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):

	At June 30, 2017		At December 31, 2016
Related parties receivable current:
Asarco LLC	$	47.6	$	5.5
Boutique Bowling de Mexico S.A. de C.V.	0.1		0.1
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates	1.5		1.3
Grupo Mexico	4.8		4.5
Mexico Generadora de Energia S. de R.L. (“MGE”)	18.5		10.2
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	1.2		1.5
Operadora de Cinemas S.A. de C.V.	0.3		0.2
Operadora de Generadoras de Energia Mexico S.A. de C.V.	—		0.1

	$	74.0	$	23.4

	At June 30, 2017		At December 31, 2016
Related parties payable:
Asarco LLC	$	40.6	$	36.3
Boutique Bowling de Mexico S.A. de C.V.	0.3		0.2
Eolica El Retiro, S.A.P.I. de C.V.	0.7		0.1
Ferrocarril Mexicano S.A. de C.V.	3.1		3.0
Grupo Mexico	2.6		0.1
MGE	43.0		13.9
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	7.7		7.8
Mexico Transportes Aereos S.A. de C.V. (“Mextransport”)	0.1		0.1
Operadora de Cinemas S.A. de C.V.	0.5		0.4
Breaker S.A. de C.V. and affiliates (“Breaker”)	—		0.3

	$	98.6	$	62.2

Purchase and sale activity:

Grupo Mexico and affiliates:

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

The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the six months ended June 30, 2017 and 2016 (in millions):

	2017		2016
Purchase activity
Asarco LLC	$	19.6	$	14.8
Eolica El Retiro, S.A.P.I. de C.V.	2.0		1.0
Ferrocarril Mexicano S.A de C.V.	23.5		21.0
Grupo Mexico	6.9		6.9
MGE	118.9		108.7
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	72.3		42.8

Total purchases	$	243.2	$	195.2


Sales activity
Asarco LLC	$	82.1	$	34.6
Compania Perforadora Mexico S.A.P.I. de C.V and affiliates	0.2		0.4
Grupo Mexico	0.2		0.3
MGE	49.4		50.1
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	—		0.3

Total sales	$	131.9	$	85.7

In addition, in the second quarter of 2017, the Company made donations of $1.4 million to Fundacion Grupo Mexico, an organization dedicated to promoting social and economic development of the communities close to the Company’s Mexican operations.

The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano S.A de C.V., and for construction services provided by Mexico Proyectos y Desarrollo S.A. de C.V. and its affiliates. All of these companies are subsidiaries of Grupo Mexico.

The Company’s Mexican operations purchased scrap and other residual copper mineral from Asarco LLC, and power from MGE. Both companies are subsidiaries 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 Energetica 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. The remaining balance was restructured as subordinated debt of MGE. In the third quarter of 2016, MGE repaid the outstanding balance of the debt. Related to this loan, the Company recorded interest income of $3.1 million in the first six months of 2016.

In 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply some of the Company’s Mexican operations with power through 2032. MGE completed construction of its first power plant in June 2013 and the second plant, in the second quarter of 2014. These plants are natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts. The first plant began supplying power to the Company in December 2013, and the second plant began to supply power in June 2015. MGE is supplying a portion of its power output to third-party energy users.

On August 4, 2014, Mexico Generadora de Energia Eolica S. de R.L. de C.V, an indirect subsidiary of Grupo Mexico, located in Oaxaca, Mexico, acquired Eolica el Retiro. Eolica el Retiro is a windfarm that has 37 wind turbines. This company started operations in January 2014 and started to sell power to IMMSA and other subsidiaries of Grupo Mexico in the third quarter of 2014. Eolica el Retiro is supplying approximately 28% of its power output to IMMSA.

The Company sold copper cathodes, rod and anodes, as well as sulfuric acid, silver, gold and lime to Asarco LLC. 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 to Compania Perforadora Mexico S.A.P.I. de C.V., and for natural gas and services provided to MGE; all subsidiaries of Grupo Mexico.

Companies with relationships to the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in the six months ended June 30, 2017 and 2016 (in millions):

	2017		2016
Purchase activity
Boutique Bowling de Mexico S.A. de C.V.	$	0.1	$	0.2
Mextransport	0.4		1.0
Operadora de Cinemas S.A. de C.V.	0.1		0.3

Total purchases	$	0.6	$	1.5


Sales activity
Boutique Bowling de Mexico S.A. de C.V.	$	0.1	$	0.1
Mextransport	—		0.2
Operadora de Cinemas S.A. de C.V.	0.1		—

Total sales	$	0.2	$	0.3

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

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

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

In addition, the Company received fees for building rental and maintenance provided to Boutique Bowling de Mexico S.A. de C.V., and Operadora de Cinemas S.A. de C.V.

Companies with relationships to SCC executive officers:

The following table summarizes the purchase activities with companies with relationships to SCC executive officers in the six months ended June 30, 2017 and 2016 (in millions):

	2017			2016
Breaker	$	(*	)	$	0.4
Higher Technology S.A.C.	—			0.6
Pigoba S.A. de C.V.	—			0.1
Servicios y Fabricaciones Mecanicas S.A.C.	0.2			0.2

Total purchases	$	0.2		$	1.3

(*) amount is lower than $0.1 million

In 2016, the Company purchased industrial materials from Breaker S.A. de C.V., Breaker Peru S.A.C., and Pigoba S.A. de C.V. in which the SCC´s Chief Executive Officer´s sons, Carlos Gonzalez and Alejandro Gonzalez; and son-in-law, Jorge Gonzalez, have a proprietary interest. Also, the Company purchased industrial material to Higher Technology S.A.C. and paid fees for maintenance services provided by Servicios y Fabricaciones Mecanicas S.A.C. Companies in which Carlos Gonzalez son of SCC´s Chief Executive Officer had a proprietary interest through June 6, 2016.

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

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