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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, 2024

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

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 April 30, 2024 there were outstanding 773,116,069 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, 2024 and 2023

3

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023

4

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2024 and 2023

7

Notes to Condensed Consolidated Financial Statements

8-33

Item 2.

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

34-50

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

51-52

Item 4.

Controls and procedures

53

Report of Independent Registered Public Accounting Firm

54

Part II. Other Information:

Item 1.

Legal Proceedings

55

Item 1A.

Risk Factors

55

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

55

Item 4.

Mine Safety Disclosures

55

Item 6.

List of Exhibits

56-59

Signatures

60

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, 

    

2024

    

2023

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

$

2,599.8

$

2,793.9

Operating cost and expenses:

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

 

1,157.6

 

1,194.2

Selling, general and administrative

 

30.8

 

30.4

Depreciation, amortization and depletion

 

209.0

 

203.7

Exploration

 

12.7

 

11.9

Total operating costs and expenses

 

1,410.1

 

1,440.2

Operating income

 

1,189.7

 

1,353.7

Interest expense

 

(94.2)

 

(94.1)

Capitalized interest

 

13.7

 

11.4

Other income (expense)

 

19.0

 

10.5

Interest income

 

27.3

 

21.3

Income before income taxes

 

1,155.5

 

1,302.8

Income taxes (including royalty taxes, see Note 4)

 

423.4

 

480.5

Net income before equity earnings of affiliate

 

732.1

 

822.3

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

 

6.7

 

(6.4)

Net income

 

738.8

 

815.9

Less: Net income attributable to the non-controlling interest

 

2.8

 

2.7

Net income attributable to SCC

$

736.0

$

813.2

Per common share amounts attributable to SCC:

Net earnings-basic and diluted

$

0.95

$

1.05

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, 

    

2024

    

2023

COMPREHENSIVE INCOME:

Net income and comprehensive income

$

738.8

$

815.9

Total comprehensive income

 

738.8

 

815.9

Comprehensive income attributable to the non-controlling interest

 

2.8

 

2.7

Comprehensive income attributable to SCC

$

736.0

$

813.2

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, 

    

2024

    

2023

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

$

1,252.2

$

1,151.5

Short-term investments

 

329.3

 

599.3

Accounts receivable trade

 

1,293.9

 

1,141.1

Accounts receivable other (including related parties 2024- $23.2 and 2023 - $27.3)

 

101.1

 

87.2

Inventories

 

1,014.4

 

1,016.9

Prepaid taxes

410.6

395.4

Other current assets

 

39.3

 

38.1

Total current assets

 

4,440.8

 

4,429.5

Property and mine development, net

 

9,783.2

9,782.9

Ore stockpiles on leach pads

 

1,132.5

1,121.7

Intangible assets, net

 

128.8

130.2

Right-of-use assets

 

757.1

775.4

Deferred income tax

 

253.2

256.1

Equity method investment

 

113.9

108.2

Other non-current assets

 

179.8

121.3

Total assets

$

16,789.3

$

16,725.3

LIABILITIES

Current liabilities:

Accounts payable (including related parties 2024- $84.4 and 2023- $93.6)

$

748.5

$

652.6

Accrued income taxes

 

142.3

 

278.3

Accrued workers’ participation

 

192.5

 

245.7

Accrued interest

 

127.1

 

97.1

Lease liabilities current

77.0

78.0

Other accrued liabilities

 

52.6

 

36.8

Total current liabilities

 

1,340.0

 

1,388.5

Long-term debt

 

6,255.5

6,254.6

Lease liabilities

680.1

697.4

Deferred income taxes

 

149.9

132.2

Non-current taxes payable

84.2

92.7

Other liabilities and reserves

 

55.9

66.2

Asset retirement obligation

 

617.8

612.5

Total non-current liabilities

 

7,843.4

 

7,855.6

Commitments and contingencies (Note 9)

STOCKHOLDERS’ EQUITY (NOTE 10)

Common stock par value $0.01; shares authorized, 2024 and 2023–2,000; shares issued, 2024 and 2023–884.6

 

8.8

8.8

Additional paid-in capital

 

3,541.4

3,532.8

Retained earnings

 

7,156.7

7,033.5

Accumulated other comprehensive income

 

(8.0)

(8.0)

Treasury stock, at cost, common shares

 

(3,157.2)

(3,149.0)

Total Southern Copper Corporation stockholders’ equity

 

7,541.7

 

7,418.1

Non-controlling interest

 

64.2

 

63.1

Total equity

 

7,605.9

 

7,481.2

Total liabilities and equity

$

16,789.3

$

16,725.3

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, 

2024

2023

OPERATING ACTIVITIES

Net income

$

738.8

$

815.9

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

Depreciation, amortization and depletion

 

209.0

 

203.7

Equity earnings of affiliate, net of dividends received

 

(5.7)

6.4

Loss on foreign currency transaction effect

 

3.8

6.5

(Benefit) provision for deferred income taxes

 

19.1

(18.4)

Other, net

 

5.5

7.5

Change in operating assets and liabilities:

Decrease (increase) in accounts receivable

 

(152.8)

131.5

Decrease (increase) in inventories

 

(8.2)

29.6

Increase (decrease) in accounts payable and accrued liabilities

 

151.8

12.7

Decrease (increase) in other operating assets and liabilities

 

(301.6)

(10.2)

Net cash provided by operating activities

 

659.7

 

1,185.2

INVESTING ACTIVITIES

Capital expenditures

 

(213.8)

 

(238.1)

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

 

270.0

 

67.7

Other

 

Net cash used in investing activities

 

56.2

 

(170.4)

FINANCING ACTIVITIES

Cash dividends paid to common stockholders

 

(618.5)

 

(773.1)

Other, net

 

(1.6)

 

(1.6)

Net cash used in financing activities

 

(620.1)

 

(774.7)

Effect of exchange rate changes on cash and cash equivalents

 

4.9

 

(10.0)

Increase in cash and cash equivalents

 

100.7

 

230.1

Cash and cash equivalents, at beginning of period

 

1,151.5

 

2,069.7

Cash and cash equivalents, at end of period

$

1,252.2

$

2,299.8

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)

2024

2023

TOTAL EQUITY, beginning of period

$

7,481.2

$

8,146.9

STOCKHOLDERS’ EQUITY, beginning of period

 

7,418.1

 

8,084.2

CAPITAL STOCK:

Balance at beginning and end of period:

 

8.8

 

8.8

ADDITIONAL PAID-IN CAPITAL:

Balance at beginning of period

 

3,532.8

 

3,489.7

Other activity of the period

 

8.6

 

8.0

Balance at end of period

 

3,541.4

 

3,497.7

TREASURY STOCK:

Southern Copper common shares

Balance at beginning and end of the period

 

(2,766.7)

 

(2,766.9)

Used for corporate purposes

 

0.1

 

0.1

Balance at end of period

 

(2,766.6)

 

(2,766.8)

Parent Company common shares

Balance at beginning of period

 

(382.3)

 

(340.7)

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

 

(8.3)

 

(7.6)

Balance at end of period

 

(390.6)

 

(348.3)

Treasury stock balance at end of period

 

(3,157.2)

 

(3,115.1)

RETAINED EARNINGS:

Balance at beginning of period

 

7,033.5

 

7,702.3

Net earnings

 

736.0

 

813.2

Dividends declared and paid, common stock, per share, 2024- $1, 2023– $1

 

(618.5)

 

(773.1)

Other activity

5.7

Balance at end of period

 

7,156.7

 

7,742.4

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Balance at beginning of period

 

(8.0)

 

(9.0)

Other comprehensive income (loss)

 

 

Balance at end of year

 

(8.0)

 

(9.0)

STOCKHOLDERS’ EQUITY, end of period

 

7,541.7

 

8,124.8

NON-CONTROLLING INTEREST, beginning of period

 

63.1

 

62.7

Net earnings

 

2.8

 

2.7

Distributions paid

 

(1.7)

 

(1.8)

NON-CONTROLLING INTEREST, end of period

 

64.2

 

63.6

TOTAL EQUITY, end of period

$

7,605.9

$

8,188.4

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, 2024, 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, 2024 and the results of operations, comprehensive income, cash flows and changes in equity for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year. The December 31, 2023 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, 2023 and notes included in the Company’s 2023 annual report on Form 10-K.

NOTE 2 — SHORT-TERM INVESTMENTS:

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

At March 31, 

At December 31, 

    

2024

    

2023

Trading securities

$

329.1

$

599.1

Weighted average interest rate

 

5.5

%  

 

5.7

%

Available-for-sale

$

0.2

$

0.2

Weighted average interest rate

 

0.8

%  

 

0.8

%

Total

$

329.3

$

599.3

Trading securities consisted of bonds issued by public companies and were publicly traded. Each financial instrument was independent of the others. The Company had 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, 2024, and December 31, 2023, included asset and mortgage-backed obligations. As of March 31, 2024 and December 31, 2023, 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.

8

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

Three months ended

 

March 31, 

    

2024

    

2023

 

Trading:

Interest earned

$

7.7

$

3.7

Unrealized gain (loss) at the end of the period

$

(*)

$

(*)

Available-for-sale:

Interest earned

 

(*)

(*)

Investment redeemed

$

-

$

-

(*) Less than $0.1 million.

NOTE 3 — INVENTORIES:

Inventories were as follows:

At March 31, 

At December 31, 

(in millions)

    

2024

    

2023

Inventory, current:

Metals at average cost:

Finished goods

$

85.7

$

68.8

Work-in-process

 

286.9

 

313.0

Ore stockpiles on leach pads  

232.6

230.9

Supplies at average cost

 

409.2

 

404.2

Total current inventory

$

1,014.4

$

1,016.9

Inventory, long-term:

Ore stockpiles on leach pads

$

1,132.5

$

1,121.7

During the three-month period ended March 31, 2024 and 2023, total leaching costs capitalized as non-current inventory of ore stockpiles on leach pads amounted to $66.2 million and $75.3 million, respectively. Leaching inventories recognized in cost of sales amounted to $53.7 million and $72.3 million for the three months ended March 31, 2024 and 2023 respectively.

NOTE 4 — INCOME TAXES:

The income tax provision and the effective income tax rate for the three-month period ended March 31, 2024 and 2023 consisted of (in millions):

    

2024

    

2023

Statutory income tax provision

$

363.1

$

399.0

Peruvian royalty

 

9.9

 

9.8

Mexican royalty

 

30.6

 

51.7

Peruvian special mining tax

 

19.8

 

20.0

Total income tax provision

$

423.4

$

480.5

Effective income tax rate

36.6

%

36.9

%

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 decrease in the effective income tax rate in 2024 compared to the same period in 2023 was primarily attributable to a reduction in the Mexican mining royalty payment.

Peruvian royalty and special mining tax: The Company has accrued $29.7 million and $29.8 million of royalty charge and special mining tax as part of the income tax provision for the first quarter of 2024 and 2023, respectively.

9

Mexican mining royalty: The Company has accrued $30.6 million and $51.7 million of royalty taxes as part of the income tax provision for the first quarter of 2024 and 2023, respectively.

Accounting for uncertainty in income taxes: In the first three months of 2024, the Company made payments for uncertain tax positions of $72.6 million and $13.6 million in the Peruvian and Mexican jurisdictions respectively. The Company also recorded current and non-current liabilities for the Peruvian and Mexican jurisdictions that increased the tax expense by approximately $3.7 million and $21.4 million respectively. The Company has a net current liability of $15.1 million and $19.7 million in the Peruvian and Mexican jurisdictions respectively that represents anticipated cash refunds or payments within 12 months.

Tax law updates: On May 31, 2019, the Organization for Economic Cooperation and Development (“OECD”) published a two-pillar system that introduces a minimum global tax of 15% and a proposed tax on base eroding payments. Certain aspects of Pillar Two took effect January 1, 2024, while other aspects go into effect January 1, 2025. If jurisdictions want to implement Pillar Two they will need to do so through domestic legislation. The countries in which the Company has significant operations have yet to enact Pillar Two into law and have not formally announced plans to implement these rules. The Company will continue to monitor these developments and analyze the potential impact that Pillar Two will have on future results.

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 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.

10

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

At March 31, 

At December 31, 

    

2024

    

2023

Related parties receivable current:

Grupo Mexico and affiliates:

Asarco LLC

$

5.1

$

9.4

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

(*)

(*)

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

 

(*)

(*)

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

17.1

17.1

Mexico Compania Constructora S.A de C.V.

(*)

(*)

Related to the controlling group:

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

(*)

Empresarios Industriales de Mexico, S.A. de C.V.

0.7

0.6

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

0.2

0.1

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

0.1

0.1

$

23.2

$

27.3

Related parties payable:

Grupo Mexico and affiliates:

AMMINCO

$

5.8

$

5.0

Asarco LLC

15.0

13.8

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

 

0.1

 

0.2

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

 

6.7

 

7.9

Grupo Mexico Servicios

5.2

2.7

MGE

40.0

50.3

Mexico Compania Constructora S.A de C.V.

9.5

9.5

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

1.4

3.5

Related to the controlling group:

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

 

0.4

 

0.3

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

 

0.1

 

0.3

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

0.2

0.1

$

84.4

$

93.6

(*) 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 three-month period ended March 31, 2024 and 2023 (in millions):

    

2024

    

2023

Purchase activity

Asarco LLC

$

1.2

$

26.5

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

 

0.1

 

0.4

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

 

8.1

 

14.4

Grupo Mexico Servicios

5.0

5.0

AMMINCO

2.5

2.5

MGE

 

61.7

 

62.0

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

20.6

13.9

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

 

4.0

 

3.2

Total purchases

$

103.2

$

127.9

Sales activity

Asarco LLC

$

6.7

$

9.1

AMMINCO

(*)

(*)

MGE

15.6

18.8

Total sales

$

22.3

$

27.9

(*) Less than $0.1 million.

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 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 2024, the Company donated $0.6 million 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 2023, the Company donated $1.4 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. 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 cathodes, concentrate and starter sheets from Asarco LLC and also paid fees as reimbursement of freight fees. 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 approximately 5.2% of its power output to third-party energy users, compared to 0.6% as of March 31, 2023.

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

12

(IMMSA) and other subsidiaries of Grupo Mexico in the third quarter of 2014. Currently, Eolica el Retiro supplies approximately 3.4% of its power output to IMMSA and Mexcobre, compared to 11.6% as of March 31, 2023.

The Company sold copper starter sheets, lime and sulfuric acid to Asarco LLC. The Company´s Mexican operations received fees for transportation and administrative services that were provided to Asarco and also received fees for natural gas and services provided to MGE, a subsidiary of Grupo Mexico. Additionally, the Company´s Mexican operations received fees for rental services provided to AMMINCO.

Companies with relationships to the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in the three-month period ended March 31, 2024 and 2023 (in millions):

    

2024

    

2023

Purchase activity

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

$

0.2

$

0.1

Mextransport

0.7

0.8

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

0.1

0.1

Total purchases

$