and maintenance expenditures, and

●

$(6.3) million increase in capital expenditures incurred but not yet paid.

The three months of 2020 investment activities include $40.0 million of net proceeds from short-term investments.

Net cash used in financing activities in the three months ended March 31, 2020 was $465.1 million and included a dividend distribution of $463.8 million. Net cash used in financing activities in the three months ended March 31, 2020 was $311.4 million, and included a dividend distribution of $309.2 million.

Dividends:

On February 24, 2021, we paid a dividend of $0.60 per share for a total of $463.8 million. On April 22, 2021, our Board of Directors authorized a quarterly dividend of $0.70 per share, for an expected total of approximately $541.2 million, to be paid on May 25, 2021 to SCC shareholders of record at the close of business on May 11, 2021.

Capital Investment and Exploration Programs:

A discussion of our capital investment programs is an important part of understanding our liquidity and capital resources. We expect to meet the cash requirements for these capital investments from cash on hand, internally generated funds and from additional external financing if required. For information regarding our capital investment programs, please see the discussion under the caption “Capital Investment Programs” under this Item 2.

Contractual Obligations:

There have been no material changes in our contractual obligations in the first quarter of 2021. Please see item 7 in Part II of our 2020 annual report on Form 10-K.

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NON-GAAP INFORMATION RECONCILIATION

Operating cash cost: Following is a reconciliation of “Operating Cash Cost” (see page 40) to cost of sales (exclusive of depreciation, amortization and depletion) as reported in our consolidated statement of earnings, in millions of dollars and dollars per pound of copper in the table below:


	Three Months Ended				Three Months Ended
	March 31, 2021				March 31, 2020
			$ per				$ per
	$ millions		pound		$ millions		pound
Cost of sales (exclusive of depreciation, amortization and depletion)	$	943.8	$	1.85	$	955.8	$	1.84
Add:
Selling, general and administrative		30.1		0.06		29.1		0.06
Sales premiums, net of treatment and refining charges		(7.0)		(0.01)		(0.7)		—
Less:
Workers’ participation		(104.2)		(0.21)		(53.6)		(0.10)
Cost of metals purchased from third parties		(41.2)		(0.08)		(129.3)		(0.25)
Royalty charge and other, net		(16.3)		(0.03)		(11.3)		(0.02)
Inventory change		(33.9)		(0.07)		(57.1)		(0.11)
Operating Cash Cost before by‑product revenues	$	771.3	$	1.51	$	732.9	$	1.42
Add:
By‑product revenues(1)		(382.7)		(0.75)		(321.4)		(0.62)
Net revenue on sale of metal purchased from third parties		(11.0)		(0.02)		(10.8)		(0.02)
Add:
Total by‑product revenues		(393.7)		(0.77)		(332.2)		(0.64)
Operating Cash Cost net of by‑product revenues	$	377.6	$	0.74	$	400.7	$	0.78

(1)	By-product revenues included in our presentation of operating cash cost contain the following:


	Three Months Ended				Three Months Ended
		March 31, 2021				March 31, 2020
			$ per				$ per
	$ millions		pound		$ millions		pound
Molybdenum	$	(169.6)	$	(0.33)	$	(126.0)	$	(0.24)
Silver		(127.2)		(0.25)		(75.8)		(0.15)
Zinc		(17.8)		(0.04)		(51.3)		(0.10)
Sulfuric Acid		(36.1)		(0.07)		(42.4)		(0.08)
Gold and others		(32.0)		(0.03)		(25.9)		(0.05)
Total	$	(382.7)	$	(0.75)	$	(321.4)	$	(0.62)

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Commodity price risk:

For additional information on metal price sensitivity, refer to “Metal Prices” in Part I, Item 2 of this quarterly report on Form 10-Q for the period ended March 31, 2021.

Foreign currency exchange rate risk:

Our functional currency is the U.S. dollar. Portions of our operating costs are denominated in Peruvian soles and Mexican pesos. Since our revenues are primarily denominated in U.S. dollars, when inflation or deflation in our Mexican or Peruvian operations is not offset by a change in the exchange rate of the sol or the peso to the dollar, our financial

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position, results of operations and cash flows could be affected by local cost conversion when expressed in U.S. dollars. In addition, the dollar value of our net monetary assets denominated in soles or pesos can be affected by exchange rate variances of the sol or the peso, resulting in a re-measurement gain or loss in our financial statements. Recent inflation and exchange rate variances are provided in the table below for the three months ended March 31, 2021 and 2020:


	Three Months Ended
	March 31,
	2021		2020
Peru:
Peruvian inflation rate	1.5	%	0.8	%
Initial exchange rate	3.624		3.317
Closing exchange rate	3.758		3.442
Appreciation/(devaluation)	(3.7)	%	(3.8)	%
Mexico:
Mexican inflation rate	2.3	%	1.2	%
Initial exchange rate	19.949		18.845
Closing exchange rate	20.605		23.512
Appreciation/(devaluation)	(3.3)	%	(24.8)	%

Change in monetary position:

Assuming an exchange rate variance of 10% at March 31, 2021, we estimate our net monetary position in Peruvian sol and Mexican peso would increase (decrease) our net earnings as follows:


	Effect in net
	earnings
	($ in millions)
Appreciation of 10% in U.S. dollar vs. Peruvian sol	$	23.0
Devaluation of 10% in U.S. dollar vs. Peruvian sol	$	(28.1)
Appreciation of 10% in U.S. dollar vs. Mexican peso	$	22.4
Devaluation of 10% in U.S. dollar vs. Mexican peso	$	(27.4)

Open sales risk:

Our provisional copper and molybdenum sales contain an embedded derivative that is required to be separate from the host contract for accounting purposes. The host contract is the receivable from the sale of copper and molybdenum concentrates at prevailing market prices at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to settlement. See Note 12 to our condensed consolidated financial statements for further information about these provisional sales.

Short-term Investments:

For additional information on our trading securities and available-for-sale investments, refer to “Short-term Investments” in Part I, Item 1 of this quarterly report on Form 10-Q for the period ended March 31, 2021.

Cautionary Statement:

Forward-looking statements in this report and in other Company statements include statements regarding expected commencement dates of mining or metal production operations, projected quantities of future metal production, anticipated production rates, operating efficiencies, costs and expenditures as well as projected demand or supply for the Company’s products. Actual results could differ materially depending upon factors including the risks and uncertainties relating to general U.S. and international economic and political conditions, the cyclical and volatile prices of copper, other commodities and supplies, including fuel and electricity, availability of materials, insurance coverage, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, lower than expected ore grades, water and geological problems, the failure of equipment or processes to operate in accordance with specifications, failure to obtain financial assurance to meet closure and remediation obligations, labor relations, litigation

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and environmental risks as well as political and economic risk associated with foreign operations. Results of operations are directly affected by metal prices on commodity exchanges that can be volatile.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of March 31, 2021, the Company conducted an evaluation under the supervision and with the participation of the Company’s disclosure committee and the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness and the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of March 31, 2021, to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is:

Recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and

Accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Southern Copper Corporation:

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Southern Copper Corporation and subsidiaries (the “Company”) as of March 31, 2021, the related condensed consolidated statements of earnings, comprehensive income and cash flows for the three-month periods ended March 31, 2021, and 2020, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of earnings, comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Emphasis of a Matter

We draw attention to Note 1 of the interim financial information, which describes the effects of the new outbreak of coronavirus disease ("COVID-19") as of March 31, 2021 and for the three-month period then ended.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the condensed consolidated interim financial statements taken as a whole. Accordingly, we do not express such an opinion.

Galaz, Yamazaki, Ruiz Urquiza, S.C.

Member of Deloitte Touche Tohmatsu Limited


/s/ Daniel Toledo Antonio
C.P.C. Daniel Toledo Antonio
Mexico City, Mexico
April 30, 2021

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings:

The information provided in Note “Commitments and Contingencies” to the condensed consolidated financial statements contained in Part I of this Form 10-Q, is incorporated herein by reference.

Item 1A. Risk Factors:

There have been no material changes to our risk factors during the three months ended March 31, 2021. For additional information on risk factors, refer to “Risk Factors” included in Part I, Item 1A of our Annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds:

SCC share repurchase program:

In 2008, the Company’s BOD authorized a $500 million share repurchase program that has since been increased by the BOD and is currently authorized to $3 billion. Pursuant to this program, the Company has purchased 119.5 million shares of common stock at a cost of $2.9 billion. These shares are available for general corporate purposes. The Company may purchase additional shares of its common stock from time to time, based on market conditions and other factors. This repurchase program has no expiration date and may be modified or discontinued at any time.

The NYSE closing price of SCC common shares as of March 31, 2021 was $67.87 and the maximum number of shares that the Company could purchase at that price is 1.2 million shares. As a result of the repurchase of shares of SCC’s common stock, Grupo Mexico’s direct and indirect ownership was 88.9% as of March 31, 2021. There has not been any activity in the SCC share repurchase program since the third quarter of 2016.

Item 4. Mine Safety Disclosures:

Not applicable.

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Item 6. Exhibits


Exhibit No.		Description of Exhibit

3.1		(a) Amended and Restated Certificate of Incorporation, filed on October 11, 2005. (b) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 2, 2006. (c) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 28, 2008.

3.2		By-Laws, as last amended on July 23, 2020.

4.1		(a) Indenture governing $600 million 7.500% Notes due 2035, by and among Southern Copper Corporation, the Bank of New York and The Bank of New York (Luxembourg) S.A (b) Indenture governing $400 million 7.500% Notes due 2035, by and between Southern Copper Corporation, The Bank of New York, The Bank of New York (Luxembourg) S.A.

4.2		Form of 6.375% Note (included in Exhibit 4.1).

4.3		Form of New 7.500% Note (included in Exhibit 4.2(a)).

4.4		Form of New 7.500% Note (included in Exhibit 4.2(b)).

4.5		Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which $1.1 billion of 6.750% Notes due 2040 were issued.


4.6		Second Supplemental Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 6.750% Notes due 2040 were issued.


4.7		Form of 6.750% Notes due 2040.

4.8		Third Supplemental Indenture dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.500% Notes due 2022 were issued.

4.9		Fourth Supplemental Indenture, dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.250% Notes due 2042 were issued.

4.10		Form of 3.500% Notes due 2022.


4.11		Form of 5.250% Notes due 2042.

4.12		Fifth Supplemental Indenture dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.875% Notes due 2025 were issued.

4.13		Sixth Supplemental Indenture, dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.875% Notes due 2045 were issued.

4.14		Form of 3.875% Notes due 2025.

4.15		Form of 5.875% Notes due 2045.

10.1		Directors’ Stock Award Plan of the Company, as amended through January 28, 2023.

10.2		Agreement and Plan of Merger, dated as of October 21, 2004, by and among Southern Copper Corporation, SCC Merger Sub, Inc., Americas Sales Company, Inc., Americas Mining Corporation and Minera Mexico S.A. de C.V.

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Exhibit No.		Description of Exhibit
10.3		Tax Agreement entered into by the Company and Americas Mining Corporation, effective as of February 20, 2017.

14.0		Code of Business Conduct and Ethics adopted by the Board of Directors on May 8, 2003 and amended on April 23, 2015

15.0		Consent of Registered Public Accounting Firm (Galaz, Yamazaki, Ruiz Urquiza, S.C. - Member of Deloitte Touche Tohmatsu, Limited).

31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.

32.2		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.

101.INS		XBRL Instance Document (submitted electronically with this report). The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document (submitted electronically with this report).

101.CAL		XBRL Taxonomy Calculation Linkbase Document (submitted electronically with this report).

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document (submitted electronically with this report).

101.LAB		XBRL Taxonomy Label Linkbase Document (submitted electronically with this report).

101.PRE		XBRL Taxonomy Presentation Linkbase Document (submitted electronically with this report).

104		The cover page from our Quarterly Report on Form 10-Q for the period ended March 31, 2021, filed with the Securities and Exchange Commission on April 30, 2021, is formatted in Inline Extensible Business Reporting Language (“iXBRL”)

Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Earnings for the three months ended March 31, 2021, and 2020; (ii) the Condensed Consolidated Statement of Comprehensive Income for the three months ended March 31, 2021, and 2020; (iii) the Condensed Consolidated Balance Sheet at March 31, 2021 and December 31, 2020; (iv) the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2021 and 2020; and (v) the Notes to Condensed Consolidated Financial Statements tagged in detail. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SOUTHERN COPPER CORPORATION

List of Exhibits


Exhibit No.		Description of Exhibit

3.1		(a) Amended and Restated Certificate of Incorporation, filed on October 11, 2005. (Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the third quarter of 2005 and incorporated herein by reference). (b) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 2, 2006. (Filed as Exhibit 3.1 to Registration Statement on Form S-4, File No. 333-135170) filed on June 20, 2006 and incorporated herein by reference). (c) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 28, 2008. (Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the second quarter of 2008 and incorporated herein by reference).

3.2		By-Laws, as last amended on July 23, 2020. (Filed as Exhibit 3.2 to the Company’s Form 8-K filed on July 28, 2020 and incorporated herein by reference).

4.1		(a) Indenture governing $600 million 7.500% Notes due 2035, by and among Southern Copper Corporation, the Bank of New York and The Bank of New York (Luxembourg) S.A. (Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 1, 2005) and incorporated herein by reference). (b) Indenture governing $400 million 7.500% Notes due 2035, by and between Southern Copper Corporation, The Bank of New York, The Bank of New York (Luxembourg) S.A.(Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 1, 2005 and incorporated herein by reference).

4.2		Form of 6.375% Note (included in Exhibit 4.1).

4.3		Form of New 7.500% Note (included in Exhibit 4.2(a)).

4.4		Form of New 7.500% Note (included in Exhibit 4.2(b)).

4.5		Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which $1.1 billion of 6.750% Notes due 2040 were issued (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 19, 2010 and incorporated herein by reference).


4.6		Second Supplemental Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 6.750% Notes due 2040 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 19, 2010 and incorporated herein by reference).


4.7		Form of 6.750% Notes due 2040 (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 19, 2010 and incorporated herein by reference).

4.8		Third Supplemental Indenture dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.500% Notes due 2022 were issued (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

4.9		Fourth Supplemental Indenture, dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.250% Notes due 2042 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

4.10		Form of 3.500% Notes due 2022. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

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Exhibit No.		Description of Exhibit
4.11		Form of 5.250% Notes due 2042. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

4.12		Fifth Supplemental Indenture dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.875% Notes due 2025 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

4.13		Sixth Supplemental Indenture, dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.875% Notes due 2045 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

4.14		Form of 3.875% Notes due 2025. (Filed as Exhibit A to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

4.15		Form of 5.875% Notes due 2045. (Filed as Exhibit A to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

10.1		Directors’ Stock Award Plan of the Company, as amended through January 28, 2023. (Filed as an exhibit to the Company’s 2018 Proxy Statement and incorporated herein by reference). The plan expired by its terms on January 30, 2017. A 5-year extension of the plan was approved by the Company’s stockholders at the 2018 Annual Meeting of Stockholders.

10.2		Agreement and Plan of Merger, dated as of October 21, 2004, by and among Southern Copper Corporation, SCC Merger Sub, Inc., Americas Sales Company, Inc., Americas Mining Corporation and Minera Mexico S.A. de C.V. (Filed as an Exhibit to Current Report on Form 8-K filed on October 22, 2004 and incorporated herein by reference).

10.3		Tax Agreement entered into by the Company and Americas Mining Corporation, effective as of February 20, 2017. (Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the first quarter of 2017 and incorporated herein by reference).

14.0		Code of Business Conduct and Ethics adopted by the Board of Directors on May 8, 2003 and amended on April 23, 2015. (Filed as Exhibit 14 to the Company’s Current Report on Form 8-K filed April 29, 2015 and incorporated herein by reference).

15.0		Consent of Registered Public Accounting Firm (Galaz, Yamazaki, Ruiz Urquiza, S.C. - Member of Deloitte Touche Tohmatsu, Limited) (filed herewith).

31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.

32.2		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.

101.INS		XBRL Instance Document (submitted electronically with this report). The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document (submitted electronically with this report).

101.CAL		XBRL Taxonomy Calculation Linkbase Document (submitted electronically with this report).

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document (submitted electronically with this report).

101.LAB		XBRL Taxonomy Label Linkbase Document (submitted electronically with this report).

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Exhibit No.		Description of Exhibit
101.PRE		XBRL Taxonomy Presentation Linkbase Document (submitted electronically with this report).

104		The cover page from our Quarterly Report on Form 10-Q for the period ended March 31, 2021, filed with the Securities and Exchange Commission on April 30, 2021, is formatted in Inline Extensible Business Reporting Language (“iXBRL”)

Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Earnings for the three months ended March 31, 2021 and 2020; (ii) the Condensed Consolidated Statement of Comprehensive Income for the three months ended March 31, 2021 and 2020; (iii) the Condensed Consolidated Balance Sheet at March 31, 2021 and December 31, 2020; (iv) the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2021 and 2020; and (v) the Notes to Condensed Consolidated Financial Statements tagged in detail. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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PART II — OTHER INFORMATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SOUTHERN COPPER CORPORATION
	(Registrant)


	/s/ Oscar Gonzalez Rocha
	Oscar Gonzalez Rocha
	President and Chief Executive Officer

April 30, 2021


	/s/ Raul Jacob
	Raul Jacob
	Vice President, Finance, Treasurer and Chief Financial Officer

April 30, 2021