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

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

OtherLarrea 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 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

	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.