FINANCING:

12 Months Ended

Dec. 31, 2011

FINANCING:

FINANCING:

NOTE 11-FINANCING:

Long-term debt:

	As of December 31,
(in millions)	2011			2010
2.02% Mitsui credit agreement due 2013 (Japanese LIBO rate plus 1.25% (1.71% at December 31, 2010))	$	20.0		$	30.0
6.375% Notes due 2015 ($200 million face amount, less unamortized discount of $0.6 million and $0.7 million at December 31, 2011 and 2010, respectively)	199.4			199.3
5.375% Notes due 2020 ($400 million face amount, less unamortized discount of $1.9 million and $2.0 million at December 31,2011 and 2010, respectively)	398.1			398.0
9.25% Yankee bonds—Series B due 2028	51.1			56.4
7.50% Notes due 2035 ($1,000 million face amount, less unamortized discount of $14.9 million and $15.2 million at December 31, 2011 and 2010, respectively)	985.1			984.8
6.75% Notes due 2040 ($1,100 million face amount, less unamortized discount of $8.0 million and $8.1 million at December 31,2011 and 2010, respectively)	1,092.0			1,091.9
Total debt	2,745.7			2,760.4
Less, current portion	(10.0		)	(10.0		)
Total long-term debt	$	2,735.7		$	2,750.4

The bonds, referred above as “Yankee bonds”, contain a covenant requiring Minera Mexico to maintain a ratio of EBITDA to interest expense of not less than 2.5 to 1.0 as such terms are defined by the facility.  At December 31, 2011, Minera Mexico is in compliance with this covenant.

The Mitsui credit agreement is collateralized by pledges of receivables on 31,000 tons of copper per year.  The Mitsui agreement requires the Company to maintain a minimum stockholders’ equity of $750 million and a specific ratio of debt to equity.  Reduction of Grupo Mexico’s direct or indirect voting interest in the Company to less than a majority would constitute an event of default under the Mitsui agreement.  At December 31, 2011, the Company is in compliance with these covenants.

In July 2005 the Company issued $200 million 6.375% Notes due 2015 at a discount of $1.1 million and $600 million 7.5% Notes due 2035, at a discount of $5.3 million.  The notes are senior unsecured obligations of the Company.  The Company capitalized $8.8 million of costs associated with this facility and its unamortized balance is included in “Other assets”, non-current on the consolidated balance sheet.  The net proceeds from the issuance and sale of the notes were principally used to repay outstanding indebtedness of the Company and the balance was used for general corporate purposes.  The Company filed a registration statement on Form S-4 with respect to these notes in October 2005.  In January 2006 the Company completed an exchange offer for $200 million, 6.375% Notes due 2015 and $600 million, 7.5% Notes due 2035.  In the exchange offer, $197.4 million of the 6.375% old notes due 2015 were tendered in exchange for an equivalent amount of new notes and an aggregate of $590.5 million of the 7.5% old notes due 2035 were tendered in exchange for an equivalent amount of new notes.  The indentures relating to the notes contain certain covenants, including limitations on liens, limitations on sale and leaseback transactions, rights of the holders of the notes upon the occurrence of a change of control triggering event, limitations on subsidiary indebtedness and limitations on consolidations, mergers, sales or conveyances.  Certain of these covenants cease to be applicable before the notes mature if the issuer obtains an investment grade rating.  At December 31, 2011 the Company is in compliance with these covenants. At December 31, 2011, the securities had an investment grade rating, see “Changes in Credit Risk Rating” below.

On May 9, 2006, the Company issued an additional $400 million 7.5% notes due 2035.  These notes are in addition to the $600 million of existing 7.5% notes due 2035 that were issued in July 2005.  The current transaction was issued at a spread of +240 basis points over the 30-year U.S. Treasury bond.  The original issue in July 2005 was issued at a spread of +315 basis points over the 30-year U.S. Treasury bond.  The notes were issued at a discount of $10.8 million.  The Company capitalized $3.2 million of cost associated with this facility and its unamortized balance is included in non-current “Other assets, net” on the consolidated balance sheet.  The Company used proceeds from the May 2006 issuance for its expansion programs.

The notes issued in July 2005 and the new notes issued in May 2006 are treated as a single series of notes under the indenture, including for purposes of covenants, waivers and amendments.  The Company has registered these notes under the Securities Act of 1933, as amended.

On April 16, 2010, the Company issued $1.5 billion in fixed-rate unsecured notes with a discount of $10.3 million, which is being amortized over the term of the related debt.  Net proceeds will be used for general corporate purposes, including the financing of the Company’s capital expenditure program.  The $1.5 billion fixed-rate senior unsecured notes were issued in two tranches, $400 million due in 2020 at an annual interest rate of 5.375% and $1.1 billion due in 2040 at an annual interest rate of 6.75%.  The Company has registered these notes under the Securities Act of 1933, as amended.  Interest on the notes will be paid semi-annually in arrears.  The notes will constitute the Company’s general unsecured obligations and the series of notes will rank pari passu with each other and will rank pari passu in right of payment with all of the Company’s other existing and future unsecured and unsubordinated indebtedness.  Also, related to these notes the Company has deferred $8.2 million of costs associated with the issuance of this facility, which its unamortized balance is included in “Other assets” non-current in the consolidated balance sheet and is being amortized as interest expense over the life of the loans.

In connection with the transaction, on April 16, 2010, the Company entered into a base indenture with Wells Fargo Bank, National Association, as trustee, as well as a first supplemental indenture and a second supplemental indenture which provide for the issuance, and set forth the terms of, the two tranches of notes described above.  The indentures contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets.  If the Company experiences a Change of Control Triggering Event (as defined in the indentures governing the notes), the Company must offer to repurchase the notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any.  A Change of Control Trigger Event also includes a rating decline, that is, if the rating of the notes, by at least one of the rating agencies shall be decreased by one or more gradations.

The Company may issue additional debt from time to time pursuant to the base indenture.

Changes in Credit Risk Rating:

On April 1, 2010, Moody’s investor service upgraded to Baa2 from Baa3 the Company’s senior unsecured ratings and the rating on its Yankee bonds.  Also on April 5, 2010, Fitch and Standard & Poor’s (“S&P”) ratings services assigned ratings of ‘BBB’ and ‘BBB-’, respectively, to the new notes issued.  At the same time, these credit rating agencies confirmed their long-term corporate credit rating of SCC (‘Baa2’, ‘BBB and ‘BBB- for Moody’s, Fitch and S&P, respectively).

On January 26, 2012, S&P raised its long-term corporate credit rating of the Company, as well as of its parent companies, Grupo Mexico and Americas Mining Company, to BBB from BBB- .  Also, S&P raised its ratings of the Company’s senior notes to ‘BBB’ from ‘BBB-’. S&P noted that this rating reflects its assessment of a satisfactory business risk profile, supported by the Company’s low cash cost structure, geographic diversity, position as the world’s sixth largest copper producer, vertical integration and long-life reserves.

Aggregate maturities of the outstanding borrowings at December 31, 2011, are as follows:

Years	Principal Due (*)
	(in millions)
2012	$	10.0
2013	10.0
2014	—
2015	200.0
2016	—
Thereafter	2,551.1
Total	$	2,771.1

(*)Total debt maturities do not include the debt discount valuation account of $25.4 million.

At December 31, 2011 and 2010, other assets included $5.2 million and $5.3 million, respectively, held in escrow accounts as required by the Mitsui’s loan agreement.  The funds are released from escrow as scheduled loan repayments are made.

At December 31, 2011 and 2010, the balance of capitalized debt issuance costs was $18.8 million and $19.3 million, respectively.  Amortization charged to interest expense was $0.5 million, $0.4 million and $0.5 million in 2011, 2010 and 2009, respectively