10-Q 1 a13-19543_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

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

 

For the quarterly period ended:  September 30, 2013

 

or

 

o

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

 

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 x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes x  No o

 

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

 

Large accelerated filer

x

 

Accelerated filer

o

Non-accelerated filer

o

 

Smaller reporting company

o

 

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

 

As of October 25, 2013 there were outstanding 839,992,838 shares of Southern Copper Corporation common stock, par value $0.01 per share.

 

 

 



Table of Contents

 

Southern Copper Corporation (“SCC”)

 

INDEX TO FORM 10-Q

 

 

 

Page No.

Part I. Financial Information:

 

 

 

 

Item. 1

Condensed Consolidated Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statement of Earnings for the three and nine months ended September 30, 2013 and 2012

3

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012

4

 

 

 

 

Condensed Consolidated Balance Sheet as of September 30, 2013 and December 31, 2012

5

 

 

 

 

Condensed Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2013 and 2012

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7-26

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27-44

 

 

 

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

45-46

 

 

 

Item 4.

Controls and procedures

47

 

 

 

 

Report of Independent Registered Public Accounting Firm

48

 

 

 

Part II. Other Information:

 

 

 

 

Item 1.

Legal Proceedings

49

 

 

 

Item 1A.

Risk factors

49

 

 

 

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

49

 

 

 

Item 4.

Mine Safety Disclosures

50

 

 

 

Item 6.

Exhibits

50-51

 

 

 

 

Signatures

52

 

 

 

 

List of Exhibits

53-54

 

 

 

Exhibit 15

Independent Accountants’ Awareness Letter

55

 

 

 

Exhibit 31.1

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

56

 

 

 

Exhibit 31.2

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

57

 

 

 

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

58

 

 

 

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

59

 

 

 

Exhibit 101

Financial statements for the three and nine months ended September 30, 2013 Formatted in XBRL: (i) the Condensed Consolidated Statement of Earnings, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements, tagged in detail.

Submitted electronically with this report

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1.  Condensed Consolidated Financial Statements

 

Southern Copper Corporation

 

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Net sales (including sales to related parties, see note 7)

 

$

1,384,507

 

$

1,552,379

 

$

4,417,732

 

$

5,018,191

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation, amortization and depletion shown separately below)

 

666,037

 

670,861

 

2,105,014

 

2,060,664

 

Selling, general and administrative

 

24,107

 

23,758

 

76,933

 

74,551

 

Depreciation, amortization and depletion

 

101,489

 

81,283

 

285,577

 

236,655

 

Exploration

 

11,983

 

12,470

 

33,958

 

33,795

 

Legal fees related to SCC shareholder derivative lawsuit

 

 

316,233

 

 

316,233

 

Total operating costs and expenses

 

803,616

 

1,104,605

 

2,501,482

 

2,721,898

 

Operating income

 

580,891

 

447,774

 

1,916,250

 

2,296,293

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(67,543

)

(48,458

)

(199,320

)

(143,042

)

Capitalized interest

 

18,303

 

18,827

 

46,249

 

24,889

 

Other income (expense)

 

1,724

 

3,527

 

19,507

 

29,086

 

Interest income

 

5,515

 

3,828

 

15,790

 

11,238

 

Income before income taxes

 

538,890

 

425,498

 

1,798,476

 

2,218,464

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

195,190

 

219,802

 

596,942

 

848,544

 

Net income before equity earnings of affiliate

 

343,700

 

205,696

 

1,201,534

 

1,369,920

 

Equity earnings of affiliate

 

1,865

 

13,565

 

15,169

 

38,239

 

Net income

 

345,565

 

219,261

 

1,216,703

 

1,408,159

 

Less: Net income attributable to the non-controlling interest

 

1,344

 

1,395

 

4,353

 

5,316

 

Net income attributable to SCC

 

$

344,221

 

$

217,866

 

$

1,212,350

 

$

1,402,843

 

 

 

 

 

 

 

 

 

 

 

Per common share amounts attributable to SCC:

 

 

 

 

 

 

 

 

 

Net income - basic and diluted

 

$

0.41

 

$

0.26

 

$

1.44

 

$

1.65

 

Dividends paid

 

$

0.12

 

$

0.24

 

$

0.56

 

$

1.31

 

Weighted average common shares outstanding - basic and diluted

 

841,946

 

848,419

 

844,148

 

849,283

 

 

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

 

3



Table of Contents

 

Southern Copper Corporation

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

345,565

 

$

219,261

 

$

1,216,703

 

$

1,408,159

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) net of tax:

 

 

 

 

 

 

 

 

 

Derivative instruments classified as cash flow hedge:

 

 

 

 

 

 

 

 

 

Decrease in accumulated unrealized loss (gain) in prior period

 

 

 

 

(5,447

)

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

345,565

 

$

219,261

 

$

1,216,703

 

$

1,402,712

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to the non-controlling interest

 

$

1,344

 

$

1,395

 

$

4,353

 

$

5,338

 

Comprehensive income attributable to SCC

 

$

344,221

 

$

217,866

 

$

1,212,350

 

$

1,397,374

 

 

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

 

4



Table of Contents

 

Southern Copper Corporation

 

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,795,299

 

$

2,459,488

 

Short-term investments

 

363,464

 

134,298

 

Accounts receivable trade

 

487,222

 

669,333

 

Accounts receivable other (including related parties 2013 - $30,434 and 2012 - $25,740)

 

95,431

 

82,636

 

Inventories

 

704,648

 

682,749

 

Deferred income tax

 

81,091

 

103,193

 

Other current assets

 

203,092

 

156,262

 

Total current assets

 

3,730,247

 

4,287,959

 

 

 

 

 

 

 

Property, net

 

6,032,088

 

5,156,731

 

Leachable material, net

 

373,627

 

262,795

 

Intangible assets, net

 

110,214

 

109,300

 

Related parties receivable

 

161,244

 

183,950

 

Deferred income tax

 

258,809

 

205,939

 

Other assets

 

269,442

 

177,075

 

Total assets

 

$

10,935,671

 

$

10,383,749

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

5,000

 

$

10,000

 

Accounts payable (including related parties 2013 -$13,423 and 2012 - $20,310)

 

456,850

 

475,566

 

Accrued income taxes

 

 

12,198

 

Accrued workers’ participation

 

148,153

 

266,571

 

Accrued interest

 

92,557

 

70,582

 

Other accrued liabilities

 

33,489

 

22,218

 

Total current liabilities

 

736,049

 

857,135

 

 

 

 

 

 

 

Long-term debt

 

4,204,646

 

4,203,863

 

Deferred income taxes

 

170,621

 

141,426

 

Non-current taxes payable

 

214,934

 

214,934

 

Other liabilities and reserves

 

74,518

 

59,065

 

Asset retirement obligation

 

124,948

 

118,226

 

Total non-current liabilities

 

4,789,667

 

4,737,514

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock

 

8,846

 

8,846

 

Additional paid-in capital

 

3,335,966

 

3,320,927

 

Retained earnings

 

3,089,414

 

2,350,126

 

Accumulated other comprehensive income

 

4,032

 

4,032

 

Treasury stock, at cost, common shares

 

(1,055,432

)

(918,791

)

Total Southern Copper Corporation stockholders’ equity

 

5,382,826

 

4,765,140

 

Non-controlling interest

 

27,129

 

23,960

 

Total equity

 

5,409,955

 

4,789,100

 

 

 

 

 

 

 

Total liabilities and equity

 

$

10,935,671

 

$

10,383,749

 

 

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

 

5



Table of Contents

 

Southern Copper Corporation

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(in thousands)

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income

 

$

345,565

 

$

219,261

 

$

1,216,703

 

$

1,408,159

 

Adjustments to reconcile net earnings to net cash provided from operating activities:

 

 

 

 

 

 

 

 

 

Depreciation, amortization and depletion

 

101,489

 

81,283

 

285,577

 

236,655

 

Equity earnings of affiliate, net of dividends received

 

(1,079

)

(2,654

)

(6,588

)

(19,593

)

Loss (income) on currency translation effect

 

(573

)

3,358

 

10,490

 

(3,302

)

Provision (benefit) for deferred income taxes

 

(9,769

)

56,808

 

912

 

76,116

 

Gain on sale of investment

 

 

 

 

(18,200

)

Cash provided from (used for) operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

1,148

 

97,607

 

182,111

 

160,667

 

Inventories

 

(69,104

)

(56,581

)

(132,731

)

(89,481

)

Accounts payable and accrued liabilities

 

170,346

 

345,506

 

(17,546

)

111,006

 

Other operating assets and liabilities

 

(70,847

)

(44,869

)

(171,341

)

(64,834

)

Net cash provided from operating activities

 

467,176

 

699,719

 

1,367,587

 

1,797,193

 

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(488,249

)

(258,224

)

(1,190,501

)

(665,944

)

Proceeds from (purchase of) short-term investments, net

 

29,469

 

(5,946

)

(229,166

)

142,253

 

Decrease (increase) in loan to affiliate

 

9,454

 

(37,599

)

22,706

 

(37,599

)

Sale of investment

 

 

 

 

18,200

 

Other

 

(1,981

)

93

 

(4,454

)

5,373

 

Net cash used for investing activities

 

(451,307

)

(301,676

)

(1,401,415

)

(537,717

)

 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Debt repaid

 

 

 

(5,000

)

(5,000

)

Dividends paid to common stockholders

 

(101,028

)

(203,723

)

(473,062

)

(813,883

)

Distributions to non-controlling interest

 

(231

)

(533

)

(1,097

)

(2,253

)

Repurchase of common shares

 

(59,431

)

(99,185

)

(123,991

)

(132,369

)

Other

 

263

 

154

 

1,053

 

758

 

Net cash used for financing activities

 

(160,427

)

(303,287

)

(602,097

)

(952,747

)

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

175

 

(16,322

)

(28,264

)

2,958

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(144,383

)

78,434

 

(664,189

)

309,687

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, at beginning of period

 

1,939,682

 

1,079,371

 

2,459,488

 

848,118

 

Cash and cash equivalents, at end of period

 

$

1,795,299

 

$

1,157,805

 

$

1,795,299

 

$

1,157,805

 

 

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

 

6



Table of Contents

 

Southern Copper Corporation

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 — DESCRIPTION OF THE BUSINESS:

 

In the opinion of Southern Copper Corporation, (the “Company” or “SCC”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2013 and the results of operations, comprehensive income and cash flows for the three and nine months ended September 30, 2013 and 2012.  The results of operations for the three and nine months ended September 30, 2013 and 2012 are not necessarily indicative of the results to be expected for the full year.  The December 31, 2012 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 (U.S. GAAP).  The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements at December 31, 2012 and notes included in the Company’s 2012 annual report on Form 10-K.

 

NOTE 2 — SHORT-TERM INVESTMENTS:

 

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

 

 

 

At September 30,
2013

 

At December 31,
2012

 

 

 

 

 

 

 

Trading securities

 

$

357.4

 

$

127.8

 

Weighted average interest rate

 

2.18

%

1.87

%

 

 

 

 

 

 

Available-for-sale

 

$

6.1

 

$

6.5

 

Weighted average interest rate

 

0.42

%

0.43

%

Total

 

$

363.5

 

$

134.3

 

 

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 at September 30, 2013 and December 31, 2012, included corporate bonds and asset and mortgage backed obligations.  As of September 30, 2013 and December 31, 2012, gross unrealized gains and losses on available-for-sale securities were not material.

 

Related to these investments the Company earned interest, 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

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Trading securities:

 

 

 

 

 

 

 

 

 

Interest earned

 

$

1.9

 

$

0.9

 

$

3.9

 

$

2.5

 

Unrealized gain (loss)

 

(3.3

)

3.7

 

(2.3

)

8.8

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

Interest earned

 

(*

)

(*

)

(*

)

(*

)

Investment redeemed

 

$

 

$

0.2

 

$

0.4

 

$

1.4

 


(*) Less than $0.1 million

 

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Table of Contents

 

NOTE 3 - INVENTORIES:

 

Inventories were as follows:

 

(in millions)

 

At September 30,
2013

 

At December 31,
2012

 

Inventory, current:

 

 

 

 

 

Metals at lower of average cost or market:

 

 

 

 

 

Finished goods

 

$

79.8

 

$

101.1

 

Work-in-process

 

324.7

 

297.4

 

Supplies at average cost

 

300.1

 

284.2

 

Total current inventory

 

$

704.6

 

$

682.7

 

 

 

 

 

 

 

Inventory, long-term

 

 

 

 

 

Long-term leach stockpiles

 

$

373.6

 

$

262.8

 

 

During the nine months ended September 30, 2013 and 2012 total leaching costs capitalized as long-term inventory of leachable material amounted to $218.7 million and $157.3 million, respectively. Long-term leaching inventories recognized as cost of sales amounted to $82.6 million and $52.5 million for the nine months ended September 30, 2013 and 2012, respectively.

 

NOTE 4 — INCOME TAXES:

 

The income tax provision and the effective income tax rate for the nine months of 2013 and 2012 were as follows ($ in millions):

 

 

 

2013

 

2012

 

Income tax provision

 

$

596.9

 

$

848.5

 

Effective income tax rate

 

33.2

%

38.2

%

 

These provisions include income taxes for Peru, Mexico and the United States. The higher effective tax rate in the nine months of 2012 is primarily due to $316.2 million of a one-time payment of legal fees related to the SCC shareholders derivative lawsuit, which is being treated as a non-deductible expense.

 

Changes in U.S. tax regulations

 

In September 2013, the Internal Revenue Service issued final regulations related to “tangible property.” These regulations govern when a taxpayer must capitalize or deduct expenses for acquiring, maintaining, repairing and replacing tangible property. The regulations are effective January 1, 2014 and early adoption is permitted.  The issuance of these tax regulations is considered a change in tax law under the guidelines of ASC 740.  The Company believes that the effect of the change should not have a material effect on its financial statements.

 

NOTE 5 — PROVISIONALLY PRICED SALES:

 

At September 30, 2013, the Company has recorded provisionally priced sales of copper at average forward prices per pound, and molybdenum at the September 30, 2013 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 September 30, 2013:

 

Copper
(million lbs.)

 

Priced at
(per pound)

 

Month of
Settlement

 

9.9

 

$

3.31

 

October 2013 through November 2013

 

 

Molybdenum
(million lbs.)

 

Priced at
(per pound)

 

Month of
Settlement

 

8.0

 

$

9.15

 

October 2013 through January 2014

 

 

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

 

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NOTE 6 - ASSET RETIREMENT OBLIGATION:

 

The Company maintains an estimated 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”).  Commencing in January 2010, the Company is required, under its approved closure plans, 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 periodic reviews. Currently and for the near-term future, the Company has pledged the value of its Lima office complex as support for this obligation.  The accepted value of the Lima office building, for this purpose, is $17 million. Through September 2013, the Company has provided guarantees of $10.5 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 smelter and refinery in Ilo, and the shops and auxiliary facilities at the three units, including the Ilo marine trestle. In the last quarter of 2012, the Company submitted updates to the closure plans for Toquepala, Cuajone and Ilo in accordance with the law. As a result of these revised plans, the Company adjusted its asset retirement obligation.

 

In 2012, the Company decided to recognize 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, or written or oral contract requiring the Company to carry out mine closure and environmental remediation activities, the Company considers that a constructive obligation presently exists based on, among other things, the remediation caused by the closure of the San Luis Potosi smelter in 2010. The overall cost recognized for mining closure includes the estimated costs of dismantling concentrators, smelter and refinery plants, shops and other facilities.

 

The following table summarizes the asset retirement obligation activity for the nine months ended September 30, 2013 and 2012 (in millions):

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Balance as of January 1

 

$

118.2

 

$

62.0

 

Closure payments

 

(0.7

)

 

Accretion expense

 

7.4

 

2.6

 

Balance as of September 30,

 

$

124.9

 

$

64.6

 

 

NOTE 7 — 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 transportation and construction services and 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.  It is the Company’s policy that the Audit Committee of the Board of Directors shall review all related party transactions.  The Company is prohibited from entering or continuing a material related party transaction that has not been reviewed and approved or ratified by the Audit Committee.

 

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

 

 

 

As of

 

 

 

September 30,
 2013

 

December 31,
2012

 

Related parties receivables, current:

 

 

 

 

 

Grupo Mexico, S.A.B de C.V. (“Grupo Mexico”) and affiliates

 

$

0.8

 

$

1.8

 

Mexico Generadora de Energía S. de R.L. (“MGE”)

 

8.2

 

 

Compania Perforadora Mexico, S.A.P.I. de C.V.

 

0.9

 

0.5

 

Compania Minera Coimolache S.A.

 

20.5

 

23.4

 

 

 

$

30.4

 

$

25.7

 

 

 

 

 

 

 

Related parties receivable, non-current:

 

 

 

 

 

MGE

 

$

161.2

 

$

184.0

 

 

 

 

 

 

 

Related parties payables

 

 

 

 

 

Grupo Mexico and affiliates

 

$

0.8

 

$

 

Asarco LLC

 

6.8

 

15.3

 

Higher Technology S.A.C.

 

0.1

 

0.2

 

Breaker S.A. de C.V

 

0.2

 

 

Mexico Transportes Aereos, S.A. de C.V. (“Mextransport”)

 

0.3

 

0.1

 

Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates

 

1.8

 

2.1

 

Ferrocarril Mexicano, S.A. de C.V.

 

3.4

 

2.6

 

 

 

$

13.4

 

$

20.3

 

 

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Purchase Activity:

 

The following table summarizes the purchase activity with related parties in the nine months ended September 30, 2013 and 2012 (in millions):

 

 

 

Nine months ended
September 30,

 

 

 

2013

 

2012

 

Grupo Mexico and affiliates:

 

 

 

 

 

Grupo Mexico Servicios, S.A de C.V

 

$

10.4

 

$

10.5

 

Asarco LLC

 

82.0

 

33.0

 

Ferrocarril Mexicano, S.A de C.V.

 

14.9

 

10.7

 

Compania Perforadora Mexico, S.A.P.I. de C.V and affiliates

 

4.1

 

2.2

 

Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates

 

36.5

 

37.2

 

 

 

 

 

 

 

Other Larrea family companies:

 

 

 

 

 

Mextransport

 

2.0

 

2.0

 

 

 

 

 

 

 

Companies with relationships to SCC executive officers families:

 

 

 

 

 

Higher Technology S.A.C.

 

1.7

 

2.3

 

Servicios y Fabricaciones Mecanicas S.A.C.

 

0.2

 

0.1

 

Sempertrans

 

1.0

 

0.1

 

PIGOBA, S.A. de C.V.

 

0.1

 

0.5

 

Breaker, S.A. de C.V.

 

2.7

 

1.8

 

Total purchased

 

$

155.6

 

$

100.4

 

 

Grupo Mexico and its affiliates: Grupo Mexico, the Company’s ultimate 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 for these services and expects to continue to pay for these services in the future.

 

The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano S.A de C.V., for construction services provided by Mexico Proyectos y Desarrollos S.A. de C.V. and its affiliates and for drilling services provided by Compania Perforadora Mexico S.A.P.I. de C.V. These three companies are subsidiaries of Grupo Mexico.

 

In the nine months of 2013 and 2012, the Company’s Peruvian operations paid fees for engineering, construction and consulting services provided by subsidiaries of Mexico Proyectos y Desarrollos, S.A. de C. V, a subsidiary of Grupo Mexico.

 

In 2005, the Company organized MGE, as a subsidiary of Minera Mexico, for the construction of two power plants to supply power to the Company’s Mexican operations. In May 2010, the Company’s Mexican operations granted a $350 million line of credit to MGE for the construction of the power plants. That line of credit was due on December 31, 2012 and carried an interest rate of 4.4%. In the first quarter of 2012, Controladora de Infraestructura Energética Mexico, S. A. de C. V., an indirect subsidiary of Grupo Mexico, acquired 99.999% of MGE through a capital subscription of 1,928.6 million of Mexican pesos (approximately $150 million), reducing Minera Mexico’s participation to less than 0.001%. As consequence, of this change in control MGE became an indirect subsidiary of Grupo Mexico. Additionally, at the same time, MGE paid $150 million to the Company’s Mexican operations partially reducing the total debt. At December 31, 2012, the outstanding balance of $184.0 million was restructured as subordinated debt of MGE with an interest rate of 5.75%. The $184.0 million includes $37.6 million drawn on the line of credit in 2012 and $146.4 million drawn through December 31, 2011. It is expected that MGE will complete the construction of the first power plant in 2013 and the second in 2014. MGE will repay its debt to the Company using a

 

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percentage of its profits until such time as the debt is satisfied. At September 30, 2013 the remaining balance of the debt was $161.2 million and was recorded as noncurrent related party receivable on the condensed consolidated balance sheet. Related to this loan, the Company recorded interest income of $2.6 million and $7.6 million in the third quarter and nine months of 2013, respectively.

 

In December 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply certain of the Company’s Mexican operations with power through 2032; see also Note 9 - Commitments and Contingencies, Other commitments.

 

Other Larrea family companies: The Larrea family controls a majority of the capital stock of Grupo Mexico, and has extensive interests in other businesses, including aviation and real estate.  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 and air transportation. In 2007, the Company’s Mexican subsidiaries provided guaranties for two loans obtained by Mextransport, a company controlled by the Larrea family. Mextransport provides aviation services to the Company´s Mexican operations. The repayment of these loans was completed in August 2013.

 

Companies with relationships to SCC executive officers families: The Company purchased industrial materials from Higher Technology S.A.C. and paid fees for maintenance services provided by Servicios y Fabricaciones Mecanicas S.A.C.  Mr. Carlos Gonzalez, the son of SCC’s Chief Executive Officer, has a proprietary interest in these companies.

 

The Company purchased industrial material from Sempertrans France Belting Technology and Sempertrans Belchatow SP Z.O.O., in which Mr. Alejandro Gonzalez is employed as a sales representative.  Also, the Company purchased industrial material from PIGOBA, S.A. de C.V., a company in which Mr. Alejandro Gonzalez has a proprietary interest.  Mr. Alejandro Gonzalez is the son of SCC’s Chief Executive Officer.

 

The Company purchased industrial material and services from Breaker, S.A. de C.V., a company in which Mr. Jorge Gonzalez, son-in-law of SCC’s Chief Executive Officer, has a proprietary interest, and from Breaker Peru S.A.C., a company in which Messrs. Jorge Gonzalez and Carlos Gonzales, son-in-law and son, respectively, of SCC´s Chief Executive Officer have a proprietary interest.

 

Sales Activity: The Company sold copper cathodes, rod and anodes, as well as sulfuric acid, silver, gold and lime to Asarco.  In addition, the Company received fees for building rental and maintenance services provided to Mexico Proyectos y Desarrollos, S.A. de C.V. and its affiliates and for natural gas and services provided to MGE, both subsidiaries of Grupo Mexico, and to Mextransport.

 

The following table summarizes the sales and other revenue activity in the three and nine months ended September 30, 2013 and 2012 (in millions):

 

 

 

Three Months
Ended

September 30,

 

Nine Months
Ended

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Asarco

 

$

 

$

11.5

 

$

71.8

 

$

22.9

 

Mexico Proyectos y Desarrollos, S.A. de C.V.

 

0.2

 

0.1

 

0.6

 

0.3

 

Compania Perforadora Mexico, S.A.P.I. de C.V and affiliates

 

0.1

 

0.2

 

0.4

 

0.2

 

MGE

 

10.9

 

 

 

11.6

 

 

 

Mextransport

 

 

0.1

 

0.2

 

0.9

 

Total

 

$

11.2

 

$

11.9

 

$

84.6

 

$

24.3

 

 

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

 

Equity Investment in Affiliate: The Company has a 44.2% participation in 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. To support the cost of the development of Tantahuatay, the Company loaned $56.6 million to Coimolache. Conditions and balance of the loan as of September 30, 2013 are as follows ($ in millions):

 

 

 

Loan

 

Total loan granted

 

$56.6

 

Interest rate

 

6 months Libor + 3%

 

 

 

(approximately 3.45)%

 

Remaining balance at September 30, 2013

 

$20.5

 

 

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Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

Interest:

 

2013

 

2012

 

2013

 

2012

 

Interest earned

 

$

0.2

 

$

0.5

 

$

0.8

 

$

1.5

 

 

In the third quarter and nine months of, 2013, Coimolache paid to the Company $1.9 million and $18.4 million, respectively, as a return of funds expensed during the exploration stage of the Tantahuatay mine, which amount was recorded as other income in the condensed consolidated statement of income.

 

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 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 benefit pension plan for salaried employees and a noncontributory defined benefit pension plan for union employees.

 

The components of the net periodic benefit costs for the nine months ended September 30, 2013 and 2012 are as follows (in millions):

 

 

 

2013

 

2012

 

Interest cost

 

$

0.8

 

$

0.9

 

Service cost

 

1.0

 

0.7

 

Expected return on plan assets

 

(2.5

)

(2.7

)

Amortization of net loss

 

0.1

 

0.1

 

Amortization of net actuarial loss

 

(0.6

)

(0.6

)

Net periodic benefit cost

 

$

(1.2

)

$

(1.6

)

 

Post-retirement health care plan

 

Peru: In 1996, the Company adopted a post-retirement health care plan for retired salaried employees eligible for Medicare. The plan is unfunded. 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.”

 

Mexico: Through 2007, the Buenavista unit provided health care services free of charge to employees and retired unionized employees and their families through its own hospital at the Buenavista unit. In 2011, the Company signed an agreement with the Secretary of Health of the State of Sonora to provide these services to its retired workers and their families at a lower cost for the Company but still free of charge to the retired workers.

 

The components of the net periodic cost for the nine months ended September 30, 2013 and 2012 are as follows (in millions):

 

 

 

2013

 

2012

 

Interest cost

 

$

1.2

 

$

1.1

 

Amortization of net loss (gain)

 

 

(0.2

)

Amortization of prior service cost (credit)

 

 

 

Net periodic benefit cost

 

$

1.2

 

$

0.9

 

 

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 other features, water recovery systems to conserve water and minimize impact

 

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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.

 

Environmental capital expenditures in the nine months ended September 30, 2013 and 2012 were as follows (in millions):

 

 

 

2013

 

2012

 

Peruvian operations

 

$

2.9

 

$

3.0

 

Mexican operations

 

30.3

 

13.8

 

 

 

$

33.2

 

$

16.8

 

 

Peruvian operations

 

The Company’s operations are subject to applicable Peruvian environmental laws and regulations.  The Peruvian government, through the Environmental Ministry conducts annual audits of the Company’s Peruvian mining and metallurgical operations.  Through these environmental audits, matters related to environmental commitments, compliance with legal requirements, atmospheric emissions, and effluent monitoring 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 for future closure and remediation.  In accordance with the requirements of this law the Company’s closure plans were approved by MINEM.  As part of the closure plans, the Company is providing guarantees to ensure that sufficient funds will be available for the asset retirement obligation.  See Note 6, “Asset retirement obligation,” for further discussion of this matter.

 

In August 2008, the Peruvian government enacted environmental regulations establishing stringent new air quality standards (“AQS”) for sulfur dioxide (“SO2”), emissions.  The first step set at 80 micrograms per cubic meter (“ug/m3”) came into effect on January 1, 2009.  The next step, to become effective January 1, 2014, at 20 ug/m3, is subject to availability and feasibility of technology.  These new standards are unlike recognized world AQS that generally range from about 105 ug/m3 to over 250 ug/m3 in places with smelters or heavy industry.  In 2007, the Company completed a $570 million modernization of its Ilo smelter, in order to comply with its agreement with the government to increase its SO2 recapture from 33% to 92%.  The current SO2 Ilo smelter recapture is 95% which, with prevailing weather conditions at Ilo, complies most of the time with the applicable current standard of 80 ug/m3.  The Company believes that current technology is not available to meet the new standard that comes into effect on January 1, 2014 and further believes that some rules under this regulation may allow continued operation in the absence of available feasible technology; thus, the Company will be able to continue to operate its Ilo smelter. Additionally, the Company is studying ways to enhance compliance with the 80 ug/m3 standard under all weather conditions, including adverse weather conditions and to this end has presented to the Peruvian environmental authorities a preliminary program.  The Company continues to study and analyze the Ilo city air quality issues associated with its smelter and the options available for it.

 

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. PROFEPA may initiate administrative proceedings against companies that violate environmental laws, which in the most extreme cases may result in the temporary or permanent closing of non-complying facilities, the revocation of operating licenses and/or other sanctions or fines. Also, according to the federal criminal code, PROFEPA must inform corresponding authorities regarding environmental non-compliance.

 

On January 28, 2011, Article 180 of the General Law was amended. This amendment, gives 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, natural resources, flora, fauna or human health, because it will be sufficient to argue that the harm may be caused.

 

In addition in 2011, amendments to the Civil Federal Procedures Code (“CFPC”) were published in the Official Gazette and are now in force. These amendments establish three categories of collective actions, by means of which 30 or more people claiming injury

 

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derived from environmental, consumer protection, financial services and economic competition issues will be considered to be sufficient in order to have a legitimate interest to seek through a civil procedure restitution or economic compensation or suspension of the activities from which the alleged injury derived. The amendments to the CFPC may result in more litigation, with plaintiffs seeking remedies, including suspension of the activities alleged to cause harm.

 

On June 7, 2013, the Environmental Liability Federal Law was published in the Official Gazette and became effective on July 7, 2013. It establishes general guidelines in order to determine which environmental actions will be considered to cause environmental harm that will give rise to administrative responsibilities (remediation or compensations) and criminal responsibilities. Also economic fines could be established.

 

In March 2010, the Company announced to the Mexican federal environmental authorities the closure of the copper smelter plant at San Luis Potosi. The Company initiated a program for plant demolition and soil remediation with a budget of $35.7 million, of which the Company has spent $33.9 million through September 30, 2013.  Plant demolition and construction of a confinement area at the south of the property were completed in 2012 and the Company expects to complete soil remediation and the construction of a second confinement by the end of 2014.  The Company will deposit in the confinement areas metallurgical and other waste material resulting from plant demolition. The program also includes the construction of a recreational park, a plant nursery to improve the environmental culture, and a logistic center for raw material and finished goods from the San Luis Potosi zinc plant, which the Company expects will improve the flow of traffic in the west of the city. The Company expects that once the site is remediated, the Company will be able to promote an urban development to generate a net gain on the disposal of the property.

 

The Company believes that all of its facilities in Peru and Mexico are in material compliance with applicable environmental, mining and other laws and regulations.

 

The Company also believes that continued compliance with environmental laws of Mexico and Peru will not have a material adverse effect on the Company’s business, properties, result of operations, financial condition or prospects and will not result in material capital expenditures.

 

Litigation matters:

 

Peruvian operations

 

Garcia Ataucuri and Others against SCC’s Peruvian Branch:

 

In April 1996, the Branch was served with a complaint filed in Peru by Mr. Garcia Ataucuri and approximately 900 former employees seeking the delivery of a substantial number of “labor shares” (acciones laborales) plus dividends on such shares, to be issued to each former employee in proportion to their time of employment with SCC’s Peruvian Branch.

 

The labor share litigation is based on claims of former employees for ownership of labor shares that the plaintiffs state that the Branch did not issue during the 1970s until 1979 under a former Peruvian mandated profit sharing system. In 1971, the Peruvian government enacted legislation providing that mining workers would have a 10% participation in the pre-tax profits of their employing enterprises. This participation was distributed 40% in cash and 60% in an equity interest of the enterprise. In 1978, the equity portion, which was originally delivered to a mining industry workers’ organization, was set at 5.5% of pre-tax profits and was delivered, mainly in the form of “labor shares” to individual workers. The cash portion was set at 4.0% of pre-tax earnings and was delivered to individual employees also in proportion to their time of employment with the Branch. In 1992, the workers’ participation was set at 8%, with 100% payable in cash and the equity participation was eliminated from the law.

 

In relation to the issuance of “labor shares” by the Branch in Peru, the Branch is a defendant in the following lawsuits:

 

1)             Mr. Garcia Ataucuri seeks delivery, to himself and each of the approximately 900 former employees of the Peruvian Branch, of the 3,876,380,679.65 old soles or 38,763,806.80 “labor shares” (acciones laborales), as required by Decree Law 22333 (a former profit sharing law), to be issued proportionally to each former employee in accordance with the time of employment of such employee with SCC’s Branch in Peru, plus dividends on such shares. The 38,763,806.80 labor shares sought in the complaint, with a face value of 100.00 old soles each, represent 100% of the labor shares issued by the Branch during the 1970s until 1979 for all of its employees during that period. The plaintiffs do not represent 100% of the Branch´s eligible employees during that period.

 

It should be noted that the lawsuit refers to a prior Peruvian currency called “sol de oro” or old soles, which was later changed to the “inti”, and then into today´s “nuevo sol.” One billion of old soles is equivalent to today’s one nuevo sol.

 

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After lengthy proceedings before the civil courts in Peru on September 19, 2001, on appeal from the Branch (the 2000 appeal), the Peruvian Supreme Court annulled the proceedings noting that the civil courts lacked jurisdiction and that the matter had to be decided by a labor court.

 

In October 2007, in a separate proceeding initiated by the plaintiffs, the Peruvian Constitutional Court nullified the September 19, 2001 Peruvian Supreme Court decision and ordered the Supreme Court to decide again on the merits of the case accepting or denying the Branch’s 2000 appeal.

 

In May 2009, the Supreme Court rejected the 2000 appeal of the Branch affirming the adverse decision of the appellate civil court and lower civil court. While the Supreme Court has ordered SCC’s Peruvian Branch to deliver the labor shares and dividends, it has clearly stated that SCC’s Peruvian Branch may prove, by all legal means, its assertion that the labor shares and dividends were distributed to the former employees in accordance with the profit sharing law then in effect, an assertion which SCC’s Peruvian Branch continues to make. None of the court decisions state the manner by which the Branch must comply with the delivery of such labor shares or make a liquidation of the amount to be paid for past dividends and interest, if any.

 

On June 9, 2009, SCC’s Peruvian Branch filed a proceeding of relief before a civil court in Peru seeking the nullity of the 2009 Supreme Court decision and, in a separate proceeding, a request for a precautionary measure. The civil court rendered a favorable decision on the nullity and the precautionary measure, suspending the enforcement of the Supreme Court decision, for the reasons indicated above and other reasons. In February 2012, the Branch was notified that the civil court had reversed its prior decisions. On appeal by the Peruvian Branch the Superior Court affirmed the lower court’s decisions regarding the nullity of the 2009 Supreme Court decision and the precautionary measure.  As a result, the nullity of the precautionary measure became final and unappealable. However, the nullity of the 2009 Supreme Court decision has been appealed by the Branch before the Constitutional Court. At September 30, 2013 this appeal is pending resolution. In view of this, SCC´s Peruvian Branch continues to analyze the manner in which the Supreme Court decision may be enforced and what financial impact, if any, said decision may have.

 

2)             In addition, there are filed against SCC’s Branch the following lawsuits, involving approximately 800 plaintiffs, which seek the same number of labor shares as in the Garcia Ataucuri case, plus interest, labor shares resulting from capital increases and dividends: Armando Cornejo Flores and others v. SCC’s Peruvian Branch (filed May 10, 2006); Alejandro Zapata Mamani and others v. SCC’s Peruvian Branch (filed June 27, 2008); Edgardo Garcia Ataucuri, in representation of 216 of SCC’s Peruvian Branch former workers, v. SCC’s Peruvian Branch (filed May 2011); Silvestre Macedo Condori v. SCC’s Peruvian Branch (filed June 2011); Juan Guillermo Oporto Carpio v. SCC’s Peruvian Branch (filed August 2011); Rene Mercado Caballero v. SCC’s Peruvian Branch (filed November 2011); Enrique Salazar Alvarez and others v. SCC’s Peruvian Branch (filed December 2011); Indalecio Carlos Perez Cano and others v. SCC Peruvian Branch (filed March 2012); Jesús Mamani Chura and others v. SCC’s Peruvian Branch (filed March, 2012); Armando Cornejo Flores, in representation of 37 of SCC’s Peruvian Branch former workers v. SCC’s Peruvian Branch (filed March, 2012), Porfirio Ochochoque Mamani and others v. SCC´s Peruvian Branch (filed July, 2012);  Alfonso Flores Terrones and others v. SCC’s Peruvian Branch (filed July, 2013) and Micaela Laura Alvarez and others v. SCC’s Peruvian Branch (filed August, 2013). SCC’s Peruvian Branch has answered the complaints and denied the validity of the claims.

 

SCC’s Peruvian Branch asserts that the labor shares were distributed to the former employees in accordance with the profit sharing law then in effect. The Peruvian Branch has not made a provision for these lawsuits because it believes that it has meritorious defenses to the claims asserted in the complaints. Additionally, the amount of this contingency cannot be reasonably estimated by management at this time.

 

The “Virgen Maria” Mining Concessions of the Tía Maria Mining Project

 

The Tia Maria project includes various mining concessions, totaling 32,989.64 hectares.  One of the concessions is the “Virgen María” mining concession totaling 943.72 hectares or 2.9% of the total mining concessions.

 

Related to the “Virgen María” mining concessions, the Company is party to the following lawsuits:

 

a)             Exploraciones de Concesiones Metalicas S.A.C. (“Excomet”):  In August 2009, a lawsuit was filed against SCC’s Branch by the former stockholders of Excomet.  The plaintiffs allege that the acquisition of Excomet’s shares by the Branch is null and void because the $2 million purchase price paid by the Branch for the shares of Excomet was not fairly negotiated by the plaintiffs and the Branch.  In 2005, the Branch acquired the shares of Excomet after lengthy negotiations with the plaintiffs, and after the plaintiffs, which were all the stockholders of Excomet, approved the transaction in a general stockholders’ meeting.  Excomet was at the time owner of the “Virgen Maria” mining concession.  In October 2011, the civil court

 

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dismissed the case on the grounds that the claim had been barred by the statute of limitations.  On appeal by the plaintiffs, the superior court reversed the lower court´s decision.  As of September 30, 2013, the case remains pending without further developments.

 

b)             Sociedad Minera de Responsabilidad Limitada Virgen Maria de Arequipa (SMRL Virgen Maria): In August 2010, a lawsuit was filed against SCC’s Branch and others by SMRL Virgen Maria, a company which until July 2003 owned the mining concession Virgen Maria.  SMRL Virgen Maria sold this mining concession in July 2003 to Excomet (see a) above).  The plaintiff alleges that the sale of the mining concession Virgen Maria to Excomet is null and void because the persons who attended the shareholders’ meeting of SMRL Virgen Maria, at which the purchase was agreed upon, were not the real owners of the shares.  The plaintiff is also pursuing the nullity of all the subsequent acts regarding the mining property (acquisition of the shares of Excomet by SCC’s Branch, noted above, and the sale of this concession to SCC’s Branch by Excomet). In October 2011, the civil court dismissed the case on the grounds that the claim had been barred by the statute of limitations.  Upon appeal by the plaintiffs, the superior court remanded the proceedings to the lower court, ordering the issuance of a new decision.  On June 25, 2013, the lower court dismissed the case due to procedural defects.  The plaintiff appealed this decision before the Superior Court.  As of September 30, 2013, the case remains pending without further developments.

 

c)              Omar Nuñez Melgar: In May 2011, Mr. Omar Nuñez Melgar commenced a lawsuit against the Peruvian Mining and Metallurgical Institute and MINEM challenging the denial of his request of a new mining concession that conflicted with SCC’s Branch’s Virgen Maria mining concession.  SCC’s Branch has been made a party to the proceedings as the owner of the Virgen Maria concession.  SCC’s Branch has answered the complaint and denied the validity of the claim.  As of September 30, 2013, the case remains pending without further developments.

 

The Company asserts that the lawsuits are without merit and is vigorously defending against these lawsuits.

 

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

 

In the last quarter of 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 constructed and operated the tailing dams also with proper governmental authorization, since 1995.  SCC’s Peruvian Branch asserts that the lawsuit is without merit and is vigorously defending against the lawsuit. Upon a motion filed by the Peruvian Branch the lower court has included the Ministry of Energy and Mines as a defendant in this lawsuit.  The Ministry of Energy and Mines has answered the complaint and denied the validity of the claim. As of September 30, 2013, the case remains pending without further developments.

 

Labor matters:

 

In recent years the Company has experienced a number of strikes or other labor disruptions that have had an adverse impact on its operations and operating results.

 

Peruvian Operations

 

Approximately 66% of the Company’s 4,469 Peruvian employees were unionized at September 30, 2013, represented by seven separate unions. Three of these unions, one at each major production area, represent 2,244 workers. Also, there are four smaller unions, representing the balance of workers.  The Company conducted negotiations with the unions whose collective bargaining agreements expired in 2012. In the first quarter of 2013, the Company signed three-year agreements with all the unions. The agreements included, among other things, annual salary increases of 6.5%, 5% and 5% for each of the three years, respectively, for all workers.

 

On September 26, 2013 45% of the workers of the major union of the Toquepala mine held a one-day illegal work stoppage which did not have a material impact on production.  On December 24 and 25, 2012, the three major unions held a two-day illegal work stoppage which did not have a material impact on production.

 

Mexican operations

 

In recent years, the Mexican operations have experienced a positive improvement of their labor environment, as its workers, in a free decision, opted to change their affiliation from the Sindicato Nacional de Trabajadores Mineros, Metalurgicos y Similares de la Republica Mexicana (National Union of Mine and Metal Workers and Similar Activities of the Mexican Republic or the “National Mining Union”) to other unions.  In 2006, workers of Mexicana del Cobre mining complex and IMMSA joined the Sindicato Nacional de Trabajadores de la Exploracion, Explotacion y Beneficio de Minas en la Republica Mexicana (National

 

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Union of Workers Engaged in Exploration, Exploitation and Processing of Mines in the Mexican Republic), and the Mexicana del Cobre metallurgical workers joined the Sindicato de Trabajadores de la Industria Minero Metalurgica (Union of Workers of the Mine and Metals Industry or the “CTM”).  Finally, in 2011 Buenavista del Cobre workers joined the CTM.  This positive labor environment allows the Company to increase its productivity and to develop its capital expansion programs.

 

The workers of the San Martin and Taxco mines, still under the National Mining Union, have been on strike since July 2007.  On December 10, 2009, a federal court confirmed the legality of the San Martin strike.  In order to recover the control of the San Martin mine and resume operations, on January 27, 2011, the Company filed a court petition requesting that the court, among other things define the termination payment for each unionized worker.  The court denied the petition alleging that, according to federal labor law, the union was the only legitimate party to file such petition.  On appeal by the Company, on May 13, 2011, the Mexican federal tribunal accepted the petition.  In July 2011, the National Mining Union appealed the favorable court decision before the Supreme Court.  On November 7, 2012, the Supreme Court affirmed the decision of the federal tribunal.  The Company filed a new proceeding before the labor court on the basis of the Supreme Court decision, which recognized the right of the labor court to define responsibility for the strike and the termination payment for each unionized worker.  A favorable decision of the labor court in this new proceeding would have the effect of terminating the protracted strike at San Martin.  As of September 30, 2013, the case remains pending without further developments.

 

In July 2012, Minera Krypton, a Mexican mining company, not affiliated with the Company or Grupo Mexico, hired 130 workers for the rehabilitation of its mining unit at Chalchihuites, Zacatecas.  Most of these workers, which are or were workers of the San Martin mine, joined a new union called the Sindicato de Trabajadores de la Industria Minera y Similares de la Republica Mexicana (Union of Workers of the Mine and Metals Industry and Similar Activities of the Mexican Republic or the “Union of Mexican Mine and Metal Workers”). On August 31, 2012, the Union of Mexican Mine and Metal Workers filed a petition with the labor authorities to replace the existing union at the San Martin mine.  On September 1, 2012, the workers affiliated with the Union of Mexican Mine and Metal Workers took over the San Martin mine evicting the workers on strike.  Several hearings took place during September 2012 with the federal labor authorities. On October 12, 2012, the federal labor court ordered and enforced a recount in order to establish which union will hold the collective bargaining agreement. The Union of Mexican Mine and Metal Workers lost the recount.  This result was challenged by the Union of Mexican Mine and Metal Workers.

 

On August 1, 2013, the National Union of Workers Engaged in Exploration, Exploitation and Processing of Mines in the Mexican Republic, which is the union operating at Mexicana del Cobre and IMMSA, filed a new petition before the labor authorities to replace the National Mining Union at the San Martin mine, because it believes that it represents more workers at the San Martin mine than the National Mining Union. As of September 30, 2013, the proceeding remains pending without further developments. On August 12, 2013 the Union of Mexican Mine and Metal Workers withdrew its petition to replace the existing unit at San Martin in order to expedite the restart of operations at San Martin.

 

In the case of the Taxco mine, following the workers refusal to allow exploration of new reserves, the Company commenced litigation seeking to terminate the labor relationship with workers of the Taxco mine (including the related collective bargaining agreement).  On September 1, 2010, the federal labor court issued a ruling approving the termination of the collective bargaining agreement and all the individual labor contracts of the workers affiliated with the Mexican mining union at the Taxco mine.  The ruling was based upon the resistance of the mining union to allow the Company search for reserves at the Taxco mine.  The mining union appealed the labor court ruling before a federal court.  In September 2011, the federal court accepted the union’s appeal and requested that the federal labor court review the procedure and take into account all the evidence to issue a new resolution.  On January 3, 2012, the federal labor court issued a new resolution, approving the termination of the collective bargaining agreement and all the individual labor contracts of the workers affiliated with the National Mining Union at the Taxco mine.  On January 25, 2012, the National Mining Union appealed the resolution before the federal court.  On June 14, 2012, the federal court accepted the union’s appeal and requested that the federal labor court issue a new resolution, taking into account all the evidence submitted by the parties.  On August 6, 2012, the federal labor court issued a new decision disapproving the termination of the collective bargaining agreement and the individual labor contracts of the workers affiliated with the National Mining Union at the Taxco mine. On August 29, 2012, the Company filed a proceeding seeking relief from the decision before a federal court.  On January 25, 2013, the Company filed a new proceeding before the labor court on the basis of the Supreme Court decision in the San Martin case, which recognized the right of the labor court to define responsibility for the strike and the termination payment for each unionized worker.  A favorable decision of the labor court in this new proceeding would have the effect of terminating the protracted strike at San Martin. As of September 30, 2013, this case is pending resolution.

 

It is expected that operations at these mines will remain suspended until these labor issues are resolved.

 

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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 Contingencies:

 

Tia Maria:

 

Tia Maria, an over $1.0 billion Peruvian investment project, was suspended by governmental action in April 2011 in light of protests and disruptions carried out by a small group of activists who alleged, among other things, that the project would result in severe environmental contamination and the diversion of agricultural water resources.

 

The Company is preparing a new EIA study, which it believes will take into account local community concerns and new government guidance. The Company considers that this new EIA process will alleviate all the concerns previously raised by the Tia Maria project’s neighboring communities, provide them with an independent source of information and reaffirm the validity of the Company’s assessment of the project. The Company is confident that this initiative will have a positive effect on its stakeholders and will allow the Company to obtain the approval for the development of the 120,000 ton annual production copper project. In view of the delays, the mining operations for the project have been rescheduled to start-up in 2016, contingent upon receiving all required governmental approvals in the time frame provided by law. No assurances can be given as to the specific timing of each such approval.

 

The Company has legal and valid title to the Tia Maria mining concessions and the over-lapping surface land in the area. None of above noted activities have in any way challenged, revoked, impaired or annulled the Company´s legal rights to the Tia Maria mining concessions and/or the over-lapping surface land titles acquired in the past. All the Company’s property rights on these areas are in full force.

 

In view of the delay in this project, the Company has reviewed the carrying value of this asset to ascertain whether impairment exists. Total spending on the project, through September 30, 2013, was $505.9 million of which $189.5 million has been reassigned to other Company operations.  Should the Tia Maria project not be restarted, the Company is confident that most of the project equipment will continue to be used productively, through reassignment to other mine locations operated by the Company.  The Company believes that an impairment loss, if any, will not be material.

 

Other commitments:

 

Peruvian Operations

 

Power purchase agreement - Enersur

 

In 1997, SCC sold its Ilo power plant to an independent power company, Enersur S.A. (“Enersur”).  In connection with the sale, a power purchase agreement (“PPA”) was also completed under which SCC agreed to purchase all of its power needs for its current Peruvian operations from Enersur for twenty years, commencing in 1997.

 

The Company signed in 2009 a Memorandum of Understanding (“MOU”) with Enersur regarding its PPA.  The MOU contains new economic terms that the Company believes better reflects current economic conditions in the power industry in Peru.  The new economic conditions agreed to in the MOU have been applied by Enersur to its invoices to the Company since May 2009.  Additionally, the MOU includes an option for providing power for the Tia Maria project. However, due to the delay at the Tia Maria project the final agreement was put on hold, see caption “Tia Maria” above.

 

Toquepala Concentrator Expansion

 

In connection with the EIA of the Toquepala expansion project, some community groups raised concerns related to water usage and pollution. As a result of these issues the Peruvian government started discussions with the local communities and the regional authorities to resolve this impasse. On February 8, 2013, the Company reached a final agreement with the province of Candarave, one of the three provinces neighboring the Toquepala unit, which commits the Company to funding S/.255 million (approximately $100 million) for development projects in the province.  This contribution is contingent upon receiving approval for the project and will be expended through the life of the Toquepala expansion project.  In the second quarter of 2013, the Company made a contribution of S/.45 million (approximately $17 million) to the development fund of the Candarave province   The Company continued working with the authorities of the Candarave province and in June 2013 signed an agreement with the

 

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National Water Authority, local authorities and the Candarave Board of Water Users for the hydrogeologic study of the Locumba river basin in order to improve the water utilization in the province. These contributions are contingent upon receiving approval for the project and will be expended through the life of the Toquepala expansion project.

 

Mexican operations

 

Power purchase agreement - MGE

 

MGE, a subsidiary of Grupo Mexico, is constructing two power plants in Mexico to supply power to some of the Company’s Mexican operations.  In December 2012, the Company signed a power supply agreement with MGE, whereby MGE will supply the Company with power through 2032.  The estimated monthly capacity charge is approximately $4.3 million. It is expected that MGE will begin to supply power to the Company in 2014.

 

NOTE 10 — SEGMENT AND RELATED INFORMATION:

 

Company management views Southern Copper as having three reportable segments and manages 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, type 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 type 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 Officer on the segment basis.  The Chief Operating Officer 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.

 

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

 

 

 

Three Months Ended September 30, 2013

 

 

 

(in millions)

 

 

 

Mexican
Open-pit

 

Mexican
IMMSA
Unit

 

Peruvian
Operations

 

Corporate, other
and eliminations

 

Consolidated

 

Net sales outside of segments

 

$

641.0

 

$

88.2

 

$

655.3

 

 

 

$

1,384.5

 

Intersegment sales

 

 

18.2

 

 

$

(18.2

)

 

Cost of sales (exclusive of depreciation, amortization and depletion)

 

265.4

 

74.2

 

340.9

 

(14.5

)

666.0

 

Selling, general and administrative

 

8.2

 

3.5

 

11.7

 

0.7

 

24.1

 

Depreciation, amortization and depletion

 

46.2

 

7.6

 

43.6

 

4.1

 

101.5

 

Exploration

 

0.7

 

6.7

 

4.6

 

 

12.0

 

Operating income

 

$

320.5

 

$

14.4

 

$

254.5

 

$

(8.5

)

580.9

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

 

 

 

 

 

 

 

(43.7

)

Other income (expense)

 

 

 

 

 

 

 

 

 

1.7

 

Income taxes

 

 

 

 

 

 

 

 

 

(195.2

)

Equity earnings of affiliate

 

 

 

 

 

 

 

 

 

1.8

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

(1.3

)

Net income attributable to SCC

 

 

 

 

 

 

 

 

 

$

344.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure

 

$

335.0

 

$

13.1

 

$

122.1

 

$

18.0

 

$

488.2

 

Property, net

 

$

3,266.5

 

$

372.5

 

$

2,330.5

 

$

62.6

 

$

6,032.1

 

Total assets

 

$

5,474.7

 

$

882.0

 

$

3,527.8

 

$

1,051.2

 

$

10,935.7

 

 

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Three Months Ended September 30, 2012

 

 

 

(in millions)

 

 

 

Mexican
Open-pit

 

Mexican
IMMSA
Unit

 

Peruvian
Operations

 

Corporate, other
and eliminations

 

Consolidated

 

Net sales outside of segments

 

$

784.7

 

$

86.6

 

$

681.1

 

 

$

1,552.4

 

Intersegment sales

 

 

22.3

 

 

$

(22.3

)

 

Cost of sales (exclusive of depreciation, amortization and depletion)

 

294.5

 

60.7

 

341.4

 

(25.7

)

670.9

 

Selling, general and administrative

 

8.4

 

3.6

 

11.0

 

0.7

 

23.7

 

Depreciation, amortization and depletion

 

36.9

 

6.3

 

40.1

 

(2.0

)

81.3

 

Exploration

 

1.0

 

8.3

 

3.2

 

 

12.5

 

Legal fees related to SCC shareholder derivative lawsuit

 

 

 

 

316.2

 

316.2

 

Operating income

 

$

443.9

 

$

30.0

 

$

285.4

 

$

(311.5

)

447.8

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

 

 

 

 

 

 

 

(25.8

)

Other income (expense)

 

 

 

 

 

 

 

 

 

3.5

 

Income taxes

 

 

 

 

 

 

 

 

 

(219.8

)

Equity earnings of affiliate

 

 

 

 

 

 

 

 

 

13.6

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

(1.4

)

Net income attributable to SCC

 

 

 

 

 

 

 

 

 

$

217.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure

 

$

133.7

 

$

12.4

 

$

70.1

 

$

42.0

 

$

258.2

 

Property, net

 

$

2,244.6

 

$

341.2

 

$

2,146.8

 

$

123.6

 

$

4,856.2

 

Total assets

 

$

4,082.3

 

$

807.5

 

$

3,184.3

 

$

2,767.7

 

$

10,841.8

 

 

 

 

Nine Months Ended September 30, 2013

 

 

 

(in millions)

 

 

 

Mexican
Open-pit

 

Mexican
IMMSA
Unit

 

Peruvian
Operations

 

Corporate, other
and eliminations

 

Consolidated

 

Net sales outside of segments

 

$

2,227.7

 

$

268.1

 

$

1,921.9

 

 

$

4,417.7

 

Intersegment sales

 

 

75.6

 

 

$

(75.6

)

 

Cost of sales (exclusive of depreciation, amortization and depletion)

 

982.9

 

235.7

 

976.5

 

(90.1

)

2,105.0

 

Selling, general and administrative

 

26.1

 

11.2

 

37.0

 

2.6

 

76.9

 

Depreciation, amortization and depletion

 

129.6

 

21.4

 

127.2

 

7.4

 

285.6

 

Exploration

 

2.4

 

19.4

 

12.2

 

 

34.0

 

Operating income

 

$

1,086.7

 

$

56.0

 

$

769.0

 

$

4.5

 

$

1,916.2

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

 

 

 

 

 

 

 

(137.3

)

Other income (expense)

 

 

 

 

 

 

 

 

 

19.5

 

Income taxes

 

 

 

 

 

 

 

 

 

(596.9

)

Equity earnings of affiliate

 

 

 

 

 

 

 

 

 

15.2

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

(4.4

)

Net income attributable to SCC

 

 

 

 

 

 

 

 

 

$

1,212.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure

 

$

881.0

 

$

44.5

 

$

225.3

 

$

39.7

 

$

1,190.5

 

Property, net

 

$

3,266.5

 

$

372.5

 

$

2,330.5

 

$

62.6

 

$

6,032.1

 

Total assets

 

$

5,474.7

 

$

882.0

 

$

3,527.8

 

$

1,051.2

 

$

10,935.7

 

 

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Nine Months Ended September 30, 2012

 

 

 

(in millions)

 

 

 

Mexican

Open-pit

 

Mexican
IMMSA
Unit

 

Peruvian
Operations

 

Corporate, other
and eliminations

 

Consolidated

 

Net sales outside of segments

 

$

2,483.3

 

$

281.3

 

$

2,253.6

 

 

$

5,018.2

 

Intersegment sales

 

 

98.1

 

 

$

(98.1

)

 

Cost of sales (exclusive of depreciation, amortization and depletion)

 

926.2

 

206.0

 

1,033.3

 

(104.8

)

2,060.7

 

Selling, general and administrative

 

25.5

 

10.8

 

35.6

 

2.7

 

74.6

 

Depreciation, amortization and depletion

 

106.2

 

18.9

 

118.1

 

(6.6

)

236.6

 

Exploration

 

4.2

 

21.2

 

8.4

 

 

33.8

 

Legal fees related to SCC shareholder derivative lawsuit

 

 

 

 

316.2

 

316.2

 

Operating income

 

$

1,421.2

 

$

122.5

 

$

1,058.2

 

$

(305.6

)

2,296.3

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

 

 

 

 

 

 

 

(107.0

)

Other income (expense)

 

 

 

 

 

 

 

 

 

29.1

 

Income taxes

 

 

 

 

 

 

 

 

 

(848.5

)

Equity earnings of affiliate

 

 

 

 

 

 

 

 

 

38.2

 

Non-controlling interest

 

 

 

 

 

 

 

 

 

(5.3

)

Net income attributable to SCC

 

 

 

 

 

 

 

 

 

$

1,402.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditure

 

$

537.0

 

$

40.5

 

$

158.2

 

$

(69.8

)

$

665.9

 

Property, net

 

$

2,244.6

 

$

341.2

 

$

2,146.8

 

$

123.6

 

$

4,856.2

 

Total assets

 

$

4,082.3

 

$

807.5

 

$

3,184.3

 

$

2,767.7

 

$

10,841.8

 

 

NOTE 11 — STOCKHOLDERS´EQUITY:

 

Treasury Stock:

 

Activity in treasury stock in the nine-month period ended September 30, 2013 and 2012 is as follows (in millions):

 

 

 

2013

 

2012

 

Southern Copper common shares

 

 

 

 

 

Balance as of January 1,

 

$

729.8

 

$

734.1

 

Purchase of shares

 

124.0

 

132.4

 

Stock dividend

 

 

(151.4

)

Used for corporate purposes

 

(0.3

)

(0.3

)

Balance as of September 30,

 

853.5

 

714.8

 

 

 

 

 

 

 

Parent Company (Grupo Mexico) common shares

 

 

 

 

 

Balance as of January 1,

 

189.0

 

163.7

 

Other activity, including dividend, interest and currency translation effect

 

12.9

 

24.1

 

Balance as of September 30,

 

201.9

 

187.8

 

 

 

 

 

 

 

Treasury stock balance as of September 30,

 

$

1,055.4

 

$

902.6

 

 

The following table summarizes share distributions in the nine months of 2013 and 2012:

 

 

 

2013

 

2012

 

Southern Copper common shares

 

 

 

 

 

Directors’ Stock Award Plan

 

12,000

 

14,400

 

 

 

 

 

 

 

Parent Company (Grupo Mexico) common shares

 

 

 

 

 

Employee stock purchase plan (shares in millions)

 

4.5

 

7.0

 

 

Additional paid-in capital:

 

Delaware Court Decision Related to SCC Shareholder Derivative Lawsuit:  On October 9, 2012 the Company received from AMC, its majority shareholder, $2,108.2 million in satisfaction of the judgment issued pursuant to the decision of the Court of Chancery of Delaware, which concluded that the Company paid an excessive price to AMC in the 2005 merger between the Company and Minera Mexico, S.A. de C.V. From the aforementioned sum received from AMC, the Company paid $316.2 million of legal fees and expenses to the plaintiff’s attorneys to satisfy the court ordered award of attorneys’ fees and expenses. The effect of this award was recorded in the Company’s third quarter 2012 results. The $2,108.2 million awarded to the

 

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Table of Contents

 

Company was included in the capital accounts (additional paid-in capital) on the balance sheet. Additionally, the Company recorded an operating expense of $316.2 million in its third quarter 2012 results for the legal fees related to this award.

 

Treasury Stock:

 

Southern Copper Common Shares:

 

At September 30, 2013 and 2012, there were in treasury 43,337,548 and 38,615,536 SCC’s common shares, respectively.

 

SCC share repurchase program:  In 2011, the Company´s Board of Directors authorized a $1 billion share repurchase program.  On October 17, 2013, the Board of Directors approved an increase of this program from $1 billion to $2 billion. Pursuant to this program, the Company purchased common stock as shown in the table below.  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.

 

 

 

 

 

 

 

 

 

 

 

Maximum Number

 

 

 

 

 

 

 

 

 

 

 

Total Number of

 

of Shares that May

 

 

 

 

 

 

 

Total Number of

 

Average

 

Shares Purchased as

 

Yet Be Purchased

 

 

 

Period

 

Shares

 

Price Paid

 

Part of Publicly

 

Under the Plan

 

Total Cost

 

From

 

To

 

Purchased

 

per Share

 

Announced Plan

 

@ $27.24 (*)

 

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2008:

 

 

 

 

 

 

 

 

 

 

 

 

 

08/11/08

 

12/31/08

 

28,510,150

 

$

13.49

 

28,510,150

 

 

 

$

384.7

 

2009:

 

 

 

 

 

 

 

 

 

 

 

 

 

01/12/09

 

09/30/09

 

4,912,000

 

14.64

 

33,422,150

 

 

 

71.9

 

2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

05/05/10

 

10/14/10

 

15,600

 

29.69

 

33,437,750

 

 

 

0.5

 

2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

05/02/11

 

12/31/11

 

9,034,400

 

30.29

 

42,472,150

 

 

 

273.7

 

2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

04/10/12

 

10/31/12

 

4,442,336

 

33.17

 

46,914,486

 

 

 

147.3

 

2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

04/01/13

 

04/30/13

 

1,500

 

32.96

 

46,915,986

 

 

 

0.1

 

05/01/13