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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2022

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.)

1440 East Missouri Avenue Suite 160 Phoenix, AZ

85014

(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

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of May 3, 2022 there were outstanding 773,090,069 shares of Southern Copper Corporation common stock, par value $0.01 per share.

Southern Copper Corporation (“SCC”)

INDEX TO FORM 10-Q

    

    

Page No.

Part I. Financial Information:

Item. 1

Condensed Consolidated Financial Statements (Unaudited)

3

Condensed Consolidated Statements of Earnings for the three months ended March 31, 2022 and 2021

3

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021

4

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

5

Condensed Consolidated Statements of Cash Flows for the three and ended March 31, 2022 and 2021

6

Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2022 and 2021

7

Notes to Condensed Consolidated Financial Statements

8-35

Item 2.

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

36-54

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

55-56

Item 4.

Controls and procedures

57

Report of Independent Registered Public Accounting Firm

58

Part II. Other Information:

Item 1.

Legal Proceedings

59

Item 1A.

Risk Factors

59

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

60

Item 4.

Mine Safety Disclosures

60

Item 6.

List of Exhibits

61-64

Signatures

65

2

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

Three Months Ended

March 31, 

    

2022

    

2021

Net sales (including sales to related parties, see note 5)

$

2,763.8

$

2,532.5

Operating cost and expenses:

Cost of sales (exclusive of depreciation, amortization and depletion shown separately below)

 

1,057.7

 

943.8

Selling, general and administrative

 

30.3

 

30.1

Depreciation, amortization and depletion

 

196.6

 

200.6

Exploration

 

9.1

 

6.4

Total operating costs and expenses

 

1,293.7

 

1,180.9

Operating income

 

1,470.1

 

1,351.6

Interest expense

 

(98.4)

 

(96.8)

Capitalized interest

 

10.7

 

7.2

Other income (expense)

 

11.7

 

2.3

Interest income

 

4.6

 

2.4

Income before income taxes

 

1,398.7

 

1,266.7

Income taxes (including royalty taxes, see Note 4)

 

612.1

 

507.5

Net income before equity earnings of affiliate

 

786.6

 

759.2

Equity earnings (loss) of affiliate, net of income tax

 

1.2

 

7.9

Net income

 

787.8

 

767.1

Less: Net income attributable to the non-controlling interest

 

3.1

 

3.3

Net income attributable to SCC

$

784.7

$

763.8

Per common share amounts attributable to SCC:

Net earnings-basic and diluted

$

1.02

$

0.99

Weighted average shares outstanding-basic and diluted

 

773.1

 

773.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 31, 

    

2022

    

2021

COMPREHENSIVE INCOME:

Net income and comprehensive income

$

787.8

$

767.1

Other comprehensive income (loss) net of tax:

Derivative instruments classified as cash flow hedge

- Unrealized gain (loss) of the period (net of income tax of $0.2 million in 2022)

 

(0.6)

 

Total other comprehensive income (loss)

 

(0.6)

 

Total comprehensive income

 

787.2

 

767.1

Comprehensive income attributable to the non-controlling interest

 

3.1

 

3.3

Comprehensive income attributable to SCC

$

784.1

$

763.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Southern Copper Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31, 

December 31, 

    

2022

    

2021

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

$

2,847.2

$

3,002.0

Short-term investments

 

406.5

 

486.9

Accounts receivable trade

 

1,185.8

 

1,358.7

Accounts receivable other (including related parties 2022- $29.9 and 2021 - $49.1)

 

69.4

 

87.9

Inventories

 

1,029.9

 

972.9

Prepaid taxes

165.2

197.7

Other current assets

 

64.5

 

33.5

Total current assets

 

5,768.5

 

6,139.6

Property and mine development, net

 

9,492.9

 

9,464.4

Ore stockpiles on leach pads

 

1,082.0

 

1,097.6

Intangible assets, net

 

136.8

 

138.1

Right-of-use assets

 

900.8

 

916.3

Deferred income tax

 

298.6

 

316.2

Equity method investment

 

116.7

 

115.4

Other non-current assets

 

102.6

 

110.0

Total assets

$

17,898.9

$

18,297.6

LIABILITIES

Current liabilities:

Current portion of long-term debt

$

299.8

$

299.7

Accounts payable (including related parties 2022- $114.3 and 2021- $103.3)

693.7

591.9

Accrued income taxes

 

237.0

 

832.6

Accrued workers’ participation

 

243.4

 

325.7

Accrued interest

 

131.2

 

98.6

Lease liabilities current

74.6

73.9

Other accrued liabilities

 

46.1

 

27.6

Total current liabilities

 

1,725.8

 

2,250.0

Long-term debt

 

6,248.7

 

6,247.9

Lease liabilities

826.2

842.4

Deferred income taxes

 

144.9

 

118.3

Non-current taxes payable

56.0

Other liabilities and reserves

 

66.0

 

68.3

Asset retirement obligation

 

610.7

 

562.9

Total non-current liabilities

 

7,952.5

 

7,839.8

Commitments and contingencies (Note 10)

STOCKHOLDERS’ EQUITY (NOTE 11)

Common stock par value $0.01; shares authorized, 2022 and 2021–2,000; shares issued, 2022 and 2021–884.6

 

8.8

 

8.8

Additional paid-in capital

 

3,468.3

 

3,454.1

Retained earnings

 

7,781.3

 

7,769.7

Accumulated other comprehensive income

 

(10.0)

 

(9.4)

Treasury stock, at cost, common shares

 

(3,087.7)

 

(3,074.0)

Total Southern Copper Corporation stockholders’ equity

 

8,160.7

 

8,149.2

Non-controlling interest

 

59.9

 

58.6

Total equity

 

8,220.6

 

8,207.8

Total liabilities and equity

$

17,898.9

$

18,297.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

    

Three Months Ended

    

March 31, 

2022

2021

OPERATING ACTIVITIES

Net income

$

787.8

$

767.1

Adjustments to reconcile net earnings to net cash provided from operating activities:

Depreciation, amortization and depletion

 

196.6

 

200.6

Equity earnings of affiliate, net of dividends received

 

(1.3)

(4.0)

Loss on foreign currency transaction effect

 

55.7

(19.7)

(Benefit) provision for deferred income taxes

 

43.7

(38.9)

Other, net

 

9.6

6.7

Change in operating assets and liabilities:

Decrease (increase) in accounts receivable

 

172.9

(163.3)

(Increase) decrease in inventories

 

(41.5)

38.2

Decrease in accounts payable and accrued liabilities

 

(525.0)

(1.3)

Decrease (increase) in other operating assets and liabilities

 

122.2

(2.8)

Net cash provided by operating activities

 

820.7

 

782.6

INVESTING ACTIVITIES

Capital expenditures

 

(205.2)

 

(232.6)

Proceeds from (purchase) sale of short-term investments, net

 

80.4

 

(5.2)

Other

 

(0.1)

Net cash used in investing activities

 

(124.9)

 

(237.8)

FINANCING ACTIVITIES

Cash dividends paid to common stockholders

 

(773.1)

 

(463.8)

Other, net

 

(1.7)

 

(1.3)

Net cash used in financing activities

 

(774.8)

 

(465.1)

Effect of exchange rate changes on cash and cash equivalents

 

(75.8)

 

4.0

Increase in cash and cash equivalents

 

(154.8)

 

83.7

Cash and cash equivalents, at beginning of period

 

3,002.0

 

2,183.6

Cash and cash equivalents, at end of period

$

2,847.2

$

2,267.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

    

Three Months Ended

March 31, 

(in millions)

2022

2021

TOTAL EQUITY, beginning of period

$

8,207.8

$

7,276.0

STOCKHOLDERS’ EQUITY, beginning of period

 

8,149.1

 

7,224.8

CAPITAL STOCK:

Balance at beginning and end of period:

 

8.8

 

8.8

ADDITIONAL PAID-IN CAPITAL:

Balance at beginning of period

 

3,454.1

 

3,441.5

Other activity of the period

 

14.2

 

(2.0)

Balance at end of period

 

3,468.3

 

3,439.5

TREASURY STOCK:

Southern Copper common shares

Balance at beginning and end of the period

 

(2,767.2)

 

(2,767.5)

Used for corporate purposes

 

0.1

 

Balance at end of period

 

(2,767.1)

 

(2,767.5)

Parent Company common shares

Balance at beginning of period

 

(306.8)

 

(296.0)

Other activity, including dividend, interest and foreign currency translation effect

 

(13.8)

 

2.3

Balance at end of period

 

(320.6)

 

(293.7)

Treasury stock balance at end of period

 

(3,087.7)

 

(3,061.2)

RETAINED EARNINGS:

Balance at beginning of period

 

7,769.7

 

6,846.4

Net earnings

 

784.7

 

763.8

Dividends declared and paid, common stock, per share, 2022- $1, 2021– $0.6

 

(773.1)

 

(463.8)

Balance at end of period

 

7,781.3

 

7,146.4

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Balance at beginning of period

 

(9.4)

 

(8.4)

Other comprehensive income (loss)

 

(0.6)

 

Balance at end of year

 

(10.0)

 

(8.4)

STOCKHOLDERS’ EQUITY, end of period

 

8,160.7

 

7,525.1

NON-CONTROLLING INTEREST, beginning of period

 

58.6

 

51.2

Net earnings

 

3.1

 

3.3

Distributions paid

 

(1.8)

 

(1.3)

NON-CONTROLLING INTEREST, end of period

 

59.9

 

53.2

TOTAL EQUITY, end of period

$

8,220.6

$

7,578.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Southern Copper Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1— DESCRIPTION OF THE BUSINESS:

The Company is a majority-owned, indirect subsidiary of Grupo Mexico S.A.B. de C.V. (“Grupo Mexico”). As of March 31, 2022, Grupo Mexico, through its wholly-owned subsidiary Americas Mining Corporation (“AMC”) owned 88.9% of the Company’s capital stock. The condensed consolidated financial statements presented herein consist of the accounts of Southern Copper Corporation (“Southern Copper”, "SCC" or the “Company”), a Delaware corporation, and its subsidiaries. The Company is an integrated producer of copper and other minerals, and operates mining, smelting and refining facilities in Peru and Mexico. The Company conducts its primary operations in Peru through a registered branch (the "Peruvian Branch" or “Branch” or “SPCC Peru Branch”). The Peruvian Branch is not a corporation separate from the Company. The Company's Mexican operations are conducted through subsidiaries. The Company also conducts exploration activities in Argentina, Chile, Ecuador, Mexico and Peru.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the Company’s financial position as of March 31, 2022 and the results of operations, comprehensive income, cash flows and changes in equity for the three months ended March 31, 2022 and 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year. The December 31, 2021 balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements at December 31, 2021 and notes included in the Company’s 2021 annual report on Form 10-K.

CUAJONE STOPPAGE OF OPERATIONS

On February 28, 2022 a small group of protesters from the community of Tumilaca, Pocata, Coscore and Tala, which have 472 residents in total, seized the facilities at the Viña Blanca water reservoir and cut off the water supply to the homes of the approximately 5,000 people who live in Cuajone. Prior to this illegal action, on February 18, 2022, the railway between Cuajone and Ilo was also blocked by a group of community members. They claim the Company usurped their land and demand compensation of $5.0 billion, in addition to the permanent payment of 5% of net profits.

As of March 31, 2022, the Cuajone operations remained closed with an estimate production loss of 12,869 tonnes of copper content and 296 tonnes of molybdenum, which translates into a reduction in sales of $117 million. The Company also recorded $7.9 million of unabsorbed fixed costs, which directly impacted the cost of sales.

The effect on the Company´s net income and financial position was not material as of March 31, 2022. Sales contracts were not significantly affected and measures were taken to acquire concentrates from the Company´s Mexican Operations and third parties to maintain and adequate supply to the smelter. This prevented a force majeure event from delays in fulfilling the Company´s sales commitments.

As of March 31, 2022, the Company was expecting to enter into a dialogue with the protesters and the Peruvian authorities to secure an agreement to address reasonable social demands; restore the water supply to workers and their families, and resume operations at the Company Cuajone facilities. However, if this situation continues indefinitely, the Company may be forced to consider cost reduction measures, including the relocation or furlough of workers.

8

NOTE 2 — SHORT-TERM INVESTMENTS:

Short-term investments were as follows (in millions):

At March 31, 

At December 31, 

    

2022

    

2021

Trading securities

$

406.1

$

486.5

Weighted average interest rate

 

0.4

%  

 

0.3

%

Available-for-sale

$

0.4

$

0.4

Weighted average interest rate

 

0.7

%  

 

0.7

%

Total

$

406.5

$

486.9

Trading securities consist of bonds issued by public companies and are publicly traded. Each financial instrument is independent of the others. The Company has the intention to sell these bonds in the short-term.

Available-for-sale investments consist of securities issued by public companies. Each security is independent of the others and as of March 31, 2022 and December 31, 2021, included asset and mortgage backed obligations. As of March 31, 2022 and December 31, 2021, gross unrealized gains and losses on available-for-sale securities were not material.

The Company earned interest related to these investments, which was recorded as interest income in the condensed consolidated statement of earnings. Also, the Company redeemed some of these securities and recognized gains (losses) due to changes in fair value, which were recorded as other income (expense) in the condensed consolidated statement of earnings.

The following table summarizes the activity of these investments by category (in millions):

Three months ended

 

March 31, 

    

2022

    

2021

 

Trading:

Interest earned

$

0.8

$

0.4

Unrealized gain (loss) at the end of the period

$

(0.1)

$

0.1

Available-for-sale:

Interest earned

 

(*)

(*)

Investment redeemed

$

(*)

$

0.1

(*) Less than $0.1 million.

NOTE 3 — INVENTORIES:

Inventories were as follows:

At March 31, 

At December 31, 

(in millions)

    

2022

    

2021

Inventory, current:

Metals at average cost:

Finished goods

$

79.1

$

58.6

Work-in-process

 

381.8

 

340.7

Ore stockpiles on leach pads  

260.7

259.7

Supplies at average cost

 

308.3

 

313.9

Total current inventory

$

1,029.9

$

972.9

Inventory, long-term:

Ore stockpiles on leach pads

$

1,082.0

$

1,097.6

9

During the three months ended March 31, 2022 and 2021, total leaching costs capitalized as non-current inventory of ore stockpiles on leach pads amounted to $61.5 million and $54.8 million, respectively. Leaching inventories recognized in cost of sales amounted to $76.0 million and $71.6 million for the three months ended March 31, 2022 and 2021, respectively.

NOTE 4 — INCOME TAXES:

The income tax provision and the effective income tax rate for the first three months of 2022 and 2021 consisted of (in millions):

    

2022

    

2021

Statutory income tax provision

$

511.6

$

427.3

Peruvian royalty

 

17.0

 

11.6

Mexican royalty

 

58.0

 

47.4

Peruvian special mining tax

 

25.5

 

21.2

Total income tax provision

$

612.1

$

507.5

Effective income tax rate

43.8

%

40.1

%

These provisions include income taxes for Peru, Mexico and the United States. The Mexican royalty, the Peruvian royalty and the Peruvian special mining tax are included in the income tax provision. The increase in the effective income tax rate in 2022 compared to the same period in 2021 was primarily attributable to the fact that the Company registered uncertain tax provisions in the Peruvian jurisdiction.

Peruvian royalty and special mining tax: The Company has accrued $42.5 million and $32.8 million of royalty charge and special mining tax as part of the income tax provision in the first quarter of 2022 and 2021, respectively.

Mexican mining royalty: The Company has accrued $58 million and $47.4 million of royalty taxes as part of the income tax provision for the first quarter of 2022 and 2021, respectively.

Accounting for uncertainty in income taxes: In the first three months of 2022, the company recorded a receivable, current liability and non-current liability for the Peruvian jurisdiction that increased tax expense by approximately $33.8 million. The Company’s current asset and current liability for uncertain tax positions net to $22.1 million and represent the anticipated cash refunds or payments within 12 months.

Tax Law Changes:

On December 28, 2021, the U.S. Treasury and the IRS released final regulations addressing various aspects of the foreign tax credit regime. The regulations apply to years beginning after December 28, 2021 and they are not expected to have a material impact on the Company’s financial statements.

NOTE 5 — RELATED PARTY TRANSACTIONS:

The Company has entered into certain transactions in the ordinary course of business with parties that are controlling shareholders or their affiliates. These transactions include the lease of office space, air and railroad transportation, construction services, energy supply, and other products and services related to mining and refining. The Company lends and borrows funds among affiliates for acquisitions and other corporate purposes. These financial transactions bear interest and are subject to review and approval by senior management, as are all related party transactions. Article Nine of the Amended and Restated Certificate of Incorporation of the Company prohibits the Company from engaging in a Material Affiliate Transaction that was not the subject of prior review by a committee of the Board of Directors with at least three members, each of whom is independent, and defines a Material Affiliate Transaction as a transaction or series of related transactions between Grupo Mexico or one of its affiliates (other than the Company or its subsidiaries), on the one hand, and the Company or one of its subsidiaries, on the other hand, that involves consideration of more than $10.0 million in the aggregate. It is the Company’s policy that (i) a Material Affiliate Transaction not be entered into or

10

continued without the review and approval by the Audit Committee or its subcommittee of related party transactions comprised of independent directors,(ii) any potential related party transaction process with aggregate consideration between $8.0 million and $10.0 million be authorized by the General Counsel and Chief Financial Officer of the Company and (iii) that all related party transactions, including any Material Affiliate Transaction, be reported to the Audit Committee of the Board of Directors or to its subcommittee of related party transactions.

Receivable and payable balances with related parties are shown below (in millions):

At March 31, 

At December 31, 

    

2022

    

2021

Related parties receivable current:

Grupo Mexico and affiliates:

Asarco LLC

$

7.0

$

10.0

Americas Mining Corporation (“AMC”)

0.1

0.1

Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates

 

0.3

 

0.3

Mexico Generadora de Energia S. de R.L. ("MGE")

21.8

38.4

Grupo Mexico Servicios de Ingenieria, S.A. de C.V.

0.2

0.2

Related to the controlling group:

Boutique Bowling de Mexico, S.A. de C.V.

0.1

0.1

Mexico Transportes Aereos, S.A. de C.V. ("Mextransport")

0.4

Operadora de Cinemas, S.A. de C.V.

(*)

(*)

$

29.9

$

49.1

Related parties payable:

Grupo Mexico and affiliates:

AMMINCO Apoyo Administrativo, S.A. de C.V. (“AMMINCO”)

$

4.2

$

9.5

Asarco LLC

29.6

14.9

Eolica El Retiro, S.A.P.I. de C.V.

 

0.4

 

2.7

Ferrocarril Mexicano, S.A. de C.V.

 

9.3

 

4.0

Grupo Mexico Servicios

13.6

11.1

MGE

51.3

57.2

Mexico Compania Constructora S.A de C.V.

3.5

2.0

Grupo Mexico Servicios de Ingenieria, S.A. de C.V.

1.1

0.9

Controladora de Infraestructura Energética México S.A. de C.V.

0.9

Related to the controlling group:

Boutique Bowling de Mexico, S.A. de C.V.

 

0.1

 

0.3

Mexico Transportes Aereos, S.A. de C.V. (“Mextransport”)

 

0.3

 

0.5

Operadora de Cinemas, S.A. de C.V.

(*)

0.2

$

114.3

$

103.3

(*) Less than $0.1 million.

11

Purchase and sale activity:

Grupo Mexico and affiliates:

The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the first three months of 2022 and 2021 (in millions):

    

2022

    

2021

Purchase activity

Asarco LLC

$

14.6

$

3.7

Eolica El Retiro, S.A.P.I. de C.V.

 

0.9

 

0.2

Ferrocarril Mexicano, S.A. de C.V.

 

5.2

 

10.9

Grupo Mexico Servicios

5.0

2.5

AMMINCO

2.2

4.6

MGE

 

70.1

 

77.7

Mexico Compania Constructora S.A. de C.V.

5.1

13.0

Controladora de Infraestructura energética S.A. de C.V.

0.8

Grupo Mexico Servicios de Ingenieria S. A. de C.V.

 

1.3

 

1.4

Total purchases

$

105.2

$

114.0

Sales activity

Asarco LLC

$

11.4

$

6.9

MGE

34.5

37.9

Total sales

$

45.9

$

44.8

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

In the first quarter of 2022, the Company did not make donations to Fundacion Grupo Mexico, A.C., an organization dedicated to promoting the social and economic development of the communities close to the Company’s Mexican operations. In the same period of 2021, the Company made donations of $0.5 million to this organization.

The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano, S.A de C.V., which is a subsidiary of Grupo Mexico. Additionally, the Company´s Mexican operations paid fees for specialized technical and environmental services to obtain the energy license for El Arco project provided by Controladora de Infraestructura energetica S.A. de C.V., a subsidiary of Infraestructura y transportes Mexico S.A. de C.V., which is a subsidiary of Grupo Mexico.

The Company´s Peruvian and Mexican operations paid fees for engineering services provided by Grupo Mexico Servicios de Ingenieria, S.A. de C.V., and the Company’s Mexican operations paid fees for construction services provided by Mexico Compania Constructora S.A. de C.V. Both companies are subsidiaries of Mexico Proyectos y Desarrollos, S.A. de C.V., which is a subsidiary of Grupo Mexico.

The Company’s Mexican operations purchased copper concentrates and rod from Asarco LLC and also paid fees for tolling services. Additionally, the Company´s Mexican operations purchased power from MGE. Both companies are subsidiaries of Grupo Mexico.

In 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply some of the Company’s Mexican operations with power through 2032. MGE has two natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts and has been supplying power to the Company since December 2013. Currently, MGE is supplying 0.2% of its power output to third-party energy users, compared to 2.7% as of March 31, 2021.

12

In 2014, Mexico Generadora de Energia Eolica, S. de R.L. de C.V, an indirect subsidiary of Grupo Mexico, located in Oaxaca, Mexico, acquired Eolica el Retiro. Eolica el Retiro is a windfarm with 37 wind turbines. This company started operations in January 2014 and began to sell power to Industrial Minera Mexico, S.A. de C.V. and subsidiaries (IMMSA) and other subsidiaries of Grupo Mexico in the third quarter of 2014. Currently, Eolica el Retiro supplies approximately 46.6% of its power output to IMMSA and Mexcobre, compared to 9.3% as of March 31, 2021.

The Company sold starter sheets, copper concentrate, sulfuric acid, silver and gold to Asarco LLC. The Company also received fees for natural gas and services provided to MGE, a subsidiary of Grupo Mexico.

Companies with relationships to the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in the first three months of 2022 and 2021 (in millions):

    

2022

    

2021

Purchase activity

Boutique Bowling de Mexico S.A. de C.V.

$

0.1

$

0.1

Mextransport

0.4

0.4

Operadora de Cinemas S.A. de C.V.

(*)

0.1

Total purchases

$

0.5

$

0.6

Sales activity

Boutique Bowling de Mexico S.A. de C.V.

$

(*)

$

(*)