-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+/NCxZxZePrkl7Frg8QRR5Xbt4uyghWfNZSCXRUfwIq2Bgu3kbhZhKyQ4EjY7lS 5hG3olGmM574e2QJfsqrAA== 0000912057-00-024355.txt : 20000516 0000912057-00-024355.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024355 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN PERU COPPER CORP/ CENTRAL INDEX KEY: 0001001838 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 133849074 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14066 FILM NUMBER: 631759 BUSINESS ADDRESS: STREET 1: 180 MAIDEN LANE CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2125102000 MAIL ADDRESS: STREET 1: 180 MAIDEN LANE STREET 2: 180 MAIDEN LANE CITY: NEW YORK STATE: NY ZIP: 10038 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHERN PERU COPPER HOLDING CO DATE OF NAME CHANGE: 19951006 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 2000 First Quarter FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended MARCH 31, 2000 Commission file number 1-14066 SOUTHERN PERU COPPER CORPORATION -------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-3849074 -------- ---------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 180 MAIDEN LANE, NEW YORK, N.Y. 10038 ------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 212-510-2000 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 |_| As of April 30, 2000 there were outstanding 14,095,792 shares of Southern Peru Copper Corporation common stock, par value $0.01 per share. There were also outstanding 65,900,833 shares of Southern Peru Copper Corporation Class A common stock, par value $0.01 per share. Southern Peru Copper Corporation and Subsidiaries INDEX TO FORM 10-Q Page No. -------- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements (unaudited) Condensed Consolidated Statement of Earnings Three months ended March 31, 2000 and 1999 2 Condensed Consolidated Balance Sheet March 31, 2000 and December 31, 1999 3 Condensed Consolidated Statement of Cash Flows Three Months ended March 31, 2000 and 1999 4 Notes to Condensed Consolidated Financial Statements 5-7 Item 2. Management's Discussion and Analysis of 8-12 Financial Condition and Results of Operations Report of Independent Public Accountants 13 PART II. OTHER INFORMATION: Item 4. Submission of matters to a vote of Security Holders 14 Item 6. Exhibits on Form 10-Q 14 Signatures 15 Exhibit 15 - Independent Accountants' Awareness Letter Southern Peru Copper Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (unaudited)
3 Months Ended March 31, 2000 1999 --------- --------- (in thousands, except for per share amounts) Net sales: Stockholders and affiliates $ 16,337 $ -- Others 146,785 123,942 --------- --------- Total net sales 163,122 123,942 --------- --------- Operating costs and expenses: Cost of sales 109,803 89,250 Administrative and other expenses 7,202 10,099 Depreciation and depletion 18,638 17,386 Exploration expense 732 760 --------- --------- Total operating costs and expenses 136,375 117,495 --------- --------- Operating income 26,747 6,447 Interest income 428 2,917 Other income 983 1,465 Interest expense (3,916) (5,052) --------- --------- Earnings before taxes on income and minority interest of investment shares 24,242 5,777 Taxes on income 7,611 1,733 Minority interest of investment shares in income of Peruvian Branch 156 2 --------- --------- Net earnings $ 16,475 $ 4,042 ========= ========= Per common share amounts: Net earnings - basic and diluted $ 0.21 $ 0.05 Dividends paid $ 0.06 $ 0.03 Weighted average common shares outstanding: Basic 80,001 79,857 Diluted 80,008 79,883
The accompanying notes are an integral part of these financial statements. 2 Southern Peru Copper Corporation and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
March 31, December 31, 2000 1999 ---------- ---------- (in thousands) ASSETS Current assets: Cash and cash equivalents $ 18,174 $ 10,596 Accounts receivable, net 83,569 80,664 Inventories 99,937 110,171 Other current assets 61,479 67,710 ---------- ---------- Total current assets 263,159 269,141 Net property 1,265,291 1,250,887 Other assets 24,446 25,425 ---------- ---------- Total Assets $1,552,896 $1,545,453 ========== ========== LIABILITIES Current liabilities: Current portion of long-term debt $ 27,518 $ 23,272 Accounts payable 35,849 58,413 Accrued liabilities 34,443 29,472 ---------- ---------- Total current liabilities 97,810 111,157 ---------- ---------- Long-term debt 205,007 199,253 Deferred income taxes 84,007 79,888 Other liabilities 14,938 15,242 ---------- ---------- Total non-current liabilities 303,952 294,383 ---------- ---------- Minority interest of investment shares in the Peruvian Branch 13,521 13,975 ---------- ---------- STOCKHOLDERS' EQUITY Common stock (a) 261,584 261,584 Retained earnings 876,029 864,354 ---------- ---------- Total Stockholders' Equity 1,137,613 1,125,938 ---------- ---------- Total Liabilities, Minority Interest and Stockholders' Equity $1,552,896 $1,545,453 ========== ========== (a) Common shares: Authorized 34,099 34,099 Outstanding 14,096 14,119 Class A common shares Authorized and Outstanding 65,901 65,901
The accompanying notes are an integral part of these financial statements. 3 Southern Peru Copper Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
3 Months Ended March 31, 2000 1999 -------- --------- (in thousands) OPERATING ACTIVITIES Net earnings $ 16,475 $ 4,042 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and depletion 18,638 17,386 Provision for deferred income taxes 4,222 5,256 Foreign currency transaction losses 902 1,516 Minority interest of labor shares 156 2 Net changes in operating assets and liabilities: Accounts receivable (2,821) 12,582 Inventories 10,234 1,371 Accounts payable and accrued liabilities (18,882) (6,101) Other operating assets and liabilities 8,342 2,446 -------- --------- Net cash provided by operating activities 37,266 38,500 -------- --------- INVESTING ACTIVITIES Capital expenditures (33,236) (50,314) Purchases of held-to-maturity investments -- (24,470) Proceeds from held-to-maturity investments -- 22,152 Sales of property 6 362 -------- --------- Net cash used in investing activities (33,230) (52,270) -------- --------- FINANCING ACTIVITIES Proceeds from borrowings 10,000 2,000 Escrow (deposits) withdrawals on long-term loans 190 (27) Dividends paid to common stockholders (4,800) (2,396) Distributions to minority interest (86) (47) Purchases of investment shares (851) (183) -------- --------- Net cash provided by(used in) financing activities 4,453 (653) -------- --------- Effect of exchange rate changes on cash (911) (737) -------- --------- Increase (decrease) in cash and cash equivalents 7,578 (15,160) Cash and cash equivalents at beginning of period 10,596 175,948 -------- --------- Cash and cash equivalents at end of period $ 18,174 $ 160,788 ======== =========
The accompanying notes are an integral part of these financial statements. 4 Southern Peru Copper Corporation and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) A. In the opinion of Southern Peru Copper Corporation ("the Company"), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position as of March 31, 2000 and the results of operations and cash flows for the three-months ended March 31, 2000 and 1999. The condensed financial statements as of March 31, 1999 and for the three-month period then ended were reviewed by other accountants whose report dated April 16, 1999 stated that they were not aware of any material modifications that should be made to those statements in order for them to be in conformity with generally accepted accounting principles. Certain reclassifications have been made in the financial statements from amounts previously reported. The financial data as of March 31, 2000 and for the three-months period then ended has been subjected to a review by Medina, Zaldivar y Asociados Sociedad Civil, member firm of Arthur Andersen, the Company's independent public accountants. The results of operations for the three-month period are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1999 annual report on Form 10-K. B. Inventories were as follows: (in millions)
March 31, December 31, 2000 1999 ---- ---- Metals at lower of average cost or market: Finished goods $ 1.2 $ 1.5 Work-in-process 39.3 48.7 Supplies at average cost, net of reserves 59.4 60.0 ------- ------- Total inventories $ 99.9 $ 110.2 ======= =======
C. At March 31, 2000, the Company has recorded sales of 6.7 million pounds of copper, at a provisional price of $0.80 per pound. These sales are subject to final pricing based on the average monthly LME copper prices in the month of settlement which will occur in the second quarter of 2000. D. Financial Instruments: The Company uses derivative instruments to manage its exposure to market risk from changes in commodity prices. Derivative instruments, which are designated as hedges, must be deemed effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. 5 Copper: Depending on market fundamentals and other conditions, the Company may purchase put options to reduce or eliminate the risk of price declines below the option strike price on a portion of its anticipated future production. Put options purchased by the Company establish a minimum sales price for the production covered by such put options and permit the Company to participate in price increases above the option price. The cost of the options is amortized on a straight-line basis during the period in which the options are exercisable. Depending upon market conditions the Company may either sell options it holds or exercise the options at maturity. Gains or losses from the sale or exercise of options, net of unamortized acquisition costs, are recognized in the period in which the underlying production is sold and reported as a component of the underlying transaction. Fuel swaps: The Company may enter into fuel swap agreements to limit the effect of changes in fuel prices on its production costs. A fuel swap establishes a fixed price for the quantity of fuel covered by the agreement. The difference between the published price for fuel and the price established in the contract for the month covered by the swap is recognized in production costs. Foreign currency: The Company selectively uses foreign currency swaps to limit the effects of exchange rate changes on future cash flow obligations denominated in foreign currencies. A currency swap establishes a fixed dollar cost for a fixed amount of foreign currency required at a future date. The Company has entered into currency swap agreement on a portion of its capital cost contracted in Euros. E. Commitments and Contingencies: Litigation In April 1996, the Company was served with a complaint filed in Peru by approximately 800 former employees seeking the delivery of a substantial number of investment shares (formerly called "labor shares")of its Peruvian Branch plus dividends. In October 1997, the Superior Court of Lima nullified a decision of a court of first instance, which had been adverse to the Company. The Superior Court remanded the case for a new trial. Plaintiff filed an extraordinary appeal before the Peruvian Supreme Court. The Supreme Court may grant discretionary review in limited cases. In March 1999, the Company received official notification that the Supreme Court had denied plaintiff's extraordinary appeal and affirmed the decision of the Superior Court of Lima which remanded the case to the lower court for further proceedings. In December 1999, the lower court decided against the Company, ordering the delivery of the investment shares and dividends to plaintiffs. The Company appealed this decision in January 2000. There is also pending against the Company a similar lawsuit filed by 127 additional former employees. In the third quarter of 1997, the court of first instance dismissed their complaint. Upon appeal filed by the plaintiffs, the Superior Court of Lima, in the third quarter of 1998, nullified the lower court's decision on technical grounds and remanded the case to the lower court for further proceedings. Also in December 1999, the lower court dismissed the complaint against the Company. Plaintiffs appealed this decision in January 2000. It is the opinion of management that the outcome of the legal proceedings mentioned, as well as other miscellaneous litigation and proceedings now pending, will not materially adversely affect the financial position of the Company and its consolidated subsidiaries. However, it is possible that litigation matters could have a material effect on quarterly or annual operating results, when they are resolved in future periods. 6 F. Impact of New Accounting Standards: In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and hedging activities. Initially, the statement was to be effective in fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137 which defers the effective date of SFAS No. 133 one year until June 15, 2000. The Company is currently assessing the impact of SFAS No. 133. 7 PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company reported net earnings of $16.5 million, or 21 cents per common share, for the first quarter ended March 31, 2000 compared with net earnings of $4.0 million, or 5 cents per common share, for the first quarter of 1999. The increase in earnings in the first quarter of 2000 is primarily attributable to higher copper prices when compared with the first quarter of 1999. The average price for copper on the London Metal Exchange (LME) in the first quarter of 2000 was 81 cents per pound, compared with 64 cents per pound in the year earlier period. Prices of the Company's principal by-products were lower during the first quarter of 2000. Molybdenum averaged $2.54 per pound and silver averaged $5.18 per ounce compared to $2.70 per pound and $5.28 per ounce, respectively, during the first quarter of 1999. Mine copper production decreased 0.7% to 176.3 million pounds in the first quarter of 2000 compared with the first quarter of last year. Decreases in ore grade at both mines and a fire in a conveyor belt at the Cuajone concentrator were responsible for the decrease in production. These decreases were, to a great extent, offset by improved recovery and throughput at the Cuajone mine as a result of the expansion, and increased production of SX/EW copper. The fire at the Cuajone concentrator disrupted first quarter 2000 production resulting in a loss of 11.9 million pounds of copper. The Company is pursuing this loss with its insurers. Increased SX/EW copper production of 7.6 million pounds of copper is a result of the expansion of the plant, completed in the third quarter of 1999. The refined copper production increased 6.9% in the first quarter of 2000 to 172.6 million pounds. The increase is due to increased production efficiencies at the Ilo refinery and the increased SX/EW production described above. The Company's expansion and modernization program is progressing on schedule. Engineering studies for the Ilo smelter modernization and expansion project continue. The Company plans to use the most efficient proven technology, looking not only to comply with Peruvian environmental standards but also to provide economic returns. Feasibility studies for expansion of the Toquepala concentrator and mine, the leaching section and a SX/EW plant at Cuajone are currently underway. Construction of these projects are expected to begin in the year 2000 improving SPCC's production capacity to over 900 million pounds of copper per year. The project to expand and protect the Cuajone mine from maximum flooding of the Torata river is under construction and reached 63% completion at the end of the first quarter of 2000, with an investment of $47.2 million out of the $75.5 million budget. The Torata river will be diverted in June 2000 to allow the beginning of the Cuajone pit expansion. INFLATION AND DEVALUATION OF PERUVIAN SOL: A portion of the Company's operating costs are denominated in Peruvian soles. Since the revenues of the Company are primarily denominated in U.S. dollars, when inflation in Peru is not offset by a corresponding devaluation of the sol, the financial position, results of operations and cash flows of the Company could be adversely affected. For the three months ended March 31, 2000 the inflation and devaluation rates were 1.1% and (0.7%), respectively. 8 NET SALES: Net sales in the first quarter of 2000 increased $39.2 million to $163.1 million from the comparable period in 1999. The increase in net sales was primarily the result of higher copper prices in 2000 and increased copper sales volume of 14.8 million pounds in the first quarter of 2000. At March 31, 2000, the Company has recorded sales on 6.7 million pounds of copper, at a provisional price of $0.80 per pound. These sales are subject to final pricing based on the average monthly LME copper price in the month of settlement, which will occur in the second quarter of 2000. PRICES: Sales prices for the Company's metals are established principally by reference to prices quoted on the LME, the New York Commodity Exchange (COMEX) or as published in Platt's Metals Week for dealer oxide mean prices for molybdenum products.
Three Months Ended March 31, Price/Volume Data: 2000 1999 ---- ---- Average Metal Prices: Copper (per pound-LME) $0.81 $0.64 Molybdenum (per pound) $2.54 $2.70 Silver (per ounce-COMEX) $5.18 $5.28 Sales Volume (in thousands): Copper (pounds) 183,500 168,700 Molybdenum (pounds) (1) 3,346 2,324 Silver (ounces) 875 633
(1) The Company's molybdenum production is sold in concentrate form. Volume represents pounds of molybdenum contained in concentrates. FINANCIAL INSTRUMENTS: The Company may use derivative instruments to manage its exposure to market risk from changes in commodity prices. Derivative instruments, which are designated as hedges, must be deemed effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Copper: Depending on market fundamentals and other conditions, the Company may purchase put options to reduce or eliminate the risk of price declines below the option strike price on a portion of its anticipated future production. Put options purchased by the Company establish a minimum sales price for the production covered by such put options and permit the Company to participate in price increases above the option price. The cost of the options is amortized on a straight-line basis during the period in which the options are exercisable. Depending upon market conditions the Company may either sell options it holds or exercise the options at maturity. Gains or losses from the sale or exercise of options, net of unamortized acquisition costs, are recognized in the period in which the underlying production is sold and are reported as a component of the underlying transaction. At March 31, 2000, the Company held no copper put options. 9 Fuel swaps: The Company may enter into fuel swap agreements to limit the effect of changes in fuel prices on its production costs. A fuel swap establishes a fixed price for the quantity of fuel covered by the agreement. The difference between the published price for fuel and the price established in the contract for the month covered by the swap is recognized in production costs. As of March 31, 2000 and December 31, 1999, the Company had the following fuel swap agreements:
Weighted Average Quantity Contract Price Fuel Type Period (barrels) (per barrel) --------- ------ --------- ------------ DECEMBER 31, 1999 Residual Oil 1/00 - 12/00 1,468,800 $12.80 Diesel Fuel 1/00 - 12/00 504,000 $19.36 MARCH 31, 2000 Residual Oil 4/00 - 12/00 1,101,600 $12.80 Diesel Fuel 4/00 - 12/00 378,000 $19.50
The unrealized gain in the Company's fuel swap positions at March 31, 2000 was $9.5 million. A hypothetical 10% decrease from March 31, 2000 fuel prices, would reduce the unrealized gain on fuel swaps by $3.1 million. In the first quarter of 2000, the Company's production costs would have been $4.4 million higher if this exposure had not been hedged. Foreign currency: The Company selectively uses foreign currency swaps to limit the effects of exchange rate changes on future cash flow obligations denominated in foreign currencies. A currency swap establishes a fixed dollar cost for a fixed amount of foreign currency required at a future date. The Company has entered into currency swap agreements on a portion of its capital cost contracted in euros. As of March 31, 2000 the Company had the following currency swap agreements:
US$ Euros Forward MATURITY DATE (IN MILLIONS) EXCHANGE RATE ------------- ------------- ------------- 7/31/2000 9.1 8.0 1.1341 10/31/2000 8.5 7.4 1.1419 12/29/2000 6.5 5.7 1.1467 3/31/2001 2.6 2.3 1.1535 4/30/2001 3.3 2.9 1.1559
The unrealized loss in the Company's currency swap position at March 31, 2000 was $4.6 million. A hypothetical 10 percent decrease from March 31, 2000 rates, would increase the unrealized loss on currency swaps by $2.5 million. The full cost of the currency swap amount as acquired will, when exercised, be included in the cost of the capital asset for which these swaps were obtained. OPERATING COSTS AND EXPENSES: Operating costs and expenses were $136.4 million in the first quarter of 2000 compared with $117.5 million in the first quarter of 1999. Cost of sales for the three months ended March 31, 2000 was $109.8 million compared with $89.3 million in the comparable 1999 period. The increase of $20.6 million in 2000 includes higher volume of 8.2 million pounds of copper sold from SPCC mines equivalent to $5.7 million. It also includes an increase of $7.9 million in copper production cost, principally due to increased power cost and an 10 increase of $3.2 million in purchased concentrates cost attributable to higher copper prices. Depreciation and depletion expense for the three-months ended March 31, 2000 was $18.6 million compared with $ 17.4 million in the comparable 1999 period. The increase in 2000 is principally due to the depreciation of the Toquepala SX/EW plant expansion, completed in the third quarter of 1999. NON-OPERATING ITEMS: Interest income was $0.4 million in the first quarter of 2000, compared to $2.9 million in the comparable 1999 period. The decrease reflects lower invested balances as Company funds were used for the expansion and modernization program. TAXES ON INCOME: Taxes on income for the first three months ended March 31, 2000 were $7.6 million, compared with $1.7 million for the first quarter of 1999. The increase was principally due to higher earnings in 2000. CASH FLOWS: Net cash provided by operating activities was $37.3 million in the first quarter of 2000, compared with $38.5 million in the comparable 1999 period. The decrease was attributable to increased earnings by $12.4 million mainly due to higher realized copper prices and $1.3 million of higher depreciation and depletion, offset by net changes in operating assets and liabilities of $14.9 million. Net cash used in investing activities was $33.2 million in the first quarter of 2000 and is fully explained by capital expenditures. In the first quarter of 1999, net cash used in investing activities was $52.3 million and was principally due to $50.3 million of capital expenditures and $2.3 million of net purchases of held-to-maturity investments. Net cash provided by financing activities in the first quarter of 2000 was $4.5 million, compared with a use of $0.7 million for the first quarter of 1999. The first quarter of 2000 includes a dividend distribution of $4.8 million and proceeds from borrowings of $10 million. The first quarter of 1999 included a dividend distribution of $2.4 million and proceeds from borrowings of $2.0 million. LIQUIDITY AND CAPITAL RESOURCES: The Company expects that it will meet its cash requirements for 2000 and beyond from internally generated funds, cash on hand, from borrowings under existing credit facilities and from additional external financing. In the first quarter of 2000, the Company paid a dividend to shareholders of $4.8 million or 0.06 cents per share, compared with $2.4 million or 0.03 cents per share in the same period of 1999. Certain financing agreements contain covenants, which limit the payment of dividends to stockholders. Under the most restrictive covenant, the Company may pay dividends to stockholders equal to 50% of the net income of the Company for any fiscal quarter as long as such dividends are paid by June 30 of the following year. IMPACT OF NEW ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and hedging activities. Initially, the statement was to be effective in fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, which defers the effective date of SFAS No.133 one year until June 15, 2000. The Company is currently 11 assessing the impact of SFAS No. 133. 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 availability of materials, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, lower than expected ore grades, the failure of equipment or processes to operate in accordance with specifications, labor relations, 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 which can be volatile. 12 Arthur Andersen REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Southern Peru Copper Corporation: We have reviewed the accompanying condensed balance sheet of Southern Peru Copper Corporation and subsidiaries as of March 31, 2000, and the related condensed statements of income and cash flows for the three-month period then ended. The condensed financial statements as of March 31, 1999 and for the three-month period then ended were reviewed by other accountants whose report dated April 16, 1999, stated that they were not aware of any material modifications that should be made to those statements in order for them to be in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements, referred to above, for them to be in conformity with accounting principles generally accepted in the United States of America. Medina, Zaldivar y Asociados member firm of Arthur Andersen Countersigned by: /S/ MARCO ANTONIO ZALDIVAR - -------------------------- Marco Antonio Zaldivar C.P.C. Register No. 12477 Lima, Peru, May 9, 2000 13 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders At the annual meeting of stockholders of the Company held on May 9, 2000, the holders of Common Stock, voting as a class, were asked to elect two directors, the holders of Class A Common Stock, voting as a class, were asked to elect 13 directors, and both classes, voting together, were asked to approve the selection of the independent accountants for 2000. Votes cast in the election of directors by holders of Common Stock were as follows:
Number of Shares NAMES FOR WITHHELD ----- --- -------- Amb. Everett E. Briggs 7,779,580 3,323,044 John F. McGillicuddy 7,777,260 3,325,364
In the election of directors by holders of Class A Common Stock, each of the following directors received 65,900,833 votes and no votes were withheld: German Larrea Mota-Velasco Oscar Gonzalez Rocha Manuel Calderon Cardenas Manuel J. Iraola Hector Calva Ruiz Genaro Larrea Mota-Velasco Jaime Claro Robert A. Pritzker Alberto de la Parra Zavala Daniel Tellechea Salido Hector Garcia de Quevedo Topete J. Steven Whisler Xavier Garcia de Quevedo Topete Stockholders approved the selection of the independent accountants as follows:
FOR AGAINST WITHHELD --- ------- -------- Common Stock 11,044,369 32,680 25,573 Class A Common Stock 329,504,165 - - ----------- -------- -------- Total 340,548,534 32,680 25,573
Holders of Class A Common Stock are entitled to five votes per share when voting together with the holders of Common Stock as one class. Item 6 - Exhibits on Form 10-Q 15. Independent Public Accountant's Awareness Letter 14 SIGNATURES Pursuant to the requirement 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 PERU COPPER CORPORATION (Registrant) Date: May 12, 2000 /s/ OSCAR GONZALEZ ROCHA ------------------------ President Date: May 12, 2000 /s/ DANIEL TELLECHEA SALIDO --------------------------- Vice President of Finance 15 EX-15 2 EXHIBIT 15 Exhibit 15 Arthur Andersen Securities and Exchange Commission 450 Fifth Street, N. W. Washington, D. C. 20549 May 9, 2000 We are aware that our report dated May 9, 2000 on our review of the interim financial information of Southern Peru Copper Corporation and Subsidiaries as of March 31, 2000 and for the three-month period ended March 31, 2000 and included in this Form 10-Q for the quarter ended March 31, 2000 is incorporated by reference in the Company's Registration Statement on Form S-8 (File Nos. 333-02736 and 333-40293). Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the Registration Statement prepared by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, Medina, Zaldivar y Asociados member firm of Arthur Andersen /s/ MARCO ANTONIO ZALDIVAR - -------------------------- Marco Antonio Zaldivar Partner -----END PRIVACY-ENHANCED MESSAGE-----