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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2023

OR

  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

Graphic

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.)

7310 North 16th St, Suite 135 Phoenix, AZ

    

85020

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (602) 264-1375

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common stock, par value $0.01 per share

SCCO

New York Stock Exchange
Lima Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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

At February 28, 2024, there were of record 773,113,269 shares of common stock, par value $0.01 per share, outstanding.

The aggregate market value of the shares of common stock (based upon the closing price at June 30, 2023 as reported on the New York Stock Exchange-Composite Transactions) of Southern Copper Corporation held by non-affiliates was approximately $6,148.0 million.

PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE:

Part III:

    

Proxy statement for 2024 Annual Meeting of Stockholders

Part IV:

Exhibit Index is on Page 186 through 188

Table of Contents

Southern Copper Corporation (“SCC”)

INDEX TO FORM 10-K

Page No.

PART I.

Item 1

Business

3 - 165

Item 1A

Risk factors

16 - 27

Item 1B

Unresolved Staff Comments

288

Item 1C

Cybersecurity

288 - 30

Item 2

Properties

31 - 90

Item 3

Legal Proceedings

900

Item 4

Mine Safety Disclosure

900

PART II.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

91 - 92

Item 7.

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

93 - 119

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

120 - 1201

Item 8.

Financial Statements and Supplementary Data

122 - 180

Item 9.

Changes in and Disagreements with Accountant on Accounting and Financial Disclosure

181

Item 9A.

Controls and Procedures

1811

Item 9B.

Other Information

18383

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

183

PART III.

Item 10.

Directors, Executive Officers and Corporate Governance

1844 - 1866

Item 11.

Executive Compensation

1844 - 1866

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

1844 - 1866

Item 13.

Certain Relationships and Related Transactions and Director Independence

1844 - 1866

Item 14.

Principal Accounting Fees and Services

1844 - 1866

PART IV.

Item 15.

Exhibits, Financial Statement Schedule

186 - 1888

Supplemental information

189 - 1922

Signatures

193

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PART I

ITEM 1. BUSINESS

THE COMPANY

We believe Southern Copper Corporation (“SCC”, “Southern Copper” or the “Company”) is one of the largest integrated copper producers in the world. Our major production includes copper, molybdenum, zinc and silver. All of our mining, smelting and refining facilities are located in Peru and Mexico and we conduct exploration activities in those countries and in Argentina, Chile and Ecuador. See Item 2 “Properties—Review of Operations” for maps of our principal mines, smelting facilities and refineries. The considerable scale of our operations makes us one of the largest mining companies in Peru and Mexico. We believe we have the largest copper reserves in the world. We were incorporated in Delaware in 1952 and have conducted copper mining operations since 1960. Since 1996, our common stock has been listed on both the New York and Lima Stock Exchanges.

Our Peruvian copper operations involve mining, milling and flotation of copper ore to produce copper concentrates and molybdenum concentrates; the smelting of copper concentrates to produce blister and anode copper; and the refining of anode copper to produce copper cathodes. As part of this production process, we also produce significant amounts of molybdenum concentrate and sulfuric acid. Our precious metals plant at the Ilo refinery produces refined silver, gold, and other materials. Additionally, we produce refined copper using solvent extraction/electrowinning technology (“SX-EW”). We operate the Toquepala and Cuajone open-pit mines high in the Andes Mountains, approximately 860 kilometers southeast of the city of Lima, Peru. We also operate a smelter and refinery west of the Toquepala and Cuajone mines in the coastal city of Ilo, Peru.

Our Mexican operations are conducted through our subsidiary, Minera Mexico, S.A. de C.V. (“Minera Mexico”), which we acquired in 2005. Minera Mexico engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead. Minera Mexico operates through subsidiaries that are grouped into three separate units. Mexicana de Cobre, S.A. de C.V. (together with its subsidiaries, the “La Caridad” unit) operates La Caridad, an open-pit copper mine, a copper ore concentrator, a SX-EW plant, a smelter, refinery and a rod plant. The La Caridad refinery has a precious metals plant that produces refined silver, gold and other materials. Operadora de Minas e Instalaciones Mineras, S.A de C.V. (the “Buenavista unit”) operates Buenavista, an open-pit copper mine, which is located on the site of one of the world’s largest copper ore deposits, two copper concentrators and two operating SX-EW plants. Industrial Minera Mexico, S.A. de C.V. (together with its subsidiaries, the “IMMSA unit”) operates five underground mines that produce zinc, lead, copper, silver and gold, and a zinc refinery.

We utilize modern, state of the art mining and processing methods, including global positioning systems and computerized mining processes. Our operations have a high level of vertical integration, which allows us to use our facilities, employees and equipment to manage the entire production process, including ore mining and production of refined copper rod and other products, and to execute most associated transport and logistics functions.

The sales prices for our products are largely determined by market forces beyond our control. Our management, therefore, focuses on cost control and production enhancement to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our focus is on remaining profitable during periods of low copper prices and maximizing results in periods of high copper prices. For additional information on the sale prices of the metals we produce, please see “Metal Prices” in this Item 1.

Currency Information:

Unless stated otherwise, all our financial information is presented in U.S. dollars and any reference herein to “U.S. dollars,” “dollars,” or “$” are to U.S. dollars; references to “sol,” “soles” or “S/”, signify Peruvian soles; and references to “peso,” “pesos,” or “Ps.,” represent Mexican pesos.

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Unit Information:

Unless otherwise noted, all tonnages are in metric tonnes. To convert to short tons, multiply by 1.102. All ounces are troy ounces. All distances are in kilometers. To convert to miles, multiply by 0.621. To convert hectares to acres, multiply by 2.47.

ORGANIZATIONAL STRUCTURE

The following chart describes our organizational structure, starting with our controlling stockholders, as of December 31, 2023. For the purpose of clarity, the chart identifies only our main subsidiaries and eliminates intermediate holding companies.

Graphic

We are a majority-owned, indirect subsidiary of Grupo Mexico S.A.B. de C.V. (“Grupo Mexico”). As of December 31, 2023, Grupo Mexico, through its wholly-owned subsidiary Americas Mining Corporation (“AMC”), owned 88.9% of our capital stock. Grupo Mexico’s principal business is to act as a holding company for the shares of other corporations engaged in the mining, processing, purchase and sale of minerals and other products and in the provision of railway and other related services.

We conduct our operations in Peru through a registered branch (the “SPCC Peru Branch,” “Branch” or “Peruvian Branch”). The SPCC Peru Branch comprises virtually all of our assets and liabilities associated with our copper operations in Peru. The SPCC Peru Branch does not constitute a corporation that is separate from SCC, and, as such, the obligations of the SPCC Peru Branch are direct obligations of SCC and vice-versa. The SPCC Peru Branch is, however, registered as a branch of a foreign company pursuant to Peruvian law and through this entity, we hold assets, incur liabilities and conduct operations in Peru. Although the SPCC Peru Branch has no capital or liability that is separate from that held or applicable to SCC, the SPCC Peru Branch is deemed to have equity capital for purposes of determining the economic interests of holders of our investment shares (See Note 14 “Stockholders´ Equity” of the consolidated financial statements).

In April 2005, we acquired Minera Mexico, from Americas Mining Corporation (“AMC”), a subsidiary of Grupo Mexico, our controlling stockholder. Minera Mexico is a holding company and all of its operations are conducted through subsidiaries that are grouped into three units: (i) the La Caridad unit (ii) the Buenavista unit and (iii) the IMMSA unit. We own 99.96% of Minera Mexico.

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In 2008, our Board of Directors (“BOD”) authorized a $500 million share repurchase program that has since been increased by the BOD and is currently authorized to $3 billion. Pursuant to this program, through December 31, 2023 we have purchased 119.5 million shares of our common stock at a cost of $2.9 billion. These shares are available for general corporate purposes. We may purchase additional shares 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. Please see Note 7 for a discussion of the Inflation Reduction Act effective in 2023, including a 1% excise tax on certain stock repurchases.

REPUBLIC OF PERU AND MEXICO

Our revenues are derived primarily from our operations in Peru and Mexico. Risks related to our operations in both countries include those associated with economic and political conditions, the effects of currency fluctuations and inflation, the effects of government regulations and the geographic concentration of our operations.

OUR BUSINESS

COPPER BUSINESS

Copper is an important component in the world’s infrastructure chain. It is the third most widely used metal, after iron and aluminum. Copper has unique chemical and physical properties, including high ductility; malleability; thermal and electrical conductivity; and resistance to corrosion, and as such, is considered a prime material for use in electrical and electronic products, including components for power transmission and generation, which accounts for about three quarters of copper global use, and for telecommunications, building construction, transportation and industrial machinery. Copper is also an important metal in non-electrical applications such as plumbing and roofing and, when alloyed with zinc to form brass, is used in many industrial and consumer applications.

Copper is an internationally traded commodity whose prices are mainly determined by the major metal exchanges, the Commodities Exchange, or “COMEX,” in New York and the London Metal Exchange or “LME,” in London. Copper is usually found in nature in association with sulfur. Pure copper metal is generally produced in a multi-stage process, beginning with the mining and concentrating of low-grade ores containing copper sulfide minerals, and followed by smelting and electrolytic refining to produce a pure copper cathode. An increasingly larger share of copper is being produced from acid leaching of oxidized ores. Copper is one of the oldest metals known to man and has contributed significantly to the development of civilization.

BUSINESS REPORTING SEGMENTS:

Our management divides Southern Copper into three reportable segments and manages each as a separate segment.

The three segments identified are groups of individual mines, each of which constitutes an operating segment with similar economic characteristics, product types, processes and support facilities, regulatory environments, employee bargaining contracts and currency risks. In addition, each mine within the individual group earns revenues from similar types of customers for their products and services and each group incurs expenses independently, including commercial transactions between groups.

Inter-segment sales are based on arm’s length prices at the time of sale. These may not be reflective of actual prices realized by the Company due to various factors, including additional processing, timing of sales to outside customers and transportation cost. Information regarding the Company’s sales is included in the segment data. The segments identified by the Company are:

1.Peruvian operations, which include the Toquepala and Cuajone mine complexes and the smelting and refining plants, including a precious metals plant, industrial railroad and port facilities that service both mines. Sales of its products are recorded as revenue from our Peruvian mines. The Peruvian operations produce copper, by-products of molybdenum, silver and other materials.

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2.Mexican open-pit operations, which include the La Caridad and Buenavista mine complexes and the smelting and refining plants, including a precious metals plant and a copper rod plant and support facilities that service both mines. Sales of its products are recorded as revenue of our Mexican mines. The Mexican open-pit operations produce copper, with production of by-products of molybdenum, silver and other materials.

3.Mexican underground mining operations, which include five underground mines that produce zinc, copper, lead, silver and gold; and a zinc refinery. This group is identified as the IMMSA unit and sales of its products are recorded as revenue from the IMMSA unit.

Financial information is periodically prepared for each of the three segments and the results are reported to the Chief Operating Decision Maker (“CODM”) on a segment basis. The CODM 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.

Segment information is included in Item 2 “Properties.” More information on business segment and segment financial information is included in Note 19 “Segment and Related Information” of the consolidated financial statements.

CAPITAL INVESTMENT PROGRAM AND EXPLORATION ACTIVITIES

For a description of our capital investment program, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Investment Program” and for our exploration activities, see Item 2 “Properties—Explorations Activities.”

PRINCIPAL PRODUCTS AND MARKETS

Copper is primarily used in the building and construction industries; in the power generation and transmission industry; and in the electrical and electronic products; and, to a lesser extent, in industrial machinery and equipment; consumer products; and in the automotive and transportation industries. Molybdenum is used to toughen alloy steels and soften tungsten alloy and is also used in fertilizers, dyes, enamels and reagents. Silver is used for electrical and electronic products and, to a lesser extent, in brazing alloys and solder, jewelry, coinage, photographic, silverware and catalysts. Zinc is primarily used as a coating on iron and steel to protect against corrosion; it is also used to make die cast parts to manufacture batteries and to form sheets for architectural purposes.

Our marketing strategy and annual sales planning emphasize developing and maintaining long-term customer relationships. As such, acquiring annual or other long-term contracts for the sale of our products is a high priority. Generally, 80% to 90% of our metal production is sold under annual or longer-term contracts. Sales prices are determined based on the prevailing commodity prices for the quotation period according to the terms of the contract.

We focus on end-user customers as opposed to selling on the spot market or to trading companies. In addition, we devote significant marketing efforts to diversifying our sales both by region and customer base. We also strive to provide superior customer service, including timely deliveries of our products. Our ability to consistently fulfill customer demand is underpinned by our substantial production capacity.

For additional information on sales please see “Revenue recognition” in Note 2 “Summary of Significant Accounting Policies” and Note 19 “Segment and Related Information” of the consolidated financial statements.

METALS PRICES

Prices for our products are principally a function of supply and demand and, with the exception of molybdenum, are established on COMEX and LME. Prices for our molybdenum products are established by reference to the publication Platt’s Metals Week. Our contract prices also reflect any negotiated premiums and the costs of freight and other factors.

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From time to time, we have entered into hedging transactions to provide partial protection against future decreases in the market price of metals and we may do so under certain market conditions. For a further discussion of our products market prices, please see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Metal Prices.”

The table below shows the high, low and average COMEX and LME per pound copper prices during the last 10 years:

 

Copper (COMEX)

 

Copper (LME)

Year

    

High

    

Low

    

Average

    

High

    

Low

    

Average

2014

 

3.43

 

2.84

 

3.12

 

3.37

 

2.86

 

3.11

2015

 

2.95

 

2.02

 

2.51

 

2.92

 

2.05

 

2.50

2016

 

2.69

 

1.94

 

2.20

 

2.69

 

1.96

 

2.21

2017

 

3.29

 

2.48

 

2.80

 

3.27

 

2.48

 

2.80

2018

 

3.29

 

2.56

 

2.93

 

3.29

 

2.64

 

2.96

2019

 

2.98

2.51

2.72

2.98

2.51

2.72

2020

 

3.63

2.12

2.80

3.61

2.09

2.80

2021

 

4.78

3.54

4.24

4.86

3.52

4.23

2022

 

4.93

3.21

4.01

4.87

3.18

4.00

2023—1st Q

 

4.27

3.74

4.09

4.28

3.72

4.05

2023—2nd Q

 

4.12

3.55

3.85

4.12

3.59

3.85

2023—3rd Q

 

3.99

3.63

3.77

3.96

3.64

3.79

2023—4th Q

 

3.94

3.54

3.72

3.87

3.54

3.71

2023

 

4.27

3.54

3.86

4.28

3.54

3.85

The per pound COMEX copper price during the last 5 and 10 year periods averaged $3.53 and $3.12, respectively. The per pound LME copper price during the last 5 and 10 year periods averaged $3.52 and $3.12, respectively.

The table below shows the high, low and average prices per pound with the exception of silver, which is priced per ounce. The market prices for our three principal by-products over the last 10 years are as follows:

 

 

Molybdenum (Dealer

 

 

Oxide Platt’s

Silver (COMEX)

 

Metals Week)

Zinc (LME)

Year

    

High

    

Low

    

Average

    

High

    

Low

    

Average

    

High

    

Low

    

Average

2014

 

22.05

 

15.39

 

19.04

 

15.05

 

8.75

 

11.30

 

1.10

 

0.88

 

0.98

2015

 

18.35

 

13.67

 

15.68

 

9.40

 

4.30

 

6.59

 

1.09

 

0.66

 

0.88

2016

 

20.67

 

13.74

 

17.10

 

8.60

 

5.10

 

6.42

 

1.32

 

0.73

 

0.95

2017

 

18.49

 

15.37

 

17.03

 

10.25

 

6.85

 

8.13

 

1.53

 

1.00

 

1.31

2018

 

17.55

 

13.95

 

15.65

 

13.00

 

10.60

 

11.86

 

1.64

 

1.04

 

1.33

2019

 

19.39

14.28

16.16

12.70

8.28

11.27

1.37

0.90

1.16

2020

 

29.25

11.74

20.62

10.90

7.00

8.57

1.29

0.72

1.03

2021

 

29.40

21.46

25.18

20.10

9.95

15.51

1.73

1.15

1.36

2022

 

26.89

17.55

21.76

31.85

13.90

18.61

2.05

1.22

1.58

2023—1st Q

 

24.23

20.01

22.53

38.50

24.00

32.04

1.59

1.30

1.42

2023—2nd Q

 

26.04

22.33

24.26

23.50

16.65

20.87

1.33

1.01

1.15

2023—3rd Q

 

25.22

22.24

23.60

26.25

21.98

23.59

1.20

1.03

1.10

2023—4th Q

 

25.50

20.85

23.25

22.50

16.73

18.41

1.20

1.08

1.13

2023

 

26.04

20.01

23.41

38.50

16.65

23.73

1.59

1.01

1.20

The per ounce COMEX silver price during the last 5 and 10 year periods averaged $21.43 and $19.16, respectively. The per pound Platt’s Metals Week Dealer Oxide molybdenum price during the last 5 and 10 year periods averaged $15.54 and $12.20, respectively. The per pound LME zinc price during the last 5 and 10 year periods averaged $1.27 and $1.18, respectively.

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COMPETITIVE CONDITIONS

Competition in the copper market is based primarily on price and service basis, with price being the most important factor when supplies of copper are ample. Our products compete with other materials, including aluminum and plastics. For additional information, see Item 1A “Risk Factors—The copper mining industry is highly competitive.”

HUMAN CAPITAL RESOURCES

As of December 31, 2023, we had 15,810 employees, approximately 67% of whom are covered by a Collective Labor Agreement and are represented by 16 different labor unions. We believe that the labor environment in our operations in Mexico and Peru is favorable, which has allowed us to increase productivity as we advance the goals of our capital expansion program. In addition, around 13,066 people were working as contractors in support of our operations. In accordance with our Community Development commitment, more than 46% of our workforce is hired locally.

Talent Development, Training and Retention

As a large integrated copper producer, we have a wide range of employees, including management professionals, technicians, engineers, and production employees. We believe in our people, and we provide a wide variety of opportunities for professional growth for all employees in Peru and Mexico. In 2023 we made a training investment of over $4.4 million, which resulted in more than 440,000 training hours that focused on safety and health, rquipment operations and maintenance certifications, technical training, soft skills development (primarily in Leadership Competencies, code of ethics and compliance training. We also seek to enhance institutional knowledge through on-the-job training experiences, and designed more than 400 Individual Development Plans, as part of our succession planning.

All of our employees receive initial training and opportunities for continuous development throughout their careers, which we believe favors talent retention. More than 65% of the positions are covered by internal employees and our retention rate is around 92%. Voluntary turnover indicators in all of the countries in which we operate remain at single digits year-over-year. We believe this suggests our employees have a strong desire to continue working with us.

Company Culture

We believe in a shared mission, vision, values and improving our employer brand for existing and future employees. The Company seeks to create value for its employees to help ensure that their working experience is optimal. Various efforts are made on this front, including promoting a safe and collaborative work environment and culture and ensuring employees continue to be engaged with the Company’s values and principles. We live and promote our core values of honesty, respect, and responsibility in our day-to-day.

In terms of corporate culture, the Company is committed to the continuous growth and development of its employees and surrounding communities. The Company recognizes the effort of our employees and works to strengthen institutional values. We prize creativity, honesty and equality and we ensure that our employees are aligned with the same work ethic to standardize culture across the Company. The Company also seeks to promote goal-oriented principles to obtain results that positively affect our main stakeholders and communities to drive productivity, innovation, human growth and wellbeing, environmental protection and forward thinking.

Compensation and Benefits

We also focus on attracting and retaining employees by providing compensation and benefit packages that are competitive within the applicable market, considering the location of the position, responsibilities and compensation requirements in the countries where we operate. Our compensation practices consider many factors, including individual performance and responsibilities; years of service; elements of compensation mandated by Peruvian and Mexican law; future challenges and objectives; contributions to the future success of our Company; the employee’s total compensation and our financial performance. We may also look at the compensation levels of comparable companies. We offer productivity bonuses to our employees, which motivates them to grow the Company’s results.

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Health and Safety

Our focus on health and safety includes prevention and wellness programs, through the Medical and HR departments, such as clinical attention and periodical revisions, wellness training and a wellness platform for our employees.

During 2023, we carried out 50 health campaigns with the participation of 1,894 collaborators in early detections of diseases such as breast cancer, cervical cancer, prostate cancer, and tuberculosis. Additionally, we conducted 3,877 health promotion talks with 22,804 attendees and delivered 4,569 occupational health talks, focused on preventing occupational risks and diseases. Health campaigns were held in collaboration with healthcare institutions for workers and their families within the communities where we operate, offering general consultations with comprehensive examinations including imaging studies and laboratory tests, with a special focus on breast and prostate cancer screenings.

In 2023, the environmental and occupational health and safety management systems from all our mining operations are certified under the respective ISO 140001 and ISO 45001 standards.

Health and safety programs include a strong annual training plan, compliance with the regulators at each site, risk management and Behavior Based Safety programs that extend our safety culture to contractors.  

Talent Attraction and Recruiting

We deploy several talent attraction programs, which entail leveraging organizational relations; establishing links with national and regional institutions of higher education in the countries where we operate; and participating in job fairs. We also have a job opportunities section in our webpage and use several local and international job boards to publish openings.

We offer professional internship programs to attract students before they graduate from universities or centers for vocational training. We attract over 500 graduates from different academic disciplines and universities in Mexico and Peru with our Intern Development Programs. These strategies consolidate Human Resource Planning.

Additionally, we believe that we are a first-choice employer in the countries where we operate. This reflects our efforts to strengthen relationships with our stakeholders, including employees, and engage in community development. We have transparent selection processes and are committed to upholding principles for human rights and diversity, inclusion and non-discrimination.

Employee Engagement

Additionally, we conduct a biannual Employee Opinion Survey to measure employees’ perceptions of the Company and take actions intended to increase employee engagement, develop a positive organizational environment, and strengthen our culture. We measure the employee engagement level with 18 sub-factors, grouped into two major sets of factors: loyalty and satisfaction. The first factor represents the degree to which an individual identifies with the organization and its business goals, and the second reflects the individual’s degree of satisfaction with his/her working conditions and draws a line between satisfaction levels and performance at work.

The average of these factors indicates the level of engagement on a scale of 1 to 5 (a Likert scale). In 2023, we had an engagement rating of 4.17, an increase of 2% in the good perception of our employees regarding our Company. We believe this positive trend suggests a continuous improvement on the engagement level of our people year to year.

The survey also included sociodemographic elements, in order to consider the opinions of our diverse groups within our Company and respond with our “ECO Action Plan” for the next two years.

All employees, both unionized and non-unionized, are invited to participate in all of our human talent initiatives. This reflects our belief that it is in the Company’s best interest to listen to all of our people and create open communications channels. 85% of our employees participated in 2023’s survey, which is an increase of 9% compared to 2021. This number

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exceeds that registered by other companies that apply similar surveys, consolidating the trust our employees have in this instrument.

We have adopted a corporate social responsibility policy that is designed to integrate the Company´s operations with local communities in areas influenced by our operations. This policy focuses on creating permanent and positive relationships to generate optimal social conditions and promote sustainable development in the area. We continue to make significant expenditures for community programs.  For additional information on our community programs, refer to Corporate Social Responsibility under Note 13 “Commitments and contingencies” to the consolidated financial statements.

DIVERSITY, EQUITY AND INCLUSION (DEI)

Our vision of DEI is to ensure that our people always feel included, welcomed and valued for their personal and professional contributions. This vision is based on our core values of respect, honesty and responsibility.

Consistent with our Code of Conduct and Human Rights Policy, our goal is to (i) build an organizational culture of total equality and well-being, focusing on diversity, inclusion and non-discrimination, (ii) increase sensitivity, knowledge and skills in our leaders and employees in order to build diverse and inclusive teams and promote a culture of respect, and (iii) extend this culture to the communities in which we operate.

Based on the results of a DEI survey in Mexico and Peru, we aligned our diversity and inclusion 2020-2023 Strategic Plan with five strategic initiatives:

1. Awareness campaigns, training and communication on diversity, inclusion and non-discrimination.

2. Incorporate a gender equality and diversity approach into our human resources policies and procedures (focused both on hiring and retention).

3. Physical modifications at our operations for the inclusion of women.

4. Promote diversity and equal opportunities in our neighbor communities.

5. Define specific processes on awareness, prevention and handling potential incidents of sexual and/or workplace harassment.

In 2022, we disclosed our Policy on Diversity, Inclusion, Non-Discrimination, and Zero Tolerance for Workplace or Sexual Harassment for Grupo México and the Mining Division. The latter describes the reporting mechanisms available in Mexico, Peru and the United States, and the protection for the person reporting. In 2023 we provided training about diversity and inclusion to more than 5700 employees. We have the goal to increase participation of women by 2% yearly in the organization. We increased our female workforce from 1,090 to 1,221, which represents an increase of 12% in our female headcount year-over-year. We also increased our female workforce on Leadership positions by 12%. Additionally, this year 34% of our female workforce hold a STEM position (Science, Technology, Engineering, Mathematics).

We now have a better understanding of our diversity distribution, which we believe allows us design efforts for each group, and advance towards inclusion.

CODE OF ETHICS

We certify our employees in our Code of Ethics yearly. Every employee, starting with new hires, commit and sign agreement with our main document and guidance tool for our conduct in terms of our legal, professional and ethical obligations, both in our business dealings and our interpersonal relationships.

Peru

The Company maintains ongoing communication with union representatives with the aim of ensuring labor harmony and proper management of labor relations. The Company has collective bargaining agreements with each of the six unions, the earliest expiration of which is in 2024 and the latest of which is in 2027. These agreements regulate benefits related to remuneration and working conditions.

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60.9% of the Company’s 4,979 Peruvian employees were unionized as of December 31, 2023. Currently, there are six separate unions, none of which represents the majority of workers, as defined by current Peruvian labor legislation.

During 2021, the Company held talks with the six unions to sign collective bargaining agreements prior to their effective dates. As a result, between the duration of the agreement, a long-term agreement bonus of S/10,000 (approximately $2,670) was granted in June and December 2021, the Company signed collective bargaining agreements with the six unions with durations between three to six years. All of them granted annual salary increases of 5%. Additionally, each agreement granted, among other things, a signing bonus of between S/45,000 (approximately $12,013) and S/90,000 (approximately $24,026), depending on the union that signed a six-year extension of the collective bargaining agreement. All these concepts were recorded as labor expense. In 2022, these collective bargaining agreements were executed and the Company does not have any collective agreement pending to be negotiated with the unions.

In December 2022, the Company reached a settlement with one of the unions regarding compliance with an 2018-2019 Arbitration Award. As part of this settlement, the Company made a one-time payment to each union member of S/4,000 (approximately $1,068) as a compensation bonus and also paid a signing bonus of S/1,000 (approximately $267).

In the first quarter of 2023, the Company began applying the terms of the agreements entered into with the six unions pursuant to Law 31632, which stipulates new conditions for compensation of leaves granted during COVID-19. Within the current framework of labor regulations and the agreements with all six unions, this compensation has been adapted to align with current working hours in the mining sector. These conditions were in effect until December 1, 2023.

In June 2023, the Company held two meetings with the unions to discuss different issues of collective interest. At these meetings, the unions expressed concerns regarding the current economic situation, including the rise in the cost of living in Peru, as well as issues related to services provided by the Company. In the third quarter of 2023, the Company released a formal response to each union confirming that there are collective labor agreements in force with each union that regulate all benefits related to salaries and working conditions. The Company has been complying with all its obligations under such collective labor agreements and is committed to maintaining on-going communication with the unions to ensure harmony.

In the last quarter of 2023, one of the unions which represents 24.7% of affiliated workers in the Company’s three productive units, held elections for 2023-2025. Another union, which represents 25.7% of affiliated workers, is in the process of electing its new representatives.

An important development in labor relations with the Company’s unions stems from a ruling by the Peruvian Supreme Court that was notified to the Company on October 23, 2023. After 12 years of litigation, the Court ruled in favor of the Company to settle a suit involving a worker payment in the amount of S/11,000 (approximately $2,936) that a lower court had ordered the Company to pay to one of the unions in 2011. The Company had been legally pursuing recovery of the total amount of this worker payment. The union has expressed its intention to comply with the court order and to reach an agreement to return the amount paid by the Company.

Our employees at the Toquepala and Cuajone mining units reside in the 3,700 houses and apartments that we have built at the townsites. We also have 90 houses in Ilo for staff personnel. Housing, maintenance and utility services are provided to most of our employees for a nominal cost. Our townsite and housing complexes provide schools, medical facilities, churches, banks, shops, social clubs, recreational facilities and other services.

Mexico

69.8% of our 10,802 Mexican employees were unionized as of December 31, 2023 and are represented by ten different unions. Under Mexican law, the terms of employment for unionized workers are set forth in collective bargaining agreements. Mexican companies negotiate the salary provisions of collective bargaining agreements with the labor unions on an annual basis and negotiate other benefits every two years. We conduct negotiations separately at each mining complex and each processing plant.

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Our Taxco mine in Mexico has been on strike since July 2007. For a discussion of labor matters, refer to the information contained under the caption “Labor matters” in Note 13 “Commitments and Contingencies” of the consolidated financial statements.

Employees of La Caridad and Buenavista units reside in townsites at Nacozari and Cananea, where we have built approximately 1,800 houses and apartments. Most of the employees of the IMMSA unit reside on the grounds of the mining or processing complexes where we have built 356 houses and apartments. Housing, together with maintenance and utility services, is provided at nominal cost to most of our employees. Our townsites and housing complexes include educational and medical facilities, churches, social clubs, shopping centers, banking and other services. Through 2007, the Buenavista unit provided health care services to employees and retired unionized employees and their families through its own on-site hospital. In 2010, 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. The new workers of Buenavista receive health services through the Mexican Institute of Social Security as is the case for all Mexican workers.

FUEL, ELECTRICITY AND WATER SUPPLIES

The principal raw materials used in our operations are fuel, gas, electricity and water. We use natural gas to power boilers and generators and utilize diesel fuel to power mining equipment for metallurgical processes at our operations. We believe that sufficient sources of fuel, electricity and water are readily available. Fluctuations may occur in the prices of these raw materials that are beyond our control; as such, we focus our efforts on reducing costs through cost and energy-saving measures.

Energy generates the main cost in mining, so concern for its conservation and efficient usage is critical. We have energy management committees at most of our mines, which meet periodically to discuss consumption and to develop measures directed at saving energy. Alternative sources are also being analyzed at the corporate level, including both traditional and renewable energy sources. This approach has helped us to develop a culture of energy conservation directed at ensuring the sustainability of our operations.

Peru:

Fuel: In Peru, we obtain fuel primarily from Valero Peru, a local subsidiary of Valero Energy Corporation, a U.S. producer of fuel and power. The Company believes that adequate supplies of fuel are available for its operations in Peru.

Electricity: In June 2014, we entered into a power purchase agreement for 120 megawatts (“MW”) with the state owned company Electroperu S.A., which began supplying energy to our Peruvian operations for a twenty-year period that started on April 17, 2017. In July 2014, we entered into a power purchase agreement for 120MW with a private power generator Kallpa Generacion S.A. (“Kallpa”), which began supplying energy to our Peruvian operations for a ten-year period that started on April 17, 2017. In May 2016, we signed an additional power purchase agreement for a maximum of 80MW with Kallpa, under which Kallpa will supply energy to the operations related to the Toquepala expansion and to other minor projects for a period starting on May 1, 2017 and ending after ten years of commercial operations at the Toquepala Expansion or until April 30, 2029; whichever occurs first. We feel confident that additional power can be obtained from the Peruvian national grid, should the need arise.

Additionally, we have nine megawatts of power generation capacity from two small hydro-generating facilities at Cuajone. Power is distributed over a 224-kilometer closed loop transmission circuit, which is connected to the Peruvian network.

Water: We have water rights or licenses for up to 1,950 liters per second from well fields at the Huaitire-Gentilar, Vizcachas and Titijones aquifers and surface water rights from Lake Suches. Three additional water sources are: Quebrada Honda, Quebrada Tacalaya and a smaller resource from the Cuajone mine pit. We believe these water sources are sufficient to supply the water demands of our operating units at Toquepala and Cuajone. Additionally, we have permits in Ilo to use water at three desalination plants that generate water for industrial use and domestic consumption;

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we believe these facilities will produce sufficient water to cover the requirements of both current and projected needs. Additionally, we have two licenses for the use of non-desalinated seawater for the Smelter.

The Branch has a surface water permit for the Locumba river, which will facilitate the conservation and maintenance of a portion of the wetlands in Ite.

Mexico:

Fuel: In Mexico, since 2018, we have purchased fuel from Petroleos Mexicanos (“PEMEX”), the state producer, and from private suppliers.

The La Caridad unit imports natural gas from the United States through its pipeline (between Douglas, Arizona and Nacozari, Sonora). This allows us to import natural gas at market prices and thereby reduce operating costs. Several contracts with PEMEX and the United States provide us with the option of using a monthly or daily fixed prices for our natural gas purchases.

Natural gas is used for metallurgical processes and to power furnaces, converters, casting wheels, boilers and electric generators. Diesel oil is a backup method for all these uses. We use diesel oil to power mining equipment at our operations.

Electricity: Electricity is used as the main energy source at our mining complexes. We purchase most of our electricity from Mexico Generadora de Energia S. de R. L. (“MGE”), a subsidiary of Grupo Mexico which has two power plants designed to supply power to La Caridad and Buenavista units. Currently, MGE supplies 7.6% of its power output to third party energy users. These plants are natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts. In 2012, we entered into a power supply agreement with MGE that will last until 2032. The first plant was completed in 2013 and the second in 2014. The first plant began to supply power to the Company in December 2013, and the second plant in June 2015.

We also purchase electricity from the Comision Federal de Electricidad (the Federal Electricity Commission or the “CFE”), the state’s electrical power producer. In addition, we recover some energy from waste heat boilers at the La Caridad smelter. Accordingly, a significant portion of our operating costs in Mexico is dependent upon the pricing policies of CFE and PEMEX, which are affected by political and regulatory environments, international market prices for crude oil and natural gas; and conditions in the refinery markets.

Some IMMSA mining operations also purchase electricity from Eolica el Retiro, S.A.P.I de C.V. (“Eolica”), a windfarm energy producer that is an indirect subsidiary of Grupo Mexico. In August 2013, IMMSA and other of the Company’s mining operations entered into a purchase agreement and in late 2014 started to purchase electricity from Eolica. Due to the nature of the production process there is not a fixed power capacity contracted. Currently, Eolica el Retiro is supplying approximately 12% of its power output to IMMSA and Mexcobre.

On February 20, 2020, the Company signed a power purchase agreement with Parque Eolico de Fenicias, S. de R.L. de C.V., and indirect subsidiary of Grupo Mexico, to supply 611,400 MWh of power per year to some of the Company´s Mexican operations for 20 years. This agreement is expected to become effective during the second quarter of 2024.

Water: In Mexico, water is deemed public property and industries that are not connected to a public service water supply must obtain a water concession from Comision Nacional del Agua (the National Water Commission or the “CNA”). Water usage fees are established in the Ley Federal de Derechos (the Federal Rights Law), which distinguishes several availability zones with different fees per unit of volume according to each zone, with the exception of Mexicana de Cobre. All of our operations have one or several water concessions and pump out the required water from wells. Mexicana de Cobre pumps water from the La Angostura dam, which is close to the mine and plants. At our Buenavista facility, we maintain our own wells and pay the CNA for water usage. Water conservation committees have been established at each plant to conserve and recycle water. Water usage fees are updated on a yearly basis and have been on the rise in recent years.

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LEGAL AND REGULATORY MATTERS

In 2022 and 2023, no legal, environmental, labor or tax regulations came into effect that required the Company to incur material costs of compliance, had material adverse effects on the Company’s operations, or affected normal execution of the Company’s projects. Additionally, we believe that all our facilities in Peru and Mexico are in material compliance with applicable environmental, mining and other applicable laws and regulations.

For a discussion of environmental and labor matters, reference is made to the information contained in Note 13 “Commitments and Contingencies” of the consolidated financial statements. For more information on tax matters, refer to Note 7 “Income taxes” of the consolidated financial statements.

MINING RIGHTS AND CONCESSIONS

Peru:

We have 156,818 hectares in concessions from the Peruvian government for our exploration, exploitation, extraction and production operations, at various sites, as follows:

    

Toquepala

    

Cuajone

    

Ilo

    

Other

    

Total

 

(hectares)

Plants

 

360

919

421

 

1,700

Operations

 

22,423

26,461

4,249

36,733

 

89,866

Projects and water resources

Exploration

 

65,251

 

65,251

Total

 

22,783

 

27,380

 

4,670

 

101,985

 

156,818

We believe that our Peruvian concessions are in full force and effect under applicable Peruvian laws and as such, comply with all material terms and requirements applicable to said concessions. The concessions have indefinite terms, subject to our payment of concession fees of up to $3.00 per hectare annually for the mining concessions and a fee based on nominal capacity for the processing concessions. Fees paid during 2023, 2022 and 2021, were approximately $3.4 million, $2.5 million and $2.3 million, respectively. We have two types of mining concessions in Peru: metallic and non-metallic concessions.

Mexico:

In Mexico we have 502,688 hectares in concessions from the Mexican government for our exploration and exploitation activities as outlined on the table below:

    

IMMSA

    

La Caridad

    

Buenavista

    

Projects

    

Total

 

(hectares)

Mine concessions

 

223,313

103,821

93,706

81,848

 

502,688

We believe that our Mexican concessions are in full force and in effect under applicable Mexican laws and that we are in compliance with all material terms and requirements applicable to these concessions. Under Mexican law, mineral resources belong to the Mexican nation and a concession from the Mexican federal government is required to explore or mine mineral reserves. Mining concessions have a 50-year term that can be renewed for another 25 years. Holding fees for mining concessions can be from $0.52 to $11.48 per hectare depending on the start date of the mining concession. Fees paid during 2023, 2022 and 2021 were approximately $11.7 million, $8.7 million and $7.7 million, respectively. In addition, all of our operating units in Mexico have water concessions that are in full force and effect. Although ownership is not required in order to explore or mine a concession, we generally own the land related to our Mexican concessions. We also own all of the processing facilities of our Mexican operations and the land on which they are built.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document we file at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The SEC maintains a website that contains annual, quarterly and current

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reports, proxy statements and other information that issuers (including Southern Copper Corporation) file electronically with the SEC. The SEC’s website is www.sec.gov.

Our website is www.southerncoppercorp.com. The first document on the list of materials available on this website is Form 8-K, dated March 14, 2003. We offer, free of charge, downloads of our annual, quarterly and current reports, as soon as they can be reasonably made available following electronic or physical filing with the SEC. Our website also includes the Company’s Corporate Governance guidelines and the charters of our main Board Committees. However, the information found on our website is not part of this or any other report.

CAUTIONARY STATEMENT

Forward-looking statements in this report and in other Company statements include information regarding expected commencement dates of mining or metal production operations, projected quantities of future metal production, anticipated production rates, operating efficiencies, costs and expenditures, including taxes, as well as projected demand or supply for the Company’s products. Actual results could differ materially depending upon certain factors, including the risks and uncertainties relating to general U.S. and international economic and political conditions, the cyclical and volatile prices of copper, other commodities and supplies, including fuel and electricity, the availability of materials, insurance coverage, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, lower than expected ore grades, water and geological problems, the failure of equipment or processes to operate in accordance with specifications, failure to obtain financial assurance to meet closure and remediation obligations, labor relations, litigation and 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.

CAUTIONARY NOTE REGARDING DISCLOSURE OF MINERAL PROPERTIES

Mineral Reserves and Resources

In our public filings in the U.S. and Peru and in certain other announcements not filed with the SEC, we disclose proven and probable reserves and measured, indicated and inferred mineral resources, each as defined in Item 1300 of Regulation S-K (“S-K 1300”). The estimation of measured mineral resources and indicated mineral resources implies greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves, and therefore investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into S-K 1300-compliant reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. Therefore, investors are cautioned not to assume that all or any part of inferred resources exist, or that they can be mined legally or economically.

Technical Report Summaries and Qualified Persons

The scientific and technical information concerning our mineral projects in this Form 10-K have been reviewed and approved by third-party “qualified persons” pursuant to S-K 1300. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and mineral resources included in this Form 10-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other relevant factors, please review the Technical Report Summaries for each of the Company’s material properties which are included as exhibits to, and incorporated by reference in this report.

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ITEM 1A. RISK FACTORS

Every investor or potential investor in Southern Copper Corporation should carefully consider the following risk factors.

Financial risks

Our financial performance is highly dependent on the price of copper and the other metals we produce.

Our financial performance is significantly affected by the market prices of the metals that we produce, particularly the market prices of copper, molybdenum, zinc and silver. Historically, these prices have been subject to wide fluctuations and are affected by numerous and complex factors beyond our control. Market prices are affected by a number of factors, including global economic and political conditions in general, and in particular by: international policies and regulations in the ambits of trade, taxes and tariffs; levels of supply and demand; the availability and cost of substitutes; inventory levels maintained by users; actions of participants in the commodities markets; interest rates; expectations regarding future inflation rates; currency exchange rates and changes in technology. In addition, the market prices of copper and certain other metals have on occasion been subject to rapid short-term changes. At the start of the pandemic in 2020, copper prices were initially impacted by economic uncertainty. However, in mid-2020, copper prices began to rise and reached a record highs during 2021. Volatility in global economic growth, particularly in developing countries, has the potential to adversely affect future demand and prices for commodities. Geopolitical uncertainty and protectionism have the potential to inhibit international trade and negatively impact business confidence, which can create price volatility and constraints on our ability to trade in certain markets.

In addition to the factors discussed above, copper prices may be affected by demand from China, which is currently

the largest consumer of refined copper and concentrate in the world.

Over the last three years, approximately 77.6% of our revenues have come from the sale of copper; 10.9% from molybdenum; 4.2% from silver; and 3.1% from zinc. Please see the distribution of our revenues per product on Item 8 “Financial Statements and Supplementary Data” Note 19 “Segment and Related Information—Sales value per segment”.

See also the historical average price of our products on Item 1 Business caption “Metals prices”.

We cannot predict if metals prices will rise or fall in the future. Extended significant future declines in metals prices, particularly copper, could have a material adverse impact on our results of operations, financial condition and value of our assets. Under very adverse market conditions, we might consider curtailing or modifying some of our mining and processing operations. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, in which case, we may incur losses, which may be material.

Declines in the prices of metals we sell could also result in metals inventory adjustments and impairment charges for our long-lived assets. Other events that could result in the impairment of our long-lived assets include, but are not limited to, decreases in estimated proven and probable mineral reserves and any event that might have a material adverse effect on current and future expected mine production costs.

Volatility in metals prices may also impact the price of our outstanding securities.

Although our results of operations and cash flow will reflect fluctuations in the prices of copper and other metals we produce, short-term volatility in prices may generate significant fluctuations in the price of our securities. Such volatility in the price of our securities may not be reflective of our operating performance or financial results.

Our business requires levels of capital investments that we may not be able to maintain.

Our business is capital intensive. Significant capital investments are required specifically for the exploration and exploitation of copper and other metal reserves, mining, smelting and refining costs, the maintenance of machinery and equipment and compliance with laws and regulations. We must continue to invest capital to maintain or increase the amount of copper reserves that we exploit and the amount of copper and other metals we produce. We cannot assure you

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that we will be able to maintain our production at levels that generate sufficient cash, or that we will have access to sufficient financing to continue our exploration, exploitation and refining activities at or above present levels.

Restrictive covenants in the agreements governing our indebtedness and the indebtedness of our Minera Mexico subsidiary may restrict our ability to pursue our business strategies.

Our financing instruments and those of our Minera Mexico subsidiary include financial and other restrictive covenants that, among other things, limit our and Minera Mexico’s abilities to incur additional debt and sell assets. If either we or our Minera Mexico subsidiary fails to comply with these obligations, we could be in default under the applicable agreements. This situation, if not addressed or waived, could require immediate repayment of debt obligations. Our Minera Mexico subsidiary is further limited by the terms of its outstanding notes, which also restrict the Company’s applicable incurrence of debt and liens. In addition, future credit facilities may contain limitations on our capacity to incur additional debt and liens, dispose of assets, or pay dividends to our common stockholders.

We may not pay a significant amount of our net income as cash dividends on our common stock in the future.

We have distributed a significant amount of our net income as dividends since 1996. Our dividend practice is subject to change at the discretion of our Board of Directors at any time. The amount that we pay in dividends is subject to a number of factors, including the results of our operations; our financial condition; cash requirements; tax considerations; future prospects; legal restrictions; contractual restrictions in credit agreements; limitations imposed by the government of Peru, Mexico and other countries where we have significant operations; and other factors that our Board of Directors may deem relevant. Depending on our capital investment program and global economic conditions, it is possible that future dividend distributions will be lower than the levels seen in recent years.

Our ability to recognize the benefits of deferred tax assets is dependent on future cash flows and taxable income.

Through 2023, the Company recognized the expected future tax benefit from deferred tax assets when the tax benefit was considered more likely than not to be realized. A valuation allowance is provided for those deferred tax assets for which management believes that the related benefits will not be realized. Determining the amount of the valuation allowance and assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income and existing tax laws. There can be no assurance that the Company will be able to recognize the expected future benefits of deferred tax assets; this inability could have a material adverse effect on the Company’s financial results.

Operational risks

Our actual reserves and resources may not conform to our current estimates of our ore deposits and our long-term viability depends on our ability to replenish mineral reserves and resources.

There is a degree of uncertainty attributable to the estimation of reserves and resources. Until reserves are actually mined and processed, the quantity of ore and grades must be considered estimates only. We disclose proven and probable reserves and measured, indicated and inferred resources, each as defined in Item 1300 of Regulation S-K (“S-K 1300”). Additionally, the scientific and technical information concerning our mineral projects in this Form 10-K has been reviewed and approved by third-party “qualified persons” pursuant to S-K 1300. We may be required in the future to revise our reserves and resources estimates based on our actual production. We cannot assure you that our actual reserves and resources conform to geological, metallurgical or other expectations or that the estimated volume and grade of ore will be recovered. Market prices of our metals, increased production costs, reduced recovery rates, short-term operating factors, royalty charges and other factors may render proven and probable reserves uneconomic to exploit and may result in revisions of reserves data from time to time. Reserves data may not be indicative of future results of operations. Our reserves are depleted as we mine. We depend on our ability to replenish our mineral reserves and resources for our long-term viability. We use several strategies to replenish and increase our mineral reserves and resources, including exploration and investment in properties located near our existing mine sites and investing in technology that could extend the life of a mine by allowing us to cost-effectively process ore types that were previously considered uneconomic. Acquisitions may also contribute to increasing mineral reserves and resources, and we review

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potential acquisition opportunities on a regular basis. However, we cannot assure you that we will be able to continue with our strategy to replenish reserves indefinitely.

Our operations are subject to risks, some of which are not insurable.

The business of mining, smelting and refining copper, zinc and other metals is subject to a number of risks and hazards, including industrial accidents, labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment, environmental hazards, weather and other natural phenomena, such as seismic activity, wall failures and rock slides in our open-pit mines, structural collapses of our underground mines or tailings impoundments, and lower than expected ore grades or recovery rates. The Company’s operations may also be affected by mudslides and flash floods caused by torrential rains.

Such occurrences could result in damage to, or destruction of, mining operations resulting in monetary losses and possible legal liability. In particular, surface and underground mining and related processing activities present inherent risks of injury to personnel, loss of life and damage to equipment.

The waste rock and tailings produced in our mining operations represent our largest volume of waste material. Managing the volume of waste rock and tailings presents significant environmental, safety and engineering challenges and risks. We maintain large tailings impoundments containing sand of ground rock, moistened with water, which are effectively large dams that must be engineered, built and monitored to assure structural stability and avoid leakages or structural collapse. Defects, errors and failures at tailings dams and in other impoundments at any of our mining operations could cause severe property and environmental damage and loss of life. The importance of careful design, management and monitoring of large impoundments was emphasized in recent years by large scale tailings dam failures at unaffiliated mines, which caused extensive property and environmental damage and resulted in the loss of life. For more information regarding our tailing dams, please see Item 2 “Properties—Slope Stability—Tailing Dams.”

During recent years, social and political demands has caused violence which could result in damage to, or destruction of, mining operations resulting in monetary losses and possible legal liability.

In our proactive approach to managing operational sustainability risks, we have implemented the Critical Risk Registry, aligning with the International Council on Mining and Metals (ICMM) Good Practice Guide on Health and Safety Critical Control Management. This robust system addresses both environmental and health and safety risks, ensuring compliance with best practices. By focusing on critical controls through this approach, we optimize resource allocation and bolster our efforts in sustainability risk management.

To enhance the monitoring of controls, we recently introduced a comprehensive company procedure and digital tool. This platform facilitates detailed oversight by establishing clear roles, responsibilities, timelines, reminders, and notifications. It streamlines the chain of command, enabling the prompt identification of deviations from established protocols and facilitating the implementation of corrective actions along with subsequent monitoring. Through the digital tool, we can measure, verify, and audit controls, promptly identifying instances of incorrect implementation or threshold breaches.

In addition, we maintain insurance against many of these and other risks, which under certain circumstances may not provide adequate coverage. Insurance against certain risks, including certain liabilities for environmental damage or hazards as a result of exploration and production, is not generally available to us or other companies within the mining industry. Nevertheless, recent environmental legal initiatives contemplate requirements for environmental damage insurance. If these regulations come into force, we will have to analyze the need to obtain said insurance. We do not have nor do we intend to obtain, political risk insurance. We cannot assure you that these and other uninsured events will not have an adverse effect on our business, properties, operating results, financial condition or prospects.

Changes in the demand level for our products and copper sales agreements could adversely affect our revenues.

Our financial results may be affected by fluctuations in demand for the refined, semi-refined metal products and concentrates we sell at both the industrial and consumer level, and may also be affected by changes in the global

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economy, including economic upturns and downturns of differing magnitudes. Changes in technology, industrial processes, concerns over weaknesses in the global economy and consumer habits may affect the level of demand to the extent that those increase or decrease the need for our metal products. Our revenues may also be adversely affected by events of force majeure that could have a negative impact on our sales agreements. These events include acts of nature, labor strikes, fires, floods, wars, transportation delays, government actions or other events that are beyond the control of the parties to the agreement.

However, the success of the energy transition is intrinsically linked to copper, our key product, critical for the production of technological solutions to the decrease the global greenhouse gas (GHG) emissions. Given copper's crucial role in electrification and the generation of clean energies, there exists an increasing expectation from both corporate entities and societal stakeholders that copper sourcing should emanate from entities committed to rigorous and responsible production practices.

This commitment has driven us to pledge certifications for all our copper production under international standards.

Interruptions of energy supply or increases in energy, fuel and gas costs, shortages of water supply, critical parts, equipment, skilled labor and other production costs may adversely affect our results of operations.

We require substantial amounts of fuel oil, electricity, water and other resources for our operations. Fuel, gas and power costs constituted approximately 29% of our total production cost in 2023, 34% in 2022 and 31% in 2021. We rely upon third parties for our supply of the energy resources consumed in our operations. Therefore prices for and availability of energy resources may be subject to change or curtailment due to new laws or regulations; imposition of new taxes or tariffs; interruptions in production by suppliers; and variations in global prices or market conditions, among other factors. Regarding water consumption, although each of our operations currently has sufficient water supplies to cover its operational demands, the loss of some or all water rights for any of our mines or operations, in whole or in part, shortages relative to the water to which we have rights or a lack of additional back-up water supplies at an acceptable cost, or at all, could require us to curtail or shut down mining production and could prevent us from pursuing expansion opportunities, thereby increasing and/or accelerating costs or foregoing profitable operations. In addition, future shortages of critical parts, equipment and skilled labor could adversely affect our operations and development projects.

Potential delays in the transport of products to customers and possible shortages of critical parts, equipment, and other resources may adversely affect our results of operations.

Current challenges in the global shipping industry have led to congestion in ports, a shortage in containers, and a lack of space on ships. Because of this situation, the Company faces a risk of potential supply chain disruptions that may adversely affect our operations and development projects. To address this potential issue, we have increased our safety stock levels and adjusted our replacement algorithms. Additionally, our revenues and collections may also be adversely affected by transportation delays, which could negatively impact our sales agreements. Although the recovery of the global economy is causing the aforementioned issues at ports and in the shipping industry, this situation is expected to be resolved gradually and to return to normal levels in the short term. However, if these issues continue in the long term, our supply chain and our sales flow could be adversely impacted.

Our Company is subject to health and safety laws that may restrict our operations, result in operational delays or increase our operating costs and adversely affect our financial results of operations.

We are required to comply with occupational health and safety laws and regulations in Peru and Mexico where our operations are subject to periodic inspections by the relevant governmental authorities. These laws and regulations govern, among others, health and safety workplace conditions, including high risk labor and the handling, storage and disposal of chemical and other hazardous substances. We believe our operations comply in all material respects with applicable health and safety laws and regulations in the countries in which we operate. Compliance with existing and new laws and regulations that may be applicable to us in the future could increase our operating costs and adversely affect our financial results of operations and cash flows.

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Our objective is to preserve the health and safety of our workforce by implementing occupational health and training programs and safety incentives at our operations that meet all regulatory requirements and enhance employee performance. Despite the Company’s efforts, we are not exempt from accidents. These are reported to Mexican and Peruvian authorities as required. Regarding non-fatal accidents, during the last four years, the Company’s Dart rate (rate to measure workplace injuries severe enough to warrant Day Away from work, job Restrictions and/or job Transfers) was much lower than the MSHA Dart rate (the MSHA Dart rate is published by the U.S.’s Mine Safety and Health Administration, and is used as an industry benchmark).

In 2023, we recorded five fatalities (two contractors and three employees). In 2022, we recorded four fatalities (two contractors and two employees) and in 2021, three employee fatalities were registered. The amounts paid to the Mexican and Peruvian authorities for reportable accidents had no adverse effects on our results. Under Mexican and Peruvian law penalties and fines for safety violations are generally monetary, but in certain cases may lead to the temporary or permanent shutdown of the affected facility or the suspension or revocation of permits or licenses. Additionally, violations of security and safety laws and regulations at our Peruvian operations can be considered criminal activity and punishable by a sentence of up to 10 years of prison.

Our metals exploration efforts are highly speculative in nature and may be unsuccessful.

Metals exploration is highly speculative in nature because it involves many risks and is frequently unsuccessful. Once mineralization is discovered, it may take a number of years from the initial phases of drilling until production is possible. During such time the economic feasibility of production may change. Substantial expenditures must be made to determine proven and probable mineral reserves, which requires drilling to establish the metallurgical processes that will be needed to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. We cannot assure you that our exploration programs will result in the expansion or replacement of current production with new proven and probable mineral reserves.

Development projects have no operating history upon which we can base estimates of proven and probable mineral reserves and estimates of future cash operating costs. Estimates are, to a large extent, based upon the interpretation of geological data obtained from drill holes and other sampling techniques and on pre-feasibility or feasibility studies that generate estimates of cash operating costs based upon anticipated tonnage and grades of ore to be mined and processed; the configuration of the ore body; expected recovery rates of the mineral from the ore; comparable facility and equipment operating costs; anticipated climatic conditions; and other factors. As a result, actual cash operating costs and economic returns based upon the development of proven and probable mineral reserves may differ significantly from those originally estimated. Moreover, significant decreases in actual or expected prices may mean reserves, once found, will be uneconomical to produce.

We may be adversely affected by challenges relating to slope stability.

Our open-pit mines get deeper as we mine them, presenting certain geotechnical challenges including the possibility of slope failure. If we are required to decrease pit slope angles or provide additional road access to prevent such a failure, our stated reserves could be negatively affected. Furthermore, hydrological conditions relating to pit slopes, renewal of material displaced by slope failures and increased stripping requirements could also negatively affect our stated reserves. We take action to maintain slope stability, but we cannot assure you that we will not have to take additional action in the future or that our actions taken to date will be sufficient. Unexpected slope failures, or additional requirements to prevent slope failures, may negatively affect our results of operations and financial condition and may diminish our stated mineral reserves.

We may be adversely affected by labor disputes.

In the last several years, we have experienced several strikes and other labor disruptions that have had an adverse impact on our operations and operating results. As of December 31, 2023, unions represented approximately 61% of our workforce in Peru and 70% of our workforce in Mexico. Currently, we have labor agreements in effect for our Mexican and Peruvian operations.

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Our Taxco mine in Mexico has been on strike since July 2007. It is expected that operations at this mine will remain suspended until these labor issues are resolved. In addition, workers at the San Martin mine were on strike from July 2007 to August 2018. After eleven years of an illegal stoppage, we resumed control of the San Martin mine in August 2018. During this period, the San Martin facilities deteriorated and we undertook a major renovation to restart operations during the second quarter of 2019 for a total expense of approximately $90.5 million. For additional information, see Item 2, “Properties—Mexican IMMSA Unit—San Martin and Taxco”, and Note 13, “Commitments and Contingencies—Labor matters”, to the consolidated financial statements.

We cannot assure you when the pending strike will be settled, or that in the future we will not experience strikes or other labor related work stoppages that could have a material adverse effect on our financial condition and results of operations.

Our mining operations or metal production projects may be subject to stoppage and additional costs due to community actions and other factors.

In recent years, global mining activity has been pressured by neighboring communities for financial commitments to fund social benefit programs and infrastructure improvements. Our projects in Peru are not exempt from these demands. Our Tia Maria project in Peru has experienced delays while trying to resolve issues with community groups.

Seemingly in the Peruvian mining environment, it is becoming crucial to obtain acceptance from local communities for projects in their areas, which may entail compliance with the demands for substantial investments in community infrastructure development and modernization to proceed with the mining projects.

We are confident that we will move forward with the Tia Maria project. However, we cannot assure you when and that we will incur no additional costs for community infrastructure development and modernization to obtain approval from the communities for current or future mining projects.

In 2022, violent protests by some of communities adjoining the Cuajone mine negatively affected the mine’s operations. In February 2022, the railway between Cuajone and Ilo was blocked and Viña Blanca water reservoir facilities were seized, cutting off the water supply to some residents of the Cuajone mining camp.

After numerous efforts to restore order through dialogue by the authorities, the Peruvian government declared a state of emergency in the Moquegua region in April 2022 and ordered the protestors to return the Viña Blanca facilities and the railway to the Company. After an evaluation of the damage, the Company resumed production at the Cuajone mining unit and the facilities are currently operating at full capacity.

On April 30, 2022, the Peruvian government issued a Ministerial Resolution to set up a three-party-dialogue-table with members of the community, government and Company officials executives to better understand the concerns of all parties. Several meetings have been held, the last meeting was in June 2023 and it is expected to have a new meeting in March 2024. The Company has proposed plans to invest in social programs that address the needs voiced by the communities and has indicated interest in purchasing land near the Cuajone operations to establish a buffer zone to protect facilities and production in the future. The Community insist to receive a economic compensation.

However, we cannot guarantee that any additional incidents will not arise or assert that any future incidents that occur will imply no adverse impacts for our facilities, the results of our operations or our financial position.

In addition, several collective action lawsuits and civil action lawsuits have been filed against the Company in Mexico through both federal courts and state courts in Sonora. Several constitutional lawsuits have also been filed against various government authorities and the Company. These lawsuits are seeking damages and demand remediation actions to restore the environment. The Company believes that the lawsuits are without merit and that it is not possible to determine the extent of the damages sought. Moreover, the Company cannot offer any assurances that the outcome of these lawsuits will not have adverse effects on the Company.

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Environmental regulation, climate change and other regulations may increase our costs of doing business, restrict our operations or result in operational delays.

Our exploration, mining, milling, smelting and refining activities are subject to a number of Peruvian and Mexican laws and regulations, including environmental laws and regulations, and certain industry technical standards. Additional matters subject to regulation include, but are not limited to, concession fees, transportation, production, water use and discharge, power use and generation, use and storage of explosives, surface rights, housing and other facilities for workers, reclamation, taxation, labor standards, mine safety and occupational health. As the world and the countries in which we operate become more conscious of the importance of environmental aspects, we expect additional environmental laws and regulations will be enacted over time.

Please refer to Note 13 “Commitments and Contingencies—Environmental matters” of our financial statements for further information on this subject.

The potential physical impacts of climate change on our operations are highly uncertain and depend on the geographic location of our facilities. These may include droughts and the associated changes in rainfall patterns, water shortages, changes in sea levels, and high temperatures. These effects may adversely impact the cost, production and financial performance of our operations. In addition, substantial weather-related conditions could impact our relationships and arrangements with our major customers and suppliers by materially affecting the normal flow of our transactions, especially seaborne transactions. For example, severe weather events could damage transportation infrastructures and lead to interruptions or delays in the supply of key inputs and raw materials or sold products.

We monitor fluctuations in weather patterns in the areas where we operate. Aligned with government efforts, we measure our carbon footprint and have updated our climate strategy to reduce the contributions to greenhouse gas emissions of our operations. We also evaluate our water demand, as weather changes may result in increases or decreases that affect our needs.

Efforts to comply with more stringent environmental protection programs in Peru and Mexico and with relevant trade agreements could impose constraints on operations and imply additional costs. Consequently, we may need to make significant investments in this regard in the future. We cannot assure you that current or future legislative, regulatory or trade developments will not have adverse effects on our business, properties, operating results, financial condition or prospects.

Our mining and metal production projects may expose us to new risks.

Our Company is in the midst of a large expansion program, which may expose us to additional risks in terms of industrial accidents. While we believe our contractors employ safety standards and other procedures to ensure these projects are completed with proper governance, it is possible that increased activity at our sites could cause environmental accidents or endanger human life.

Our business depends upon information technology systems that may be adversely affected by disruptions, damage, cyber-attacks, failure and risks associated with implementation and integration.

Our operations depend upon information technology systems that may be subject to disruption, damage or failure from different sources, including, without limitation, the installation of malicious software, computer viruses, security breaches, cyber-attacks and defects in design. In recent years, cybersecurity incidents have increased in frequency and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. We have taken appropriate preventive measures to mitigate potential risks by implementing an information security management system that conducts frequent monitoring; which ensures the application of controls that are frequently reviewed and tested.

In March 2021, we experienced a Ransomware cyber-attack, which was carried out by individual hackers. This cyber-attack encrypted a total of 420 servers and units of personal equipment. However, due to the quick response of our

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Information Technology team, our Enterprise Resource Planning software was not affected by the aforementioned attack.

Given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to manipulation or improper use of our systems and networks, operational delays, situations that compromise confidential or otherwise protected information, destruction or corruption of data, security breaches, or financial losses from remedial actions, any of which could have a material adverse effect on the cash flows, competitive position, financial condition or results of our operations.

Our business is exposed to certain risks associated with artificial intelligence (“AI”) and other new technologies.

Information and operational technology systems continue to evolve and, in order to remain competitive, we must implement new technologies in a timely, cost-effective and efficient manner. For example, nowadays a major number of software, hardware, services and in general technological solutions vendors are including AI components for a very wide range of applications; and we may find improvement opportunities by developing and applying AI in several of our business and operational processes. These applications may become important in our operations over time. Our ability to implement new technologies, including AI, may affect our competitiveness and, consequently, our results of operations.

 

In addition, we may utilize AI and other new technologies in software provided by third parties to enhance our capabilities in producing copper, improving business processes and responding to threats to our technology platforms.  The use of AI when lacking of a strategy and a governance model may increase our exposure to cybersecurity risks and additional risks relating to the protection of data.

Other risks

Applicable law restricts the payment of dividends from our Minera Mexico subsidiary to us.

Our subsidiary, Minera Mexico, is a Mexican company and, as such, may pay dividends only out of net income that has been approved by shareholders. Shareholders must also approve the actual dividend payment, after mandatory legal reserves have been created and losses for prior fiscal years have been satisfied. These legal constraints may limit the ability of Minera Mexico to pay dividends to us, which in turn, may have an impact on our ability to pay stockholder dividends or to service debt.

Global and local market conditions, including the high competitiveness in the copper mining industry, may adversely affect our profitability.

Our industry is cyclical in nature and fluctuates with economic cycles. Therefore, we are subject to the risks arising from adverse changes in domestic and global economic and political conditions, such as a potential global recession, Russia’s invasion of Ukraine, lower levels of consumer and corporate confidence, lower business investment, higher unemployment, reduced income and asset values in many areas, currency volatility and limited availability of credit and access to capital. Additionally, we face competition from other copper mining and producing companies around the world. Along these lines, significant competition exists to acquire properties that produce or are capable of producing copper and other metals, and some of our main competitors have consolidated, which makes them more diversified than we are.

We cannot assure you that changes in market conditions, including competition, will not adversely affect our ability to compete in the future on the basis of price or other factors with companies that may benefit from future favorable trading or other arrangements.

We are controlled by Grupo Mexico, which exercises control over our affairs and policies and whose interests may be different from yours.

As of December 31, 2023, Grupo Mexico owned indirectly 88.9% of our capital stock. Some of our officers and directors, and those of Minera Mexico, are also directors and/or officers of Grupo Mexico and/or of its affiliates. We

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cannot assure you that the interests of Grupo Mexico will not conflict with those of our minority stockholders. Grupo Mexico has the ability to determine the outcome of substantially all matters submitted for a vote to our stockholders and thus exercises control over our business policies and affairs, including the following:

the composition of our Board of Directors and, as a result, any determinations of our Board concerning our business direction and policy, including the appointment and removal of our officers;
determinations concerning mergers and other business combinations, including those that may result in a change of control;
whether dividends are paid or other distributions are made and the amount of any dividends or other distributions;
sales and dispositions of our assets;
the amount of debt financing that we incur; and
the approval of capital projects.

We cannot assure you that an increase in the financial obligations of Grupo Mexico or AMC, which may be attributable to financing or to other reasons, will not result in a scenario in which our parent corporations obtain loans, increase dividends or receive other funding from us.

In addition, we have in the past engaged in, and expect to continue engaging in, transactions with Grupo Mexico and its other affiliates that are related party transactions and may present conflicts of interest. For additional information regarding the share ownership of, and our relationships with, Grupo Mexico and its affiliates, see Note 18 “Related Party Transactions” to the consolidated financial statements.

Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies may adversely affect our financial condition and results of operations.

We are currently, and may in the future become, subject to litigation, arbitration or other legal proceedings with other parties. If rulings are against the Company, these legal proceedings, or others that could be brought against us in the future, may adversely affect our financial position or prospects. For further detailed discussion of pending litigation, please see Note 13 “Commitment and Contingencies—Litigation matters” of the consolidated financial statements.

Developments in the United States, Europe and emerging market countries may adversely affect the Company business, our common stock price and our debt securities.

The business, market value and trading price of securities of companies with significant operations in Peru and Mexico is, to varying degrees, affected by the economic policies and market conditions in the United States, Europe and emerging market countries. Although economic policies and conditions in these countries may significantly differ from policies and conditions in Peru or Mexico, the market’s reactions to developments in any of these countries may adversely affect the Company’s business causing a fluctuation on the market value or the trading price of our securities, including debt securities.

In addition, in recent years economic conditions in Mexico have shown to have an increased correlation to U.S. economic conditions. Therefore, changes in economic policies and conditions in the United States could also have a significant adverse effect on Mexican economic conditions, affecting our business and the price of our common stock or debt securities. In 2017, the United States, Canada and Mexico began a discussion to update the North American Free Trade Agreement (“NAFTA”). In September 2018, the three countries reached an agreement on a new trade deal, which will be known as the United States—Mexico—Canada Agreement (“USMCA”). In June 2019, Mexico’s senate ratified the UMSCA. In December 2019, the three countries agreed to a new review of its regional trade pact, also concluding that the USMCA would replace NAFTA. On January 29, 2020, the President of the U.S. ratified and signed the USMCA into law. On July 1, 2020, the USMCA came into effect.

Although recent developments in the U.S. have reduced political instability, lifted consumer confidence and boosted the U.S. stock market, it is unclear whether the U.S. government will enact new policies towards China, that will reduce or eliminate trade tensions between the two countries. Despite being the epicenter of the COVID-19 pandemic, China began 2021 with a relatively optimistic economic growth outlook and represents approximately 50% of the world’s

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copper demand. A slowing in China’s economic growth, coupled with continued trade tensions with the U.S. could result in lower copper prices which could have a material adverse impact on our business and results of operations. The adoption and expansion of trade restrictions; changes in the current U.S.-China relations, including on-going trade tensions; or other changes in governmental policies related to taxes, tariffs, trade agreements or any other policies are difficult to predict, and could adversely affect the demand for our products, our costs, our customers, our suppliers and the U.S. economy, and consequently could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.

We cannot assure you that the market value or trading prices of our common stock and debt securities, will not be adversely affected by events in the United States or elsewhere, including emerging market countries.

Other international risks

We are a company with substantial assets located outside of the United States. We conduct production operations in Peru and Mexico and exploration activities in these countries as well as in Chile, Argentina and Ecuador. Accordingly, in addition to the usual risks associated with conducting business in foreign countries, our business may be adversely affected by political, economic and social uncertainties in each of these countries. Such risks include possible expropriation or nationalization of property, confiscatory taxes or royalties, possible foreign exchange controls, changes in the national policy toward foreign investors, extreme environmental standards, etc.

Our international operations must comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws in the other jurisdictions in which we operate. There has been a substantial increase in global enforcement of these laws in recent years. As such, our corporate policies and processes may not prevent or detect all potential breaches of the law. Any violation of those laws could result in significant criminal or civil fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our cash flows, results of operations and financial condition.

Our insurance does not cover most losses caused by the aforementioned risks. Consequently, our production, development and exploration activities in these countries could be substantially affected by factors out of our control, some of which could materially and adversely affect our financial position or results of operations.

We may be adversely affected by natural disasters, pandemics (including the recent coronavirus outbreak) and other catastrophic events, and by man-made problems such as terrorism, which could disrupt our business operations and our business continuity. Furthermore, disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters, adverse weather conditions, floods, pandemics (including the recent coronavirus outbreak), acts of terrorism and other catastrophic or geo-political events may cause damage or disruption to our operations, international commerce and the global economy, which could have an adverse effect on our business, operating results, and financial condition.

Risks Associated with Doing Business in Peru and Mexico

There is uncertainty as to the termination and renewal of our mining concessions.

Under the laws of Peru and Mexico, mineral resources belong to the state and government. Therefore, concessions are required in both countries to explore or exploit mineral reserves. In Peru, our mineral rights derive from concessions from Ministry of Energy and Mines (“MINEM”) for our exploration, exploitation, extraction and/or production operations. In Mexico, our mineral rights derive from concessions granted, on a discretionary basis, by the Ministry of Economy, pursuant to Mexican mining law and regulations thereunder.

Mining concessions in both Peru and Mexico may be terminated if the obligations of the concessioner are not satisfied. In Peru, we are obligated to pay certain fees for our mining concession. In Mexico, we are obligated, among other things, to explore or exploit the relevant concession, to pay any relevant fees, to comply with all environmental and safety standards, to provide information to the Ministry of Economy and to allow inspections by the Ministry of Economy. Any

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termination or unfavorable modification of the terms of one or more of our concessions, or failure to obtain renewals of such concessions subject to renewal or extensions, could have a material adverse effect on our financial condition and prospects.

Peruvian economic and political conditions, as well as illegal mining activities may have an adverse impact on our business.

A significant portion of our operations is conducted in Peru. Accordingly, our business, financial condition or results of operations could be affected by changes in the political, regulatory or economic developments in the country and changes in the economic or other policies of the Peruvian government. Over the past several decades, Peru has had a succession of regimes with differing political agendas and policies. In the twentieth century, past governments have frequently intervened in the nation’s economy and social structure. Among other actions, past governments have imposed controls on prices, exchange rates and local and foreign investments; placed limitations on imports; restricted companies’ abilities to dismiss employees and have prohibited the remittance of profits to foreign investors.

Between 2019 and 2023, Peru experienced heightened political instability in a context marked by ongoing investigations into allegations of corruption and confrontation on the political front. Significant political turmoil in Peru led to a shutdown of the Peruvian Congress and the removal of three Peruvian presidents.

On December 7, 2022, the Peruvian congress invoked its powers under the Constitution to remove the current President from office. The Vice President immediately assumed the presidency, which has led to considerable turmoil, particularly in the south of Peru, where acts of vandalism and violence escalated. Roadblocks were scattered throughout the country, which negatively affected the normal course of business in various regions. Fortunately, our operations were not impacted. This climate of violence gradually subsided during the year and was replaced by a general concern about the economic recession and personal insecurity.

Because we have significant operations in Peru, we cannot provide any assurance that political developments and economic conditions, including any changes to economic policies or the adoption of other reforms proposed by existing or future administrations in Peru and/or other factors will have no material adverse effects on market conditions, the prices of our securities, our ability to obtain financing, our results of operations, or our financial condition.

Mexican economic and political conditions, as well as drug-related violence, may have an adverse impact on our business.

The Mexican economy is highly sensitive to economic developments in the United States, mainly because of its high level of exports to this market. Other risks in Mexico are increases in taxes on the mining sector and higher royalties, such as those enacted in 2013. As has occurred in other metal producing countries, the mining industry may be perceived as a source of additional fiscal revenue.

In addition, public safety organizations in Mexico are under significant stress, as a result of drug-related violence. This situation creates potential risks, particularly for transportation of minerals and finished products, which may affect a small portion of our production. Drug-related violence has had a limited impact on our operations, as it has tended to concentrate outside of our areas of production. The potential risks to our operations might increase if the violence spreads to our areas of production.

On May 09, 2023, Mexican Congress approved several changes effective immediately to the Mining Law, the National Waters Law, the General Law of Ecological Balance and Environmental Protection and the General Law for the Prevention and Integral Management of Waste. The main aspects of the Companys´s business that will be affected by the legislation are the terms for mining concessions from 50 to 30 years; new conditions on water use; provision of guarantees for site closure and remediation; a new 5% contribution of net earnings to indigenous communities for new projects and significant changes to exploration rules.

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Down the line, the aforementioned changes could trigger amendment, additions and repeals of provisions of a number of laws, including the Mining Law, the National Water Law, the General Law for Ecological Balance and Environmental Protection and the General Law for the Prevention and Management of Mine Waste.

Although the Company believes that there will be no material impact on the Company's current operations or financial situation as a result of these changes, we cannot assure you that future developments in these laws will not affect our business.

Because we have significant operations in Mexico, we cannot provide any assurance that political developments and economic conditions, including any changes to economic policies or the adoption of other reforms proposed by existing or future administrations in Mexico, or the advent of drug-related violence in the country, will have no material adverse effect on market conditions, the prices of our securities, our ability to obtain financing, our results of operations or our financial condition.

Peruvian inflation and fluctuations in the sol exchange rate may adversely affect our financial condition and results of operations.

Although the U.S. dollar is our functional currency and our revenues are primarily denominated in U.S. dollars, as we operate in Peru, portions of our operating costs are denominated in Peruvian soles. Accordingly, when inflation or deflation in Peru is not offset by a change in the exchange rate of the sol, our financial position, results of operations, cash flows and the market price of our common stock could be affected.

Inflation in Peru in 2023, 2022 and 2021 was 3.2%, 8.5% and 6.4%, respectively. In 2023, the value of the sol appreciated by 2.8% against the U.S. dollar, versus a 4.5% appreciation in 2022 and a 10.3% depreciation in 2021. Although the Peruvian government’s economic policy reduced inflation and the economy has experienced significant growth in the past decade, we cannot assure you that inflation will not increase from its current level or that such economic growth will continue in the future at similar rates or at all. Additionally, a global financial economic crisis could negatively affect the Peruvian economy.

To manage the volatility related to the risk of currency rate fluctuations, we may enter into forward exchange contracts. We cannot assure you, however, that currency fluctuations will not have an impact on our financial condition and results of operations.

Mexican inflation, restrictive exchange control policies and fluctuations in the peso exchange rate may adversely affect our financial condition and results of operations.

Although all of our Mexican operations’ sales of metals are priced and invoiced in U.S. dollars, a substantial portion of its costs are denominated in pesos. Accordingly, when inflation in Mexico increases without a corresponding depreciation of the peso, the net income generated by our Mexican operations is adversely affected. Inflation in Mexico was 4.7% in 2023, 7.8% in 2022 and 7.4% in 2021. The value of the peso appreciated by 12.7% against the U.S. dollar in 2023, versus a 5.9% apreciation in 2022 and a 3.2% of depreciation in 2021. The peso has been subject in the past to significant volatility, which may not have been proportionate to the inflation rate and may not be proportionate to the inflation rate in the future.

Currently, the Mexican government does not restrict the ability of Mexican companies or individuals to convert pesos into dollars or other currencies. While we do not expect the Mexican government to impose any restrictions or exchange control policies in the future, it is an area we closely monitor. We cannot assure you the Mexican government will maintain its current policies with regard to the peso or that the peso’s value will not fluctuate significantly in the future. The imposition of exchange control policies could impair Minera Mexico’s ability to obtain imported goods and to meet its U.S. dollar-denominated obligations and could have an adverse effect on our business and financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Risk Management and Strategy

Our Cybersecurity Approach and Integration

Technology is a fundamental element in our Company’s permanent engagement with innovation and continuous improvement in the area of risk management and cybersecurity management strategy. As cybersecurity threats are becoming increasingly sophisticated and rapidly evolving, we have implemented processes for overseeing and identifying material risks from potential cybersecurity threats. Cyber risk management is a core component of our Company’s governance structure, and our cybersecurity processes are integrated into the Company’s overall risk management system and processes. Our primary focus is information security.

Our Information Technology governance framework is composed of policies, procedures, standards, and methodologies to identify and manage risks among other aspects, which are governed by reference frameworks and best practices.

SCC’s information security strategy is led by the Technology and Information Security Director (“TISD”), with review and support from the Chief Information Security Officer (“CISO”) of Grupo Mexico. The main purpose of SCC’s information security strategy is to identify and manage technological risks that could affect the Company's objectives and to strengthen our Company’s resilience. As part of management’s oversight of cybersecurity, the information security strategy is presented on an annual basis to SCC’s Audit Committee of the Board of Directors, which reports to the full Board of Directors, with additional review and oversight by AMC’s Risks Committee. In addition, we conduct a quarterly follow-up of our cybersecurity strategy’s execution progress and any significant cybersecurity incidents are rigorously monitored.

SCC’s Information Technology Governance Framework includes:

a.Procedures for Information Security Risk Management and Information Security Risk Management Methodology based on the ISO 27005 Information security, cybersecurity and privacy protection standard and Control Objectives for Information and Related Technology (“COBIT”), which establishes criteria to identify, analyze, evaluate, treat and accept risks to the Company's technology infrastructure, including cybersecurity risks.  

Our Risk Management Methodology is applied year-round and covers all of the Company’s IT departments and processes. The results are used to generate and update risk and control matrices.

Cybersecurity risks are documented on the Information Security risks and controls matrices. Key risks and their treatment are tracked via these matrices as part of the Information Security processes, which include Vulnerability Management, Patch Management on Information Technology devices, Hardening, Information Security Incident Response, Information Security Culture Development and Cyber Threat Intelligence.

The IT risks and controls matrices are reviewed, authorized, and released annually by the Technology and Information Security Director. The matrices are then submitted to SCC's Internal Audit department to review and evaluate controls, in terms of design, implementation, and operational effectiveness.

b.Information Security Incident Management Procedure based on the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework

We utilize the Cybersecurity Framework of the NIST to outline the activities and authorize personnel to handle information security and cybersecurity incident responses within the Company. This procedure outlines the phases of the incident response process, including detection and analysis; containment and intelligence development; eradication and remediation; recovery; and post-incident activities. Assessments include the

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qualitative and quantitative factors that are essential for determining materiality on information security and cybersecurity incidents.

In   instances where a cybersecurity incident is classified and declared as material, our process is designed to meticulously document in a comprehensive report, all critical details such as the date and time of identification of the incident, a concise description of the incident's nature and scope, the impact of the incident on the Company's operations, and its current status (remediated or is undergoing remediation), in order to be clearly informed by the Company.

Information security and cybersecurity incidents undergo thorough review and assessment by the Information Security Subdirector, in collaboration with cybersecurity specialists and experts. Those incidents classified as material are reported to the Technology and Information Security Director, relevant Business Directors, and the  Board’s Audit Committee, with additional review by AMC's Productivity and Risk Committees. . Simultaneously, these processes allow cybersecurity incidents classified as “material” to be promptly disclosed to the SEC in a Form 8-K report within 4 business days of the Company’s determination that such incident is in fact a “material” incident.

Oversight of Third-Party Service Providers

Security Assessment Process for IT Service Providers

Our Security Assessment Process for IT Service Providers is based on the ISO 27001 Information security, cybersecurity, and privacy protection standard. This standard’s guidelines ensure that service providers design and implement procedures and notification mechanisms for incident response management within their technological infrastructure. All contracts with IT service providers must stipulate the service levels required by the Company.

Regular meetings are conducted with IT service providers to assess compliance with contracted services, which includes a report on detected information security and cybersecurity incidents, activities for their remediation, and findings and insights from previous reviews and improvements.

Engagement with External Experts

The Company engages top-tier external cyber security firms as needed and leverage their expertise. This is part of our ongoing effort to evaluate and enhance our cybersecurity program. The information security strategy includes assessments conducted by third parties and the engagement of specialized services for specific tasks, including:

a.Internal and External Penetration Testing of SCC's Technology Infrastructure: This service is contracted at least annually to identify and remediate vulnerabilities that may exist at the infrastructure and critical operation systems levels.
b.Cybersecurity Organizational Maturity Assessment: The objective of this service is to understand the level of risk and maturity of the Company's cybersecurity controls (Cybersecurity Assessment). The results of Cybersecurity Assessments are used to design and implement work plans.

Disclosure of Management’s Responsibilities

Technology and Information Security Director and Information Security Subdirector

Our management possesses significant expertise in the assessment and management of cybersecurity risks. TISD, and the Information Security Subdirector (“ISD”), has extensive experience in the areas of information technology, information security risk management, and cybersecurity. Specific to cybersecurity, the TISD and the ISD have the expertise to provide insights into the nature of cyber threats, the Company’s readiness, and actions that should be taken to mitigate such risks.

The TISD, under the direction of the Company’s Chief Executive Officer, is responsible for overseeing the Company’s information technology systems, digital capabilities, and cybersecurity practices. The current TISD has more than 25 years

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of IT experience and has spent 15+ years overseeing cybersecurity strategy, implementation, and operation. Additionally, he holds a Master’s degree in IT Management and a Master’s Degree in Business Administration.

The ISD, under the direction of the TISD, is responsible for overseeing the organization’s cybersecurity and promoting a security-centric culture throughout our operations. The ISD is at the forefront of enhancing our cybersecurity framework and strengthening the overall cybersecurity program. Additionally, the ISD oversees the cyber risk management function, which identifies cybersecurity threats and assesses cybersecurity risks. Our ISD has more than 12 years of experience in the cybersecurity field and holds a Computer Engineering degree.

Risk Committee and Productivity Committee

The Company’s holding company, AMC, has the following Committees, that convene several times a year:

AMC Productivity Committee
AMC Risks Committee

These committees provide support to the Company's Board of Directors with respect to information security and cybersecurity matters. In particular, the Risk Committee provides oversight of the Company’s risk management, cybersecurity, and operational compliance activities, as well as a means of bringing risk issues to the attention of management.

Disclosure of the Board’s Roles and Responsibilities

The Board of Directors is responsible for global oversight of our strategic and operational risks. The Audit Committee assists the Board of Directors with this responsibility by reviewing and discussing our risk assessment and risk management practices, including cybersecurity risks, with members of management. The Audit Committee, in turn, periodically reports its findings to the Board of Directors.

The Audit Committee

The Audit Committee is responsible for overseeing the Company’s overall risk management strategies, including cybersecurity risks and disclosures. To keep the Audit Committee informed, our information security strategy is periodically presented to the Audit Committee, which reports to the full Board of Directors. Regular meetings are held to report to the Audit Committee, which include a risk assessment that highlights cybersecurity risks and cybersecurity risk mitigation actions. Additionally, the Audit Committee receives updates on significant incidents and cybersecurity risks that have been presented to or discussed with the Risk Committee.

The Internal Audit Department

The Internal Audit department of SCC operates in accordance to an Annual Plan that has been approved by the SCC Audit Committee. This plan encompasses the design and execution of system audits, including testing of cybersecurity controls and protocols. Recommendations from both Internal and External experts are thoroughly reviewed and evaluated and may be implemented if findings so merit.

Cybersecurity Incident Impact

While we identified no cybersecurity incidents, we have been subject to attempted cybersecurity threats and will likely continue to be subject to such attempts in the future. For additional discussions of risks from cybersecurity threats we face, see Item 1A “Risk Factors”. There were no material cybersecurity incidents in 2023.

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ITEM 2. PROPERTIES

SUMMARY DISCLOSURE

The following maps show the locations of our principal mines, smelting facilities, refineries and projects. We operate open-pit copper mines in the southern part of Peru—at Toquepala and Cuajone—and in Mexico, at La Caridad and Buenavista. We also own five underground mines, three out of which currently produce zinc, copper, silver and gold.

The below description of the Company’s mining operations is qualified in its entirety by reference to the Technical Report Summaries included as exhibits to this report and incorporated by reference into this Item 2.

GraphicGraphic

EXTRACTION, SMELTING AND REFINING PROCESSES

Our operations include open-pit and underground mining, concentrating, copper smelting, copper refining, copper rod production, solvent extraction/electrowinning (“SX-EW”), zinc refining, sulfuric acid production, molybdenum concentrate production and silver and gold refining. The extraction and production process are summarized below.

OPEN-PIT MINING

In an open-pit mine, the production process begins at the mine pit, where waste rock, leaching ore and copper ore are drilled and blasted and then loaded onto diesel-electric trucks by electric shovels. Waste is hauled to dump areas and leaching ore is hauled to leaching dumps. The ore to be milled is transported to the primary crushers.

UNDERGROUND MINING

In an underground mine, the production process begins at the stopes, where copper, zinc and lead veins are drilled and blasted and the ore is hauled to the underground crusher station. The crushed ore is then hoisted to the surface for processing.

CONCENTRATING

The copper ore above an established cut-off from the primary crusher or the copper, zinc and lead-bearing ore from the underground mines is transported to a concentrator plant where gyratory crushers break the ore into sizes no larger than three-quarter of an inch. The ore is then sent to a mill section where it is ground to the consistency of fine powder. The finely ground ore is mixed with water and chemical reagents and pumped as a slurry to the flotation separator, where it is mixed with certain chemicals. In the flotation separator, reagent solutions and air pumped into the flotation cells cause the minerals to separate from the waste rock and bubble to the surface where they are collected and dried.

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If the bulk concentrated copper contains molybdenum, it is first processed in a molybdenum plant as described below under “Molybdenum Production.” In addition, some of the concentrates contain economic amounts of gold and silver that are recovered in the smelters and refineries.

COPPER SMELTING

Copper concentrates are transported to a smelter, where they are smelted using a furnace, converter and anode furnace to produce either blister copper (which is in the form of cakes with air pockets) or copper anodes (which are cleaned of air pockets). At the smelter, the concentrates are mixed with flux (a chemical substance intentionally included for high temperature processing) and then sent to reverberatory furnaces producing copper matte and slag (a mixture of iron and other impurities). Copper matte contains approximately 65% copper. Copper matte is then sent to the converters, where the material is oxidized in two steps: (i) the iron sulfides in the matte are oxidized with silica, producing slag that is returned to the reverberatory furnaces, and (ii) the copper contained in the matte sulfides is then oxidized to produce copper that, after casting, is called blister copper, containing approximately 98% to 99% copper, or anodes, containing approximately 99.7% copper. Most of the blister and anode production is sent to the refinery and the remainder is sold to customers.

COPPER REFINING

Anodes are suspended in tanks with a solution containing water, sulfuric acid and copper sulfate. A weak electrical current is passed through the anodes and chemical solution and the dissolved copper is deposited on very thin starting sheets to produce copper cathodes containing approximately 99.99% copper. During this process, silver, gold and other metals (for example, palladium, platinum and selenium), along with other impurities, settle on the bottom of the tank (anodic muds). This anodic mud is processed at a precious metal plant where selenium, silver and gold are recovered.

COPPER ROD PLANT

To produce copper rod, copper cathodes are first smelted in a furnace and then dosed in a casting machine. The dosed copper is then extruded and passed through a cooling system that begins solidification of copper into a 60×50 millimeter copper bar. The resulting copper bar is gradually stretched in a rolling mill to achieve the desired diameter. The rolled bar is then cooled and sprayed with wax as a preservation agent and collected into a rod coil that is compacted and sent to market.

SOLVENT EXTRACTION/ELECTROWINNING (“SX-EW”)

A complementary processing method is the leaching and SX-EW process. During the SX-EW process, low-grade sulfides ore and copper oxides are leached with sulfuric acid to allow copper content recovery. The acid and copper solution is then agitated with a solvent that contains chemical additives that attract copper ions. As the solvent is lighter than water, it floats to the surface carrying with it the copper content. The solvent is then separated using an acid solution, freeing the copper. The acid solution containing the copper is then moved to electrolytic extraction tanks to produce copper cathodes.

MOLYBDENUM PRODUCTION

Molybdenum is recovered from copper-molybdenum concentrates produced at the concentrator. The copper-molybdenum concentrate is first treated with a thickener until it becomes slurry. The slurry is then agitated in a chemical and water solution and pumped to the flotation separator. The separator creates a froth that carries molybdenum to the surface but not the copper mineral (which is later filtered to produce copper concentrates. The molybdenum froth is skimmed off, filtered and dried to produce molybdenum concentrates.

ZINC REFINING

Metallic zinc is produced through electrolysis using zinc concentrates and zinc oxides. Sulfur is eliminated from the concentrates by roasting and the zinc oxide is dissolved in sulfuric acid solution to eliminate solid impurities. The

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purified zinc sulfide solution is treated by electrolysis to produce refined zinc and to separate silver and gold, which are recovered as concentrates.

SULFURIC ACID PRODUCTION

Sulfur dioxide gases are produced in the copper smelting and zinc roasting processes. As a part of our environmental preservation program, we treat the sulfur dioxide emissions at two of our Mexican plants and at our Peruvian processing facilities to produce sulfuric acid, some of which is, in turn, used for the copper leaching process; the balance is sold to mining and fertilizer companies located mainly in Mexico, Peru, United States and Chile.

SILVER AND GOLD REFINING

Silver and gold are recovered from copper, zinc and lead concentrates in the smelters and refineries and from slimes through electrolytic refining.

PRODUCTION OVERVIEW

The table below provides an overview of Southern Copper’s aggregate annual production for all of its properties during each of the three most recently completed fiscal years:

 

Variance

 

Year Ended December 31, 

 

2023 -2022

 

2022 -2021

    

2023

    

2022

    

2021

    

Volume

    

%

    

Volume

    

%

COPPER (thousand pounds):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Mined

 

2,008,438

 

1,972,480

 

2,112,465

 

35,958

 

1.8

%  

(139,985)

 

(6.6)

%

Smelted

 

1,383,597

 

1,405,421

 

1,319,619

 

(21,824)

(1.6)

%  

85,802

 

6.5

%

Refined

 

1,419,817

 

1,495,767

 

1,401,719

 

(75,950)

(5.1)

%  

94,048

 

6.7

%

Rod

 

340,182

 

344,893

 

330,961

 

(4,711)

(1.4)

%  

13,932

 

4.2

%

SILVER (thousand ounces)

 

 

 

  

 

  

Mined

 

18,408

 

18,562

 

18,962

 

(154)

(0.8)

%  

(400)

 

(2.1)

%

Refined

 

10,927

 

14,272

 

13,691

 

(3,345)

(23.4)

%  

581

 

4.2

%

MOLYBDENUM (thousand pounds)

 

 

 

  

 

  

Mined

 

59,164

 

57,849

 

66,716

 

1,315

 

2.3

%  

(8,867)

 

(13.3)

%

ZINC (thousand pounds)

 

 

 

  

 

  

 

  

 

  

 

  

Mined

 

144,422

 

132,300

 

147,617

 

12,122

 

9.2

%  

(15,317)

 

(10.4)

%

Refined

 

222,695

 

220,225

 

204,306

 

2,470

 

1.1

%