Southern Copper
Annual Report 2005

Plain-text annual report

page 1 SOUTHERN COPPER CORPORATION page 2 ANNUAL REPORT page 2 ANNUAL REPORT [ the future is globall ] index 02 Operating highlights 03 Main Statistical Data 04 Letter to the Shareholders 06 Production Statistics 07 09 13 17 21 23 25 31 37 Selected Financial and Statistical Data Expansion and Modernization Program Exploration Community Outreach Results of Operations for the years ended December 31, 2005, 2004 and 2003. Dividends and Capital Stock Environmental Affairs General Information Description of Operations and Development Regarding the issuing entity 52 Members of the Board of Directors page 4 ANNUAL REPORT page 5 SOUTHERN COPPER CORPORATION Southern Copper Corporation and Subsidiaries Operating highlights (tons) Operating Area or plant 2005 2004 Total material moved (000’s) Copper in concentrate Molybdenum produced Total material moved (000’s) Copper in concentrate Molybdenum produced Cathodes produced Concentrates smelted Blister produced Cathodes produced Total material moved (000’s) Copper in concentrate Molybdenum produced Total material moved (000’s) Copper in concentrate SX/EW Cathodes Concentrates smelted Anode produced Cathodes produced Rod produced Zinc Lead Copper Silver (Kilograms) Gold (Kilograms) Toquepala Cuajone Smelter/refineries in Peru Mexicana de Cobre – Caridad Cananea Smelter/refineries in Mexico Underground R: Production records. Copper Reserves R R 134,505 157,456 5,324 109,855 163,659 5,279 36,498 1,206,252 325,623 285,205 75,465 122,317 4,200 102,508 118,741 78,454 894,735 282,412 233,685 113,167 143,609 19,545 12,804 316,723 125 115,120 160,852 6,004 101,265 194,389 4,657 42,125 1,213,030 320,722 280,679 72,430 110,385 3,712 93,160 123,228 71,975 820,459 250,890 202,146 69,529 133,778 18,842 15,053 325,652 164 Peruvian Open Pit Operations Mexican Open Pit Operations Total Open Pit Mines IMMSA Cuajone Toquepala Cananea La Caridad 1,935,407 Copper Reserves (Thousand tons) Sulfides Average Grade: Copper Molybdenum Leachable Leachable Material Grade Waste Total material Stripping ratio 0.561% 0.019% 11,604 0.568% 5,022,010 6,969,021 2.60 2,174,479 3,759,426 1,562,184 9,431,496 41,644 0.580% 0.032% 2,777,807 0.494% - 1,499,915 0.315% 0.028% 0.498% 0.026% 0.51% 1,489,303 5,778,629 0.172% 0.226% 0.157% 0.183% 7,364,671 12,316,957 4.66 3,979,732 9,239,073 1.46 540,455 3,591,942 1.30 16,906,868 32,116,993 2.41 page 4 ANNUAL REPORT page 5 SOUTHERN COPPER CORPORATION Main SCC Statistical Data Productivity (Tons of copper per employee) Accidents (Million Hours Per Man) 56 54 52 48 45 60 40 20 30 20 10 2 2 9 1 9 1 8 1 8 1 ‘01 ‘02 ‘03 ‘04 ‘05 ‘01 ‘02 ‘03 ‘04 ‘05 SX/EW Production (Thousand tons) Refinery Production (Thousand tons) 1 9 1 . 2 2 1 9 8 9 . 4 1 1 4 4 7 . 8 1 1 0 0 1 . 4 1 1 2 5 9 . 4 1 1 120 100 80 60 40 20 0 5 7 . 4 3 5 0 9 8 8 1 5 . 5 2 8 . 2 8 4 0 7 5 . 1 8 4 3 7 9 . 7 4 4 600 500 400 300 200 100 ‘01 ‘02 ‘03 ‘04 ‘05 ‘01 ‘02 ‘03 ‘04 ‘05 Copper Production (Thousand tons) Copper Sales (Thousand tons) 7 0 0 8 1 7 . . 8 2 9 9 8 6 . 5 0 6 8 4 6 9 1 0 . 4 1 6 6 1 9 . 5 6 6 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 2 1 4 . 1 2 7 5 8 4 . 0 6 6 7 0 1 . 5 4 6 8 6 6 9 0 7 . 3 5 5 . 8 9 6 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 ‘01 ‘02 ‘03 ‘04 ‘05 ‘01 ‘02 ‘03 ‘04 ‘05 page 6 ANNUAL REPORT Letter to the Shareholders page 7 SOUTHERN COPPER CORPORATION 2005 has been an extraordinary year for Southern Copper Corporation (SCC) (formerly named Southern Peru Copper Corporation). On April 1, 2005, we completed the acquisition of Minera Mexico with the issuance of an additional 67.2 million shares of common stock to our principal share- holder, Grupo Mexico. With this acquisition we have almost doubled the size of our Company and more then doubled our mineral reserves. Our sales reached $4.1billion and net earnings were $1.4 billion, an increase of 32.8% and 42.5% respectively as compared with 2004. These record results are mainly due to the higher metal prices as well as a reduction in operating costs, and reflect our commitment to be a more ef- ficient mining operation and a more integrated company. We would like to highlight the strength of our balance sheet, as evidenced by an increase of US$512.5 million, or 18.2%, in stockholder’s equity, a decrease of US$158.2 million in long-term debt and an increase in US$120.0 million in cash and marketable securities. In 2005, average market prices for our main products increased signifi- cantly over 2004. The COMEX average copper price was $1.68 per pound in 2005, compared to $1.29 in 2004, an increase of 30.4%. The zinc aver- age price was $0.63 per pound, 31.9% higher than the $0.48 per pound, from the previous year. The silver average price was US$7.32 per pound, 9.6% higher than the $6.68 recorded in the previous year. The gold aver- age price was $444.88 per ounce, an 8.7% increase compared with $409.21 in 2004. The molybdenum average price was US$31.05 per pound, 94.7% higher than the $15.95 recorded in 2004. Given the price strength of our main product, copper, we have not acquired copper hedges for 2006 or future years. Based on copper consumption growth, the improvements in metal prices, our estimates, general market and independent analysts expectations, we have taken this position as we believe this will permit SCC to retain the entire benefits from copper prices. The Ilo Peru smelter modernization project is moving ahead on schedule with detailed engineering completed and construction work in process in page 6 ANNUAL REPORT page 7 SOUTHERN COPPER CORPORATION order to finish by the end of 2006. The anode casting wheel part of this project was successfully hot tested in the first quarter of 2006 replacing Ilo blister production with anodes. We now directly feed the refinery and have eliminated the re-melting of blister into anode form. We estimate that this will save the Company two cents per pound in our smelting and refining cost at the Ilo operations. At December 31, 2005, the smelter project has reached 64% comple- tion. Additionally, the Company’s leaching dumps, crushing and conveying project at the Toquepala mine is in pro- duction. The primary crusher was placed in operation in August. The overland conveyors 1, 2 and 3, and the grass- hoppers 30 and 31 were put on the production line. The conveying system reached its rated capacity of 6,500 ton/hr at the end of September 2005. The construction of the ramp will continue until completion in August 2006. Regarding exploration activities in Peru, the drilling program at our promising Los Chancas project was concluded. The process for the pre-feasibility study has been started and should be completed by July 2006. The drilling pro- gram at Tia Maria was completed in March 2006 and we have begun the economic evaluation of the project. The Cananea mine’s new SX/EW plant project is currently underway. In its first stage, it is expected to produce 10,500 tons of additional copper by the end of 2007. Studies for a 22,900 ton subsequent expansion of the SX/EW plant are also being underway As the Cananea min has the largest quantity of our copper reserves, we are studying several possibilities for expanding it to a scale that fully maximizes its potential. We continue to integrate aspects of our Peruvian and Mexican facilities to achieve operational synergies. We are working to achieve additional economic benefits as we further integrate our operations utilizing best practices throughout our Peruvian and Mexican operations. In December 2005, a team from our Peruvian and Mexican opera- tions and an independent consulting group was formed to review the support operations of the two locations. The team is responsible for completing this review in 2006, recommending best practice and implementing such recom- mendation prior to 2007. Currently, SCC has mining operations in Peru and Mexico and exploration operations in both countries as well as Chile. The exploration and development of these properties will permit the Company to increase its reserves, as well as its future prospects. The projects Southern Copper is executing will consolidate even more our position among the principal metal produc- ers in the world, which we believe indicates a more satisfactory economic return for shareholders and a greater con- tribution for the countries and localities where we operate, as well as appropriate benefit for our workers. On behalf of Southern Copper Corporation’s Board, we express our thanks to all the personnel for their effort, work and dedication and to our clients for their continued trust and loyalty, and to you, our shareholders, for your perma- nent support. German Larrea Mota-Velasco Chairman of the Board Oscar Gonzalez Rocha President and Chief Executive Officer page 8 ANNUAL REPORT page 9 SOUTHERN COPPER CORPORATION Southern Copper Corporation and Subsidiaries Five-year Production Statistics Copper production Mined (tons) Material Mined (thousand) Copper in concentrates Copper SX/EW Total copper Molybdenum in concentrates Zinc in concentrates Silver in concentrates Smelter/refineries production Copper Zinc Silver (thousand ounces) Toquepala Material Mined (thousand) Copper in concentrates Molybdenum in concentrates Cuajone Material Mined (thousand) Copper in concentrates Molybdenum in concentrates Smelter/refineries in Peru SX/EW Smelted concentrates Blister produced Cathode produced Mexicana de Cobre – Caridad Material Mined (thousand) Copper in concentrates Molybdenum in concentrates Cananea Material Mined Copper in concentrates Smelter/refineries in Mexico SX/EW Smelted concentrates Anode produced Cathode produced Rod produced Underground Contents in concentrates (tons) Zinc Lead Copper Silver (Kilograms) Gold (Kilograms) 2005 2004 2003 2002 2001 426,951 574,976 114,952 689,928 14,803 143,609 575,266 629,353 101,523 12,487 134,505 157,456 5,324 109,855 163,659 5,279 386,364 603,907 114,100 718,007 14,373 133,778 576,372 594,278 102,556 10,796 115,120 160,852 6,004 101,265 194,389 4,657 356,600 547,172 118,744 665,916 12,521 128,760 559,941 537,501 101,069 12,147 105,242 142,373 4,153 97,471 184,528 4,867 357,635 491,828 122,191 614,019 11,747 135,442 562,219 579,905 92,012 15,536 102,145 125,424 4,215 99,589 168,208 4,104 385,666 533,616 114,989 648,605 13,869 149,252 617,575 676,038 107,005 15,799 99,492 122,751 4,098 101,702 165,085 4,253 36,498 1,206,252 325,623 285,205 42,125 1,213,030 320,722 280,679 47,756 1,182,870 314,920 284,006 52,854 1,183,816 316,493 281,669 54,428 1,165,062 328,241 277,260 75,465 122,317 4,200 102,508 118,741 78,454 894,735 282,412 233,685 113,167 143,609 19,545 12,804 316,723 125 72,430 110,385 3,712 93,160 123,228 71,975 820,459 250,890 202,146 69,529 133,778 18,842 15,053 325,652 164 73,916 107,236 3,501 75,692 94,103 70,988 629,505 199,033 163,965 53,822 128,760 20,884 18,932 334,993 217 62,592 91,925 3,428 88,435 86,641 69,336 700,278 239,031 199,901 97,485 135,442 23,800 19,630 380,695 266 84,204 140,760 5,518 94,551 82,198 60,561 947,175 317,133 257,490 129,562 149,252 28,991 22,822 420,947 278 page 8 ANNUAL REPORT page 9 SOUTHERN COPPER CORPORATION Southern Copper Corporation and Subsidiaries Five-year selected financial and statistical data For the years ended december 31, (in millions, except per share and employee data) Consolidated statement of earnings Net sales Operating costs and expenses Operating income Minority interest of investment shares in income of Peruvian Branch Cumulative effect of change in accounting principle, net Net earnings Per share amount Net earnings - Basic and diluted Dividends paid Consolidated balance sheet Total assets Cash and marketable securities Total debt Stockholder’s equity Consolidated statement of cash flows Cash provided from operating activities Dividend paid Capital expenditures Depreciation & depletion Capital stock Common shares outstanding NYSE Price – high Price – low Book value per share P/E ratio Financial ratios Current assets to current liabilities Debt as % of capitalization Employees (at year end) (1) No available 2005 2004 2003 2002 2001 $ $ 4,113 2,018 2,095 3,097 1,614 1,483 $ 1,577 1,251 326 $ 1,388 1,201 187 $ 1,560 1,485 75 12 5 $ 1,400 $ 982 $ 4 (2) 84 9 (3) $ 145 $ (110) $ $ $ $ $ 9.51 5.80 $ 5,688 876 1,172 3,326 1,644 854 471 277 147.2 70.60 41.63 $ $ $ 22.59 7.04 $ $ $ 6.67 1.30 5,319 756 1,330 2,814 1,172 191 228 193 147.2 54.10 26.53 19.11 7.08 $ $ $ 0.57 0.31 $ $ 0.98 0.19 4,491 352 1,671 2,023 $ 4,419 175 1,621 1,882 $ $ $ (0.75) 0.19 4,481 261 1,714 1,752 65 45 65 177 182 22 85 158 N/A (1) 29 181 166 $ $ $ 147.2 48.85 14.42 13.74 83.11 $ $ $ 147.2 15.54 10.82 12.78 15.41 $ $ $ 147.2 15.10 8.42 11.90 (20.25) 2.15 8.2% 1.70 17.0% 1.88 39.5% 1.64 43.4% 12,888 12,794 12,713 12,714 0.46 45.4% 14,320 page 10 ANNUAL REPORT [ the future is globall ] first page 11 SOUTHERN COPPER CORPORATION page 10 ANNUAL REPORT page 11 SOUTHERN COPPER CORPORATION Expansion and Modernization Program Operations in Peru Ilo Unit, casting wheel in smelter, Peru. Concerning the expansion and modernization programs that have been taking place in recent years, we can announce the following: In Toquepala, the Leaching Dumps, crushing and conveying Project reached 94% progress in December 2005. The new primary crusher was placed in operations and the overland conveyors 1, 2 and 3, bridge equip- ment, spreader and first stretch of belt 15 with 3.7 kilometers in length, started operating. This equipment is being used to make the ramp that will provide access to leacheable deposit formations at level 2875. At the end of the year, 4.5 million tons of waste material were deposited and the ramp construction is estimated to be completed in the third quarter of 2006. The New PLS Dams Construction Project is being developed. This project complements the Leaching Dumps Project, since these new deposits will require new collection dams because the ones existing will be covered by leachable materials to be deposited in the area. At December 2005, the project had reached 47% progress. The sedimentation and landslide con- tention dams were finished. The PLS dam reached 68% progress. In an- other area of the project, the new power sub-station was completed and is now under operation. Equipment and materials are currently being sought for the following stage referring to PLS and raffinate driving lines. This in- volved essentially pipes and pumps, as well as the acquisition of material and equipment for a power distribution system at 13.8 Kv. Studies on possible sites for Tailings Disposal were finished. Analysis of alternatives were completed and we decided to expand the current Que- brada Honda dam, using the conventional cycloning method. Engineering started in December and at the same time the existing auxiliary dikes were raised two meters to make sure decanted water does not flow towards Quebrada Santallana. Regarding the new copper press filter in Toquepala, the installation was completed and it is in operation since June 2005. The Ilo Smelter Modernization Project, the new Smelter will use an Isa- smelt furnace and two rotating furnaces at the copper concentrate fusion stage to separate matt from slag. The conversion stage will be realized in four 15 feet diameter and 35 feet long Pierce Smith converters. Out of these, three will be re-furbished and one will be new. A new Anode Plant, a new Sulfuric Acid Plant and a new Oxigen Plant will be installed, as well as the other necessary auxiliary facilities. page 12 ANNUAL REPORT page 13 SOUTHERN COPPER CORPORATION Processing capacity will be 1.2 million tons of copper concentrate per year. Sulfur capture will be 95%, above cur- rent environmental legislation require- ments. The final product of the new Smelter will be copper anodes instead of the blister bars that were produced before. In 2005, construction works contin- ued, reaching 64% progress to Decem- ber 2005. The Acid Plant construction works reached 46% progress with the completion of civil works. Current work is assembly of main equipment. Oxygen Plant construction works have progressed by 56%, mechanic assem- bly is practically finished and electric and instrumentation assembly was started. The Anode Plant is almost finished and cold tests have been per- formed. Hot tests with refined copper in the new furnaces were made in January 2006. HDPE underground piping and electric duct installation works were fin- ished; installations for reception of GLP were completed, and are now the most modern in Peru. The civil works of the new seawater intake are con- cluded. The civil works for the rest of the project show a 93% progress. The contract to manufacture and install tanks is 58% completed, pending still is the installation of 22,500 tons tanks for receiving and storing sulfu- ric acid produced by the new and existing Acid Plants. The Isasmelt fusion furnace and the rotating furnaces to separate matte from slag are already placed on their pedestal shoes and we have been working on mounting the smelter building structures. Likewise, we have been installing metallic structures in the feeding hoppers that feed the Isasmelt furnace and in the electrostatic precipitator area. On the other hand, we have been working and installing all kinds of ducts for the sys- tem to manage the collection of gasses of the converters and installing the other project’s main equipment, such as electric transformers, desalting plants, among others. We started obtaining permits to install a maritime terminal to embark the sulfuric acid that will be produced due to the modernization. The terminal consists of a pier on the Pacific ocean in the sector called Bahia Tablones west of the coastal Ilo-Matarani road and the coast, 15 km north of the city of Ilo and south of the Smelter. The call for tenders started for the Los Chancas project pre-feasibility study. We expect to complete such studies on the third quarter of 2006. Operations in Mexico Sulfuric Acid Plant Optimization Project at La Caridad Metallurgic Complex Optimization of the Sulfuric Acid Plant at La Caridad Metallurgic Complex was commenced. This will permit us to increase gas management capacity and ensure fusion content of the Smeltering Plant at 1 million tons of con- centrate per year. Acid Plant No. 1 will increase its 223,421 capacity to 240,000 m³ of gases (dry base) and the increase in Acid Plant No. 2 will be from 190,139 to 220,000 m³ of gases (dry base). Optimization works in both plants were the design change to the distributions in the drying towers, intermediate page 12 ANNUAL REPORT page 13 SOUTHERN COPPER CORPORATION Processing capacity will be 1.2 million tons of copper concentrate per year. Sulfur capture will be 95%, above current environmental legislation requirements. absorption and final absorption tower distributors, as well as the renewal of fog removers. These optimization works will continue in March 2006. Power Generation Plant Construction The Mexico division will invest more than $600 million to build a new power gen- eration plant for its own consumption. The plant will have a generation capacity of 450 MW per year, using the coal that comes from its own reserves located in the state of Coahuila. The plant will use circulating fluidized bed technology ensuring clean power generation, which will comply with every domestic and international environmen- tal requirement. The project will represent considerable savings in the cost of kw/hr consumed by mining and metallurgic units in Mexico, permitting them to have competitive power and long-term cost certainty. This will be added to an increase of SCC’s coal operations in Mexico, which will bring about more jobs and revenues. Santa Barbara Unit Expansion The project consists on expanding the mineral extraction capacity from inside the mine to the surface with a 1,354 meters conveyor belt. With this project we will have access to the San Diego mine reserve, which metal contents are the greatest in all the unit. In 2005, the first 900 meters were finished. The 454 remaining meters plus the infrastructure needed for ore transportation will be completed in 2006. San Martin Unit Shaft Deepening The two phase project to deepen the unit’s shaft will permit to improve the extraction of the ore reserves at the least possible cost. The First phase contemplates sinking 220 meters of shaft and the neces- sary works for the crusher equipment. All the mining works are completed and the last days of August 2006 have been fixed as the testing and startup date. It will be necessary to deepen interior II shaft in 2007-2008, as well as building new load installations. 330 shaft meters will be sunk at this stage, giving the unit’s operation continuity and permitting it to reach the highest mineral potential level. Coal Extraction Expansion SCC Mexican Division has 67 million tons of coal in reserve. In 2005, the first project stage to increase coal production to 2 million tons per year was started, this first stage means preparation and exploitation of the eastern zone with long wall mining system and an estimated production of 900,000 tons. The second stage contemplates preparing and exploiting the reserves lo- cated in the Western Zone to reach an additional production of 1.1 million annual tons. In 2006, construction works at the new mine will be started to be able to extract the coal. page 14 ANNUAL REPORT [ the future is globall ] second page 15 SOUTHERN COPPER CORPORATION page 14 ANNUAL REPORT page 15 SOUTHERN COPPER CORPORATION Exploration We are committed with an intense exploration program to locate new miner- alized bodies in Peru, Mexico and Chile. We spent $24.4 million in explora- tion programs in 2005, $15.6 million in 2004 and $17.9 million in 2003, and we have budgeted $33.4 million for 2006. We currently control 99,537 hectares of mining rights in Peru. In Mexico we control 505,127 hectares in exploration and exploitation concessions. We also hold 38,200 hectares of exploration concessions in Chile. PERU Los Chancas. The Los Chancas project, located in the department of Apuri- mac in the south, is a copper and molybdenum porphyry deposit. In 2004, we completed the final phase of the diamond drilling program and the second and the final phase of metallurgic testing. In 2005, several companies have been invited to present proposals for execution of pre-feasibility studies that will begin in 2006. Once completed, we will be able to make a determi- nation if more exploration is needed or if the project contains commercially mineable reserves, which would warrant future development after compres- sive economic, technical and legal feasibility studies are completed. Testing to date indicated a mineral deposit of 200 million tons with a copper grade of 1.0%, 0.07% of molybdenum and 0.12 grams of gold per ton. Tantahuatay. The Tantahuatay project is located in the department of Caja- marca, in the north. We have performed exploration work in the upper part of the deposit, principally for gold recovery. Work to date indicates mineraliza- tion of 27.1 million tons, with an average gold contents of 0.89 grams per ton and 13.0 grams of silver per ton. This project, in which we we have a 44.25% share, continues in the exploratory stage. In 2004 and 2005, we concen- trated our efforts on dealing with the social and environmental concerns of communities near the project. Tia Maria. The Tia Maria project, located in the department of Arequipa, in the south, is a copper porphyritic system. In 2005, a total of 29,000 meters of diamond-drilling was completed out of the 15,000 meters initially pro- jected. The drilling is continuing into 2006 to complete the program. This project is in the exploratory stage but we expect to commence the feasibility study in the second quarter of 2006. Toquepala Unit, mining operations, Peru page 16 ANNUAL REPORT page 17 SOUTHERN COPPER CORPORATION La Caridad Unit, drilling operation, Mexico We are committed to an intense exploration program to locate new mineralized bodies in Peru, Mexico and Chile. We spent $24.4 million in exploration programs in 2005, $15.6 million in 2004 and $17.9 million in 2003, and we have budgeted $33.4 million for 2006. Other prospects in Peru. As part of the 2005 exploration and development program, we programed drilling at the Gloria Cristina prospect, located in the north of Peru, in the departments of La Libertad and the El Fiscal prospect, in the south, in the department of Arequipa. The El Fiscal project shows evidence of copper-gold mineralization and we are scheduling addi- tional drilling as part of the 2006 exploration and development program. MEXICO Drilling programs of 40,500 and 19,000 meters were developed in the Cana- nea and La Caridad mines, respectively. These projects aim at defining re- serves and carrying out metallurgic tests to improve recovery at the plants. The El Arco project, containing measured resource of 846 million tons of a 0.51% sulphide copper grade and 170 million tons of an oxide copper grade of 0.56%, technical studies were completed to locate 150 liters per second of fresh water for the SX/EW process. We are currently waiting for the cor- responding permits to test results with direct drilling. page 16 ANNUAL REPORT page 17 SOUTHERN COPPER CORPORATION Panoramic view, Toquepala Unit, Peru In the Coahuila state, we continued the exploration activities to identify additional reserves to the current 67 million tons. In the Guayacan zone 11,714 meters were drilled, showing an important additional potential. The Environment Secretariat and Natural Resources (SEMARNAT) and Gua- najuato Ecology Institute permits were obtained to explore for gold, silver, copper, zinc and lead, in the claim Reduccion Leon located in Sierra de Lo- bos, Guanajuato. Likewise, 5,284 meters were drilled at the Morelos Sur project located in the Guerrero state. Studies show it is still interesting due to its amounts of gold and silver. The Company controls 770 claims in exploration totaling 296,227 hectares with exploration and exploitation rights. However, with the changes in min- ing legislation as from January 2006, they will only be called mining conces- sion rights. Generally, at all these claims, we are carrying out geology, geophysics, in- spection, exploration, conservation and necessary infrastructure works. CHILE In 2003, we bought several explora- tion properties in Chile with more than 35,000 hectares in mining rights. In 2004, we started exploration works with diamond drilling in the El Salado prospect. El Salado. It is located in the Atacama region, and occupies a 2,700 hectares area. It is being explored for copper and gold mineralization. 11,079 meters of di- amond drilling were performed in 2005. Other prospects in Chile. Catanave and Esperanza, located in the Tarapaca and Atacama regions, respectively, in the north of Chile, are programd for explo- ration in the near future. page 18 ANNUAL REPORT [ the future is globall ] third page 19 SOUTHERN COPPER CORPORATION page 18 ANNUAL REPORT page 19 SOUTHERN COPPER CORPORATION Community Outreach Operations in Peru Open pit, Toquepala mine, Peru Southern Copper substantially stimulates the economy in the south of the country and is particularly identified with the sustainable development and wellbeing of the Tacna and Moquegua population, promoting and carrying out Social Investment actions in the neighboring communities. This is un- dertaken by co-management with different public entities and the popula- tion. SCC directs its community outreach to the geographic environment as a facilitator for social-economic development. Southern Copper is a good corporate social neighbor and is environmentally responsible. It evidences this approach through co-participatory projects. In 2005, SCC developed, among others, the following projects: • Water resource management: In the Torata valley (Moquegua), the 7th Stage of the Chilligua canal construction is being completed. At the same time, we are promoting water use optimization through training and prac- tical courses to users and the installation of 60 gates, as well as the repair of the main water intakes. We continued supporting the Torata User Board logistically and technically so they can participate in local participatory budgeting. In Candarave (Tacna), the Marisol Water Divide was built. This will benefit the district of Cairani, Huanuara, Candarave and Quilahuani. We are also building and rehabilitating minor irrigation infrastructure in ten Irrigation Committees. In Higuerani, we are exploring the possibility of drilling a well to draw underground water. • Agriculture: In Candarave, potato and oregano seed areas were strength- ened. We also fostered sowing of oat seeds. We continued renewing alfalfa plantations, by improving water consumption and fostering feed oat sowing. At the same time we started researching biological greenfly control. In Torata, we are training producers to grow more profitable crops for their families. In the Locumba and Ite valleys we are working on irriga- tion infrastructure. • Cattle raising: In Candarave, we continued supporting genetic improve- ment of sheep, promoting cattle raising and dairy industry, as well as the artificial insemination and cattle stalling programs. In Torata, we provide technical and animal health assistance. We created the Torata Alta Farm- ing Producer Association and, together with them, we started a family farm program for guinea pig raising. In Suches-Huaytire-Tacalaya, we are starting a genetic research program with South American camelids. At the same time, we continue working in controlling sarcosistiosis and promot- ing sale of camelid meat. To do so, we are completing the construction of a slaughter area in Huaytire. In Higuerani, (Ilabaya-Tacna), the reproduc- page 20 ANNUAL REPORT page 21 SOUTHERN COPPER CORPORATION ing guinea pig raising project was strengthened and we provide perma- nent technical assistance on animal health and cattle management to the different communities devoted to this field. In Arondaya (Cuajone), we are continuing a program to develop the existing subsistance cattle raising so as to improve raising of camelids, sheep and goats, by training area youths in veterinary management. • Commercial development: In Canda- rave, we are strengthening the sale of meat through the Farming Producer Association made up by the same cattle raisers who are trained and ad- vised by SCC technicians. Currently, their organization they manage successfully and have refrigerated trucks and two equipped stores, one in Toquepala and one in Cuajone. In Higuerani, we strengthen a guinea pig sale channel directly from the farm to the Toquepala soup kitchens and concessionaires. • Basic infrastructure: We channeled the Locumba river from Ilabaya to the Locumba bridge. In the Huaytire alpaca producing zone, we continued building shelters, reproduction mod- SCC directs its community outreach to the geographic environ- ment as a facilitator for social-economic development. Southern Copper is a good corporate social neighbor and is environmen- tally responsible. It evidences this approach through co-participa- tory projects. ules (for controlled population) and fences around paddocks, to facilitate rational use of pasture. • Capacity improvement: In Candarave we organized Christmas choir con- tests. We promoted the organization of youth through Interquorum Net- work at provincial level. • Additional activities: We sponsored agricultural fairs in Candarave and Torata. In 2005, the results reached by the Company’s Social Program were highly satisfactory, due, among other things, to daily and permanent sharing of our technicians with the neighboring communities. This permitted to leverage their strengths, prioritize their needs, identify their deficiencies and try to minimize them and, by doing so, we contributed to improve their living condi- tions and efficiently manage the relationship between our company and the neighboring areas. Operations in Mexico IMMSA DIVISION The IMMSA Division actively participates by promoting environmental culture, working with elementary schools where we give talks, workshops, courses, promote recycling, ecologic creativity, ecologic journeys and camps aiming at educating environmental leaders that may foster ecologic awareness. The Division coordinates with different institutions of the health sector to carry out educational and training activities, such as talks, courses, campaigns concerning hygiene, nutrition, drug addiction, among others. It also supports health sector institutions to carry out vaccination campaigns. The Company is concerned with the education and development of the com- munity and gratuitously gives cosmetic, sewing, manual work, first aid, infor- mation technology, baking, yoga courses and workshops, as well as informa- tion sessions on health and environmental self-care, among others. Besides, the IMMSA Division promotes sport among the population, provid- ing them with facilities to access their fields and facilities where more than 40 amateur soccer teams, more than 50 baseball and softball teams participate. Several educational institutions also hold their inter-institutional matches there. In neighboring towns we hold national day and charity activities. Said page 20 ANNUAL REPORT page 21 SOUTHERN COPPER CORPORATION Similarly, the city Museum is maintained by Cananea. Here, they exhibit objects, documents and historical documents and photographs and there are also temporary exhibits. Both Units frequently support different educational and social institutions of their community, facilitating transport for students and senior citizens to spe- cial events and activities. In 2005, the Company contributed with a donation to the Rancho Feliz Institution, which supports different assistance homes for orphan children and asylums for elderly people in the Nacozari and Cananea communities. These Units develop sport programs for their workers where the community at large can also participate. The La Caridad Unit supports water supply organizations, providing tank- ers for distribution to the community during draught times, when there are problems for the regular supply of this service. Similarly, when there are water supply problems, the Cananea Unit supports the community with potable water pumping to the city’s supply system. division also promotes the IMMSA Children Soccer League – INFONAVIT MO- RALES, and participates in organizing, disseminating and co-sponsoring sev- eral athletism events. IMMSA participates with the San Luis Potosi municipality monthly providing them more than 50,000 m3 of water by the interconnection of the municipal network. Besides, it participates in paving streets and sidewalks, as well as in city landscaping. CANANEA AND LA CARIDAD UNITS Cananea and La Caridad participate in promoting the environmental culture and they are present in different forums on this matter, as well as in commu- nity non-governmental organizations. La Caridad Unit has a nursery where trees of different regional species are grown. They are gratuitously distributed to institutions and individuals, who simply commit to take care of the trees’ development. The Cananea Unit contributes with maintaining the Cananea city nursery, with the same aims as the La Caridad Unit nursery. Additionally, these Units support the Hermosillo City Ecologic Center, located in the state of Sonora, and contribute to the conservation of the Mexican Gray Wolf. This is a wolf species that lives is the region and is endangered. The emergency brigades of both Units support laboring communities in case of fire, natural disasters or environmental contingencies. Besides, the Cana- nea Unit cooperates with the Volunteer Firefighter Body by making preventive maintenance of their 4 firefighting equipment. The La Caridad Unit organizes different socio-cultural activities such as manual workshop, baking, pottery, guitar playing and carpentry. It also orga- nizes exhibits and talks on pre-school education, children development, and personal achievement, among others. On January 6, the La Caridad Unit distributed toys among low income popula- tion of Esqueda, in the state of Sonora. The Cananea Unit is totally charged with maintaining the Cananea city public library, which is classified as the sixth in the state of Sonora. This library provides free Internet service and workshops for children during vacations. page 22 ANNUAL REPORT [ the future is globall ] fourth page 23 SOUTHERN COPPER CORPORATION page 22 ANNUAL REPORT page 23 SOUTHERN COPPER CORPORATION Results of operations for the years ended December 31, 2005, 2004 and 2003. SCC reported 2005 net earnings of $1,400.1 million or diluted earnings of $9.51 per share, compared with net earnings of $982.4 million or diluted earnings of $6.67 per share in 2004 and $83.5 million or diluted earnings of $0.57 per share in 2003. The increase in the Company´ s results for 2005 is due mainly to an increase in metal prices of our products, which was partially compensated with a re- duction in the copper sales and silver. Price of copper during 2005 in the London Metal Exchange (LME) and the New York Commodity Exchange (COMEX) was of $1.67 and $1.68 per pound of copper respectively, compared to $1.30 and $1.29 in 2004. The recent surge in price of molybdenum, principal by-product of SCC, has had a significant effect on the Company´s traditional calculation of cash cost and its comparability with prior periods. Accordingly, the Company is presenting cash costs with and without the inclusion of all by-products reve- nues. SCC excludes from its calculation of operating cash cost, depreciation, amortization and depletion, exploration, workers´ participation provisions and items of a non-recurring nature. The Company´s operating cash cost, as defined, for the three years ended December 31, is as follows: Cash cost per pound of copper produced Cash cost per pound of copper produced (without by-products revenue) 2003 2005 2004 (in cents per pound) 0.182 0.026 0.435 1.005 0.852 0.743 Net Sales: Net sales in 2005 were $4,112.6 million, compared with $3,096.7 million in 2004 and $1,576.6 million in 2003. Sales increased in 2005 by $1,015.9 million, a 32.8% increase over the previous year, mainly due to higher copper, molybdenum, silver and zinc and higher sales of molybde- num and zinc. Prices: Sales prices for the Company´ s metals are established principally by reference to prices quoted in the London Metal Exchange (LME), the New York Commodity Exchange (COMEX) or published in Platt´s Metals Week, for dealer oxide mean prices for molybdenum. Toquepala concentrator, Peru page 24 ANNUAL REPORT page 25 SOUTHERN COPPER CORPORATION Net sales in 2005 were $4,112.6 million, compared with $3,096.7 million in 2004 and $1,576.6 million in 2003. Sales in- creased in 2004 by $1,015.9 million, a 32.8% increase over the previous year Price/Volume data Average Metal Prices Copper (per pound – LME) Copper (per pound – COMEX) Molybdenum (per pound) Zinc (per pound – COMEX) Silver (per ounce – COMEX) 2005 2004 2003 $ 1.67 $ 1.68 $ 31.05 $ 0.63 $ 7.32 1.30 $ 1.29 $ $ 15.95 $ 0.48 $ 6.68 $ 0.81 $ 0.81 $ 5.21 $ 0.38 $ 4.89 Sales volume (in thousands) Copper (pounds) Molybdenum (pounds) (1) Zinc (pounds) Silver (ounces) 2005 1,540,100 32,154 294,141 19,756 2004 1,564,548 31,636 266,587 20,212 2003 1,456,118 27,553 269,442 19,498 Leaching, Solvent, Extraction & Electrowinning plant (SX/EW) in Toquepala Unit, Peru (1) The Company’s molybdenum production is sold in the form of concentrates. Volume represents pounds of molybdenum contained in concentrates. page 24 ANNUAL REPORT page 25 SOUTHERN COPPER CORPORATION Dividends and Capital Stock Night view, Cuajone concentrator, Peru The Company paid dividends to stockholders of $853.9 million or $5.80 per share in 2005, compared to $191.4 million or $1.30 per share in 2004 and $45.4 million or $0.31 per share in 2003. Distributions to the investment shares minority interest were $5.3 million, $1.5 million and $0.4 million in 2005, 2004 and 2003, respectively. On January 27, 2006, a transaction dividend of $2.75 per common share was declared and was paid on March 3, 2006, to shareholders of record at the close of business on February 15, 2006. The Company´ s dividend policy continues to be reviewed at each Board of Directors´ meeting, taking into consideration the current intensive capital investment program, and cash flow generated from operations. page 26 ANNUAL REPORT [ the future is globall ] fifth page 27 SOUTHERN COPPER CORPORATION page 26 ANNUAL REPORT page 27 SOUTHERN COPPER CORPORATION Environmental Affairs Peruvian Operations View of tailings dam, La Caridad Unit, Mexico Some of the Company’s operations are subject to applicable Peruvian en- vironmental laws and regulations. The Peruvian government, through its Ministerio de Energia y Minas (the Ministry of Energy and Mines, or MEM) conducts certain annual audits of the Company’s Peruvian mining and metallurgical operations. Through these environmental audits, matters re- lated to environmental commitments, compliance with legal requirements, atmospheric emissions and effluent monitoring are reviewed. The Company believes that it is in material compliance with applicable Peruvian environ- mental laws and regulations. In accordance with Peruvian regulations, in 1996 the Company submit- ted its Programa de Adecuacion y Manejo Ambiental (the Environmental Compliance and Management Program, known by its Spanish acronym, PA M A) to the MEM. A third-party environmental audit was conducted in order to elaborate the PAMA. The PA M A applied to all current operations that did not have an approved environmental impact study at the time. SCC’s PA M A was approved in January 1997 and contains 34 mitigation measures and projects necessary to (1) bring the existing operations into compliance with the environmental standards established by the MEM and (2) identify areas impacted by operations that are no longer active and need to be reclaimed or remediated. By the end of 2004, 31 of these projects were completed, including all PAMA commitments related to the Company’s operations in Cuajone and Toque- pala. The three pending PAMA projects all relate to the Ilo smelter operations. The primary areas of environmental concern are the smelter reverberatory slag eroded from slag deposits up until 1994, and atmospheric emissions from the Ilo smelter. The slag remediation program is progressing as scheduled and is expected to be completed by 2007. With respect to the smelter emissions, the third phase of the Ilo smelter modernization has started and is scheduled to be completed by 2007. In July 2003, the Company awarded the contract to provide the technology and basic engineering for the modernization of the Ilo smelter to Fluor Chile S.A. and Xstrata Plc (formerly M.I.M. Holdings Limited). The Company believes that the selected technology complies with the current environmental regulations. This project is the Company’s largest and most important short-term capital investment project and is estimated at $500 million, including $389 million expended through December 31st, 2005. Beginning in 1995 and continuing while this project is under construc- tion, the Company has established an emissions curtailment program that has allowed the Company to comply with the annual sulfur dioxide air quality standard (established by the MEM in 1996) in the city of Ilo. page 28 ANNUAL REPORT page 29 SOUTHERN COPPER CORPORATION On October 14, 2003, the Peruvian Con- gress published a new law announcing future closure and remediation obliga- tions for the mining industry. The law was amended on May 28, 2004 and again on May 8, 2005. The current modification establishes that mining companies must submit their mine closure plans within one year of publi- cation of final regulations. On August 16, 2005 final regulations were pub- lished and the Company has initiated the preparation of the required mine closure plan. As part of the law and the qualifying regulations the Company is also required to engage an indepen- dent consulting entity to prepare the mine closure plan. The final plan, which is required by August 2006, is subject to approval by MEM and open to public discussion and comment in the area of Company operations. Additionally, the law requires companies to provide financial guarantees to insure that remediation programs are completed. The Company anticipates that this law will increase its asset retirement obligations and require future expen- ditures and amortizations over the life of the mine to satisfy requirements. The The Company’s operations, close to the Mexican-American border, are also subjected to the Cooperation Agreement for the Protection and Improvement of the Environment in the Border Zone Company believes the liability for these asset retirement obligations can- not currently be measured, or reasonably estimated, until the Company has substantially completed its mine closure plan and is reasonably confident that it will be approved by MEM in its most material respects. However, the Company has made a preliminary estimate of this liability and has recorded such amount in its 2005 financial results. The Company foresees significant environmental capital expenditures in 2006 and continuing into 2007. Dur- ing 2005, $234.6 million of environmental capital expenditures were made on the smelter project. Operations in Mexico Some Company’s operation activities are subject to federal, state and mu- nicipal environmental laws, official Mexican standards and regulations for protecting the environment, including regulations concerning water supply, water pollution, sound pollution, and solid waste and hazardous waste dis- posal. Some of these laws and regulations are relevant on matters related to Company’s facilities in San Luis Potosi. The main legislation applicable to the Company’s Mexican operations is the General Law for Ecologic Balance and Environmental Protection. This is a fed- eral law and is controlled by the Federal Environmental Protection Attorney’s Office (PROFEPA). PROFEPA monitors compliance with environmental legis- lation and enforces Mexican environmental laws, regulations and official standards. If necessary, PROFEPA can file administrative procedures against companies that violate environmental legislation, which in extreme cases can result in temporary or permanent close of facilities that do not comply with provisions, revocation of operation licenses and/or other sanctions and fines. According to the Federal Criminal Code, PROFEPA must also inform the corresponding authorities about environmental crimes. The Company’s operations, close to the Mexican-American border, are also subject to the Cooperation Agreement for the Protection and Improve- ment of the Environment in the Border Zone, or La Paz Agreement, signed in 1983 by the United States and Mexico, aiming at improving air quality along the border. The La Paz Agreement establishes standards for sulfur dioxide emissions and requires installing and maintaining emissions moni- toring systems and information recording in our smelters in the northwest of Mexico. To comply with sulfur dioxide emission standards, enacted by the Environment Law and the La Paz Agreement, Minera Mexico closed in December 1999 the Cananea smelter and the Monterrey operations. The Mexican environmental regulations has become more strict in the last de- page 28 ANNUAL REPORT page 29 SOUTHERN COPPER CORPORATION • The San Martin Unit, located in the state of Zacatecas, started the certi- fication process as a Clean Industry. • In the Copper Plant located in the state of San Luis Potosi, as follow-up to a volunteer proposal of improving the environment, the Environmental and Natural Resources Secretariat authorized the activities to remediate soils and improve the control of emis- sions submitted by the Company. The Company has uninterruptedly worked to follow up the Actions Detailed Plan derived from said authorization. • In the state of San Luis Potosi, there is a tree nursery, thanks to which 41,371 trees were distributed as follows: 6,680 for IMMSA division’s properties; 2,009 for the division employees and laborers; 11,210 for community support; 7,149 to sup- port schools; 4,696 for the San Luis Potosi Municipality and 2,276 for supporting the Environmental and Natural Resources Secretariat and other governmental agencies. At the end of 2005, the nursery had 50,820 developing trees. cade and we expect this trend to go on and to be influenced by the environ- mental agreement signed by Mexico, the United States and Canada related to the NAFTA, in February 1999. However, the Company’s management does not consider that continuing compliance with the Mexican Federal or State Environmental Laws will have a material adverse effect on the Company’s business, facilities, operation results, financial situation or that it would result in material capital expenses. Even though the Company considers that all its facilities comply with environmental, mining and other laws and regulations, the Company cannot ensure that stricter provisions or that the current laws and regulations or adoption of new laws and regulations will not have a material adverse effect on the businesses, properties, operation results, financial condition or prospects of the Company. Due to the proximity of some of the facilities of our Mexican operations subsidiaries to urban areas, the authorities may implement some measures that could impact or restrict the operation of said facilities. Any use of force to close any facility may have an adverse effect in the relevant subsidiary’s operational results. The Company has established broad environmental conservation programs at its mining facilities of Peru and Mexico. The Company’s environmental programs include water recovery systems to preserve the resource and mini- mize pollution of nearby water sources, reforestation programs to stabilize surfaces of tailings dams and implementing clean technology at the mines to reduce dust emissions. IMMSA Division • At the Zinc Refinery located in the San Luis Potosi state, we requested the Environmental and Natural Resources Secretariat (SEMARNAT), to start a procedure to declare the areas around the refinery as Safeguard Interme- diate Zone (ZIS). The ZIS is defined as a safety area located within a land stretch that is a buffer between some establishments and nearby popula- tion centers. • As for the Angangeo Project, the Environmental Natural Resources Secre- tariat granted the Environmental Impact Authorization. • The Santa Barbara Unit, located in the state of Chihuahaua, is in the pro- cess of obtaining the Clean Industry certificate under the Federal Environ- ment Protection Attorney’s Office (PROFEPA). page 30 ANNUAL REPORT page 31 SOUTHERN COPPER CORPORATION • Aiming at preserving fauna that, eventually, approaches our facili- ties, the Zinc Plant in San Luis Potosi installed a new and modern system called Fire Fly, which, through its high technology, helps to prevent mi- grating birds to approach final waste disposal sites. CANANEA AND LA CARIDAD • In 2005, we started the Clean In- dustry certification process for the Cananea mine and La Caridad mine Concentrator Plants, as well as for the molybdenum plant in La Caridad. We also registered the Action Plan before the Federal Environmental Protection Attorney’s Office after having performed the corresponding environmental audits. Additionally, we started a Voluntary Environmental Audit process at the Cananea Con- centration Plant. • We concluded Cananea’s unit internal reforestation by planting 2,500 trees. This is the company that contributes more trees in the country to the program that the National Forestry Commission (CONAFOR) cur- rently promotes. • As for reforestation, we continued with the activity of linking every mu- nicipality within the mining units’ and plants’ area of influence. During 2005, 13 municipalities of Sierra de Sonora were reforested with a total of 1,410,000 produced and planted trees. To achieve this, we were aided by the National Defense Secretariat and the National Forestry Commission. Currently, 1,100,000 trees are developing in the nursery and we have scheduled to increase production to 1,550,000 trees for year 2006. • We got the Clean Industry certification from the Natural Gas Transpor- tation System (Gasoducto Douglas – Nacozari) facilities, within the Environmental Audit Program of the Federal Environmental Protection Attorney’s Office. Likewise, audits are being carried out at our facilities at La Caridad (Hydrometalurgy Plant, Wire Rod Plant, Precious Metals Plant, Concentrator Plant, Molybdenum Plant and Lime Plant) all of these in the state of Sonora. • We coordinated the Clean Community program by participating in talks given at elementary and secondary schools and by handing out garbage collecting containers. These activities took place in 6 cities of the state of Sonora. Flotation cells in concentrator, La Caridad Unit, Mexico • Currently, we actively participate in the Technical Advisor Council and the Task Force for protecting and preserving the Valle de los Cirios flora and page 30 ANNUAL REPORT page 31 SOUTHERN COPPER CORPORATION In 2005, we started the Clean Industry certification process for the Cananea mine and La Caridad mine Concentrator Plants, as well as for the molybdenum plant at La Caridad Water recovered from the tailings dam, La Caridad Unit, Mexico fauna in Baja California. We have recently worked on the Reserve Man- agement Plan and we have been able to get the El Arco project area and concession areas to be rated as special utilization zones, thus permitting mining activities. GENERAL MEXICAN DIVISION ENVIRONMENTAL ISSUES • The Mexican division has a Qualifications System aimed at improving our human resources performance. In 2005, we supported the Human Re- sources Directorate by giving the Qualification Systems courses to all the personnel of the Mexican offices, at IMMSA division managerial level em- ployees and to employees of the Cananea and La Caridad units. Courses which dealt with Ecologic Awareness. • Taking into account the importance of developing an environmental culture, together with the Information Technology Directorate, we repro- duced the intranet page capture and design protocol on Environmental Affairs for the Mexican SCC division. page 32 ANNUAL REPORT [ the future is globall ] sixth page 33 SOUTHERN COPPER CORPORATION page 32 ANNUAL REPORT page 33 SOUTHERN COPPER CORPORATION General Information, Description of Operations and Development Information related to its constitution and its registration in the Public Registry: Smelter operations in Ilo Metalurgical Complex, Peru See: Brief historical review from the constitution of the Company on page 37. Brief Description: Southern Copper Corporation (SCC) is a copper, molyb- denum, zinc and silver integrated producer. All our mining, smelting and refining facilities are located in Peru and Mexico, and we carry out explora- tion in said countries and in Chile. Our activities make us the largest min- ing company in Peru and Mexico. We are the largest publicly traded copper mining company in the world based on reserves and the fifth largest cop- per mining company in the world based on 2004 sales. Our operations in Peru comprise mining, milling and flotation of minerals to produce copper and molybdenum concentrates. The smelting of copper concentrates pro- duces blister copper and blister raffinate for producing cathodes. We also produce copper cathodes by using the SX/EW technology. We operate the Cuajone and Toquepala mines in the heights of the Andes, approximately 984 kilometers southeast of the city of Lima, Peru. We also operate a smelter and refinery west of the mines in Toquepala and Cuajone, in the city of Ilo, Peru. Our operations in Mexico are carried out by Minera Mexico S.A. de C.V., a subsidiary we bought on April 1, 2005. Minera Mexico mainly develops ac- tivities of mining and processing of copper, zinc, silver, gold, lead and mo- lybdenum. Minera Mexico operates through subsidiaries that are grouped in three separate units. Mexicana de Cobre S.A. de C.V. (together with its subsidiaries, Mexcobre Unit), it operates an open pit mine, a copper con- centrator, a SX/EW plant, a smelter, two refineries and a wire rod plant. Mexicana de Cananea S.A. de C.V. (together with its subsidiaries, Cananea Unit) operates an open pit mine located in one of the areas with more cop- per reserves in the world, a copper concentrator and two SX/EW plants. Industrial Minera Mexico S.A. de C.V. (Immsa) and Minerales Metalicos del Norte S.A. (together with Immsa and its subsidiaries, Immsa Unit) operate five underground mines producing zinc, lead, copper, silver and gold, and a coal and coke mine and several industrial processing facilities for zinc and copper. We use advanced mining and processing methods, including global po- sitioning systems (GPS). Our operations are highly integrated vertically, which permits us to manage the whole production process, from mining to refined copper and other products, as well as transportation and logistics, by using our own facilities, employees and equipment. page 34 ANNUAL REPORT page 35 SOUTHERN COPPER CORPORATION Group SCC, indirectly, makes part of Grupo Mexico S.A. de C.V. who owns 100% of Americas Mining Corporation (AMC) share- holding. Name of the company SEVERAL ACTIVITIES Location Inscription in the RPMV % 1) Grupo Mexico, S.A. de C. V. 2) 3) Grupo Mexico Servicios, S.A. de C.V. Mexico Proyectos y Desarrollo, S.A. de C.V. RAILROAD ACTIVITIES Infraestructura y Transportes Mexico, S.A. de C. V. Grupo Ferroviario Mexicano, S.A. de C.V. Intermodal Mexico, S.A. de C.V. MINING ACTIVITIES Grupo Minero Mexico Internacional, S.A. de C.V. Americas Mining Corporation (AMC) ASARCO LLC Southern Copper Corporation (SCC) Americas Sales Company, Inc. Minera Mexico, S. A. de C. V. SDG Mexico Apoyo Administrativo, S.A. de C.V. Industrial Minera Mexico, S.A. de C. V. Mexicana de Cananea, S.A. de C. V. Mexicana de Cobre, S.A. de C. V. Mexicana del Arco, S.A. de C.V. Mexico Compañia Inmobiliaria, S.A. Minerales Metalicos del Norte, S.A. Minera Mexico Internacional, Incorporated Servicios de Apoyo Administrativo, S.A. de C.V. Western Copper Supplies Global Natural Resources, Inc. Logistics Services Incorporated (LSI) Multimines Corporation Multimines Insurance Company, Ltd. Southern Peru Limited Southern Peru Copper Corporation, Agencia en Chile Southern Peru Copper Corporation, Sucursal del Peru Compañia Minera Los Tolmos, S.A. 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) 27) 28) 29) 30) NOTE: 1.- Includes 82.69% of patrimony and 16.60% of common Investment Shares. Mexico Mexico Mexico Mexico Mexico Mexico Mexico USA USA USA USA Mexico Mexico Mexico Mexico Mexico Mexico Mexico Mexico USA Mexico USA USA USA USA Bermudas USA Chile Peru Peru 100.0 99.9 100.0 74.0 100.0 99.8 99.99 100.0 75.1 100.0 99.95 100.0 99.99 99.99 99.97 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.291 97.31 page 34 ANNUAL REPORT page 35 SOUTHERN COPPER CORPORATION Corporate Capital and Common Stock Harvest of cathodes at the Ilo refinery, Peru The authorized number of shares is Issued and Paid-In Capital: Common Shares Nominal Value of Common Shares Total number and percent of shares Americas Mining Corporation Common Shares Total Shares shares 167,207,640 147,228,025 $ 0.01 Interest 75.1% 24.9% 100.0% Authorizations Obtained for the Development of the Business Operations in Peru 1. Toquepala Concentrator: Authorized by Directorial Resolution No.455- 91-EM/DGM/DCM dated July 5, 1991, which approved the operation of the Toquepala Concentrator. The resolution granted 240 hectares of surface land and authorized a throughput of 39,000 Metric Tons/Day. Based on Report No. 413-97-EM/DGM/DPDM dated July 7, 1997 the Director General of Mining authorized the expansion of the Toquepala Concentrator to a 43,000 Metric Tons/Day throughput. page 36 ANNUAL REPORT page 37 SOUTHERN COPPER CORPORATION Based on Report N° 547-2002-EM/DGM/DPDM, dated November 6, 2002, the Director General of Mining authorized the expansion of the Toquepala Concentrator to a capacity of 60,000 metric tons/day. 2. Botiflaca Concentrator at Cuajone: Authorized by Directorial Resolu- tion No. 150-81-EM/DCM dated August 14, 1981, which approved the operation of the Cuajone Concentrator. The resolution granted 56 hectares of surface land. Based on Report No. 266-99-EM/DGM/DPDM dated July 20, 1999 the Director General of Mining authorized the expansion of the Cuajone Concentrator to a 87,000 metric tons/day throughput. 3. Toquepala Leaching Plant (SX/EW): Authorized by Directorial Resolu- tion No. 166-96-EM/DGM dated May 7, 1996, which approved the operation of the Toquepala SX/EW Plant. The resolution granted 60 hectares of surface land and authorized a throughput of 11,850 met- ric tons/day. Based on Report No. 663-98-EM/DGM/DPDM dated November 10, 1998 the Director General of Mining authorized the expansion of the Toquepala SX/EW Plant to a 18,737 metric tons/day throughput. 4. Cuajone Leaching Plant (LX/EW): Authorized by Directorial Resolu- tion No.155-96-EM/DGM dated May 6, 1996, which approved the operation of the Cuajone Leaching Plant. The resolution granted 400 hectares of surface land and authorized a throughput of 2,100 metric tons/day. 5. Ilo Smelter: Authorized by Directorial Resolution No. 0078-69-EM/ DGM dated August 21, 1969, which approved the operation of the Ilo Smelter. The resolution authorized a production of 400 Short Tons/ Day of blister copper. Based on Report No.204-2000-EM-DGM-DPDM dated June 20, 2000 the Director General of Mining authorized the expansion of the Ilo Smelter to a 3,100 metric tons/day throughput of copper concen- trates. 6. Ilo Refinery: Authorized by Report No. 056-94-EM/DGM/DRDM dated page 36 ANNUAL REPORT page 37 SOUTHERN COPPER CORPORATION May 27, 1994 the Director General of Mining authorized the operation of the Ilo Copper Refinery at 190,000 metric tons/year throughput of blister copper. Based on Report No. 506-98-EM/DGM/DPDM dated September 2, 1998 the Director General of Mining authorized the expansion of the Ilo Copper Refinery to a capacity of 658 metric tons/day throughput of blister copper. Based on Report N° 080-2002-EM-DGM/DPDM, dated March 13, 2002, the Director General of Mining authorized the expansion of the Ilo Copper Refinery to a capacity of 800 metric tons/day. 7. Sulfuric Acid Plant: Authorized by Directorial Resolution No. 024-96- EM/DGM dated January 19, 1996 the Director General of Mining au- thorized the operation of the Sulfuric Acid Plant at a production rate of 472 metric tons/day. Based on Report No. 313-98-EM/DGM/DPDM dated May 18, 1998 the Director General of Mining authorized the ex- pansion of the Ilo Sulfuric Acid Plant to a capacity of 300,000 metric tons/year production. 8. Coquina Wash Plant and Sea shell Concentrator authorized to operate by Directorial Resolution Nº 110-93-EM/DGM of August 3, 1993. The plant processes 2068 metric tons/day of raw material (coquina) recov- ered from nearby mines. Seashell is produced separating sand and other materials from the coquina using sea water washing screens. Operations in Mexico La Caridad Mine La Caridad Concentrator started operating in June 1979, with a milling capacity of 72,000 metric tons per day. La Caridad Concentrator expanded its capacity in 1986, to 90,000 metric tons per day. The Molybdenum Plant started operating in June 1982, with a capacity to produce 2000 metric tons of Copper-Molybdenum Concentrate per day. page 38 ANNUAL REPORT page 39 SOUTHERN COPPER CORPORATION The La Caridad SX/EW Plant started operating in May 1995, with a capacity of 60 metric tons per day. The La Caridad Metallurgic Complex The La Caridad Smelter started oper- ating in July 1986, with a production capacity of 493 metric tons of anode per day. The La Caridad Smelter expanded its capacity in March 1997, to 932 metric tons of anodes per day. The La Caridad Refinery started oper- ating in July 1997, with a production capacity of 493 metric tons of cathodic copper per day. The La Caridad Refinery expanded its capacity in January 1998, to 822 metric tons of cathodic copper per day. The La Caridad Precious Metals Plant started operating in May 1999, with a production capacity of 43,836 silver ounces per day, 247 gold ounces per day, and 342 selenium kg per day. The La Caridad Wire Rod Plant started operating in April 1998, with a produc- tion capacity of 300 metric tons of wire rod per day. The La Caridad Wire Rod Plant expanded its capacity in March 2000 to 411 metric tons of wire rod per day. Cananea Mine The Cananea Concentrator started operating in September 1986, with a ca- pacity of 62,500 metric tons per day. The Cananea Concentrator expanded its capacity in 1988, to 70,000 metric tons per day. The Cananea Concentrator expanded its capacity in 1998, to 76,700 metric tons per day. The Cananea SX/EW I Plant started operating in 1980, with a capacity of 30 metric tons per day. The Cananea SX/EW II Plant started operating in 1989, with a capacity of 60 metric tons per day. The Cananea SX/EW II Plant expanded its capacity in 2001, to 120 metric tons per day. Underground Mines 1.- The Santa Barbara Unit has a milling capacity of 6,000 metric tons of ore per day. 2.- The Santa Eulalia Unit has a milling capacity of 1,450 metric tons of ore per day. 3. The San Martin Unit has a milling capacity of 4,400 metric tons of ore per day. 4.- The Charcas Unit has a milling capacity of 4,000 metric tons of ore per day. 5.- The Taxco Unit has a milling capacity of 2,000 metric tons per day. 6.- The Pasta de Conchos Unit has a washing capacity of 3,600 metric tons per day. 7.- The Zinc Refinery has capacity to produce 285 refined zinc metric tons per day. 8.- The San Luis Potosi Copper Smelter has production capacity of 66 blister copper metric tons per day. page 38 ANNUAL REPORT page 39 SOUTHERN COPPER CORPORATION Description of Operations and Development Regarding the Issuing Entity Purpose The purpose of Southern Copper Corporation (SCC) is to engage in activi- ties allowed by the laws of the State of Delaware. Its main activity is to extract, mill, concentrate, smelt, treat, prepare for market, manufacture, sell, exchange and, in general, to produce and negotiate for sales of cop- per, gold, silver, lead, zinc, iron and any other class of minerals and ma- terials or other materials, effects and goods of any nature or description; as well as to explore, exploit, sample, examine, investigate, recognize, locate, appraise, buy, sell, exchange, etc., mining concessions and min- ing deposits. SCC belongs to the CIUU 1320 group. The term of duration of the Company is indefinite. Brief historical review from the constitution of the Company The Company was organized on December 12, 1952, according to the Laws of the State of Delaware of the United States of America, under the original denomination of Southern Peru Copper Corporation, which was renamed on October 11, 2005, to Southern Copper Corporation (SCC). In 1954, SCC established a Branch in Peru to carry out mining activities in this country. The Branch was established under public instrument certified by Public Notary from Lima, Dr. Ricardo Fernandini Arana, on November 6, 1954. The Branch is registered in the Electronic Record No. 3025091 of the Ju- ridical Entities Registry Office of Lima and Callao (before: Entry N° 384 of the Record N° 2447 of the Mining Registry of Natural and Juridical Entities of the Public Mining Registry). Actions following company incorporation: Capital increase: By Public Deed dated May 31, 1995, signed before the notary public of Lima, Dr. Carlos A. Sotomayor Bernos, registered in Card 2447 of the Pub- lic Mining Registry, the Branch capital increase was formalized. It was made through money contribution by the Company in favor of its Peru Branch and by the owners of labor shares, pursuant to Legislative De- cree No. 677. The capital contribution made by the Company was aimed at increasing the capital allotted to the Branch by the headquarters and registered in Peru. The capital contri- bution made by the Labor Shares (to- day Investment Shares) owners was assigned to the Labor Shares account of the Branch for issuing new Labor Shares. Part of the money contribution made by the Company in favor of its Branch and by the Labor Shares owners was applied as a capital premium to the Resident account as Additional Capi- tal. Exchange of Labor Shares for Common Shares: Dated September 7, 1995, Southern Copper Holding Company was also incorporated pursuant to the Laws of the State of Delaware, for the purpose of acting as a holding company that owner of all Southern Peru Copper Cor- poration shares, and of performing an exchange of the shares that were then called Labor Shares (today Investment Shares) issued by the branch in Peru, and delivering to the owners of labor shares a certain number of common shares issued by SPCC in the United States. As a consequence of this share exchange, ex-owners of Labor Shares acquired 17.31% of SPCC’s Capital, and this company acquired ownership of 80.77% of Labor Shares (today In- vestment Shares). page 40 ANNUAL REPORT page 41 SOUTHERN COPPER CORPORATION On December 31, 1995, Southern Peru Copper Corporation changed its corpo- rate name for Southern Peru Limited, and Southern Copper Holding Company changed its corporate name to Southern Peru Copper Corporation. As a consequence of this corporate name change, the mining activities of the company in Peru started being performed under the name of Southern Peru Limited, Peru Branch (SPL). On December 31, 1998, the merger between Southern Peru Copper Cor- poration and Southern Peru Limited was agreed. The first company ab- sorbed the second one and assumed all its assets and liabilities, including the Branch in Peru. This merger did not imply any change to the share per- centage in the corporate capital or in the Patrimonial Participation Account (investment shares), which were kept unchanged. As a consequence of the merger, the mining activities of the corporation in Peru were again carried out under the name of Southern Peru Copper Corpo- ration, Peru Branch, or the abbreviated name of Southern Peru and or the acro- nym SPCC. Change of Economic Group: In November 1999, Grupo Mexico S. A. de C. V., a company incorporated pursuant to the Laws of the Republic of Mexico, acquired in the United Stated 100% of ASARCO, Inc. shares, the main shareholder of Southern Peru Cop- per Corporation at that time. In this way, SPCC became a subsidiary of Grupo Mexico, which keeps its shareholding through American Mining Company (AMC). Acquisition of Minera Mexico, S.A. de C.V. (MM) and other corporate changes: SCC shareholders, in a shareholder extraordinary meeting dated March 28, 2005, approved the issuance of Common Shares and required actions related to the acquisition of MM, a company incorporated pursuant to the Laws of the Republic of Mexico. This transaction was approved by more than 90% of the issued shares of the capital of SCC. To acquire MM, SCC issued 67,207,640 shares in exchange for MM shares. Once the shares related to the acquisition were issued, Americas Mining Corporation increased its share in SCC from 54.3% to approximately 75.1%. Change in the Articles of Incorporation Deed: On March 28, 2005, following Board of Directors recommendations, SCC shareholders approved in an extraordinary meeting the amendments to the Certificate of Incorporation, changing the composition and obligations of some Board committees. Special Independent Director: The changes to the Certificate of Incorporation require the Board to include a certain number of special independent directors. A special independent director is a person who (i) complies with the independence standards of the New York Stock Exchange (or any other stock exchange or association in which Common Shares are listed) and (ii) is appointed by the Special Nomi- nation Committee of the Board. A special independent director may only be removed from the Board upon a justified cause. The number of special independent directors on tha Board at any time shall equal (a) the total number of directors on the Board multiplied by (b) the per- centage of Common Shares all the shareholders (that are not Grupo Mexico and its affiliates) have, rounding up to the following whole number. Notwith- page 40 ANNUAL REPORT page 41 SOUTHERN COPPER CORPORATION standing the above mentioned, the total number of persons appointed as special independent directors (not belonging to Grupo Mexico) cannot be less than two or more than six. Special Nominating Committee: To appoint persons as candidates for the election of special independent directors and cover special independent directors vacancies, the amendment to the Certificate of Incorporation requires the Company to appoint a Special Nominating Committee. The Special Nominating Committee must be made up by three SCC directors, two (2) of which are currently Mr. Luis Miguel Palomino and Mr. Carlos Ruiz Sacristan (each one an Initial Director and, together with their successors, the Special Designees) and any other director, who was initially Mr. Oscar Gonzalez Rocha and is now Mr Armando Ortega Gomez, as appointed by the Board or the Board Designee. The Board Designees will be annually selected by the Board. The Special Designees will be annually se- lected by the member of the Board who are special independent directors or Initial Directors. Only the special independent directors can cover vacancies in the Special Nominating Committee. Any member of the Special Nominating Committee can be removed at any time by the Board with a justified cause. The unanimous vote of all the members in the Special Committee will be nec- essary to adopt any agreement or to take any action. Notwithstanding the above mentioned, the Special Nominating Committe’s power to name special independent Directors Designees is subjected to the shareholders’ right to appoint directors pursuant to the by-laws. The amendment provisions referring to the special independent directors may be modified only with the favorable vote of the majority of the Common Shares owners (calculated without applying qualified majority voting right) that are not Grupo Mexico and its affiliates. Transactions with affiliates: The amendments to the Certificate also prohibit the Company to undertake important transactions with affiliates, except if the transaction has been reviewed by a committee of at least three Board members, each one of which will comply with the New York Stock Exchange (or any other stock exchange or association on which Common Shares are listed) indepen- dence regulations. An important transaction with affiliates is defined as an important transaction, commercial negotiation or financial participation in any transaction, any series of transactions between Grupo Mexico or one of its affiliates (different from the Company or any of the subsidiaries), on the one hand, and the Company or one of the subsidiaries, on the other hand, comprising a total consideration of more than $10,000,000.00. The Company submitted the Amend- ment of its Certificate of Incorporation to the Secretary of State of the State of Delaware, and it came into effect on March 31, 2005 at 11:59 P.M. Change of corporate name and other corporate changes: On September 20, 2005, by written consent instead of an extraordinary shareholder meeting, the majority shareholder approved the corporate name change of Southern Peru Cop- per Corporation to Southern Copper Corporation or SCC. The change was adopted because the new corporate the name reflects more precisely Company’s operations outside the Republic of Peru after its acquisition of Minera Mexico and SCC’s presence in the Republic of Chile through the acquisition of some mining exploration concessions. Additionally, on the same date, the majority shareholder approved an amendment of our Certificate of Incor- page 42 ANNUAL REPORT page 43 SOUTHERN COPPER CORPORATION poration to remove other provisions in our Certificate related to our Class A Common Shares that were formerly in circulation, which were converted to Common Shares on May 19, 2005, and to change the number of corporate directors from fifteen to a number that will be regularly established follow- ing agreement of the majority Board members, provided that the number of directors will not be less than six or more than fifteen. The Certificate amendment was sub- mitted to the Secretary of State of the State of Delaware, and came into effect on October 11, 2005. Peru Branch Name: Generally, the change of corporate name of the parent should comprise the corresponding change of name of the ancillary organizations linked to it, as is the case of the Peru Branch through which the Corporation develops its min- ing activities in Peru. After consulting with Peruvian lawyers, the Board of Directors, taking into con- sideration the net worth and assets importance of the Branch, the need to continue acknowledging the position of the Peruvian Branch with its local and international copper clients, the need to preserve its prestige and its position and good name in the copper market, and the need to prevent any possible cli- ent loss, as well as to guarantee the revenue flow from sales, its financial and economic revenues and its solvency, the Board of Directors agreed to maintain the original corporate name of the Peru Branch, that is, Southern Peru Copper Corporation, Peru Branch, or the abbreviated name Southern Peru and/or the acronym SPCC. Changes in the Certificate of Articles of Incorporation and By-laws: Dated January 26, 2006, the Board approved amendment to Southern Cop- per Corporation’s by-laws aiming at removing the provisions related to Class A Common Shares, among other changes. These changes will be submitted to approval by the shareholders at the annual shareholder meeting to take place in April 2006. SCC is, indirectly, part of Grupo Mexico S.A. de C.V. who owns 100% of Americas Mining Corporation (AMC) shareholding, owner of 75.1% of SCC shares. Information about plans and investment policies See Expansion and Modernization Program on page 9. Relationship between the Issuer and the Government On November 20, 1996, SCC and the Peruvian Government (Ministry of En- ergy and Mines) signed a contract that will remain effective until the year 2010 which guarantees the tax stability and the availability of exchange to foreign currency of the Branch’s earnings related to the operation of the SX/ EW plant at Toquepala and at the Solvent Extraction (SX) operation in Cua- jone. Also, on April 18th, 1995, SCC and the Peruvian Government (CONITE) signed a contract that guarantees the availability of foreign currencies, free remittance of dividends outside Peru, among other guarantees related to the acid plant of the Ilo Smelter. SCC obtains revenues for tax credits in Peru for the general sales tax (IGV) paid in connection with the acquisition of capital goods and other goods and services used in its operations, counting these credits as a paid expense in advance. By virtue of this refund, SCC is entitled to credit the amount of the IGV against its Peruvian tax obligations or to receive a refund. page 42 ANNUAL REPORT page 43 SOUTHERN COPPER CORPORATION Optimizing Control System (OCS), as well as, 6 WEMCO-130 Flotation Cells, 4 OK-100 Flotation Cells, 3 OK-50 Flotation Cells, 5 WEMCO- 60 Flotation Cells, 15 Column Cells and 24 WEMCO 42.5m3 Flotation Cells, 72 Agitair 1.13 m3 Cells, 2 Larox Filter Presses (PF60 & PF96), 5 Middling Thickeners, 2 Tailings Thickeners, 3 High-Rate Tailings, 1 Tripper Car, 1 Track tractor CAT D10- R and a recycled water pipe line. 3. 8 trucks Komatsu 930E, each one with a capacity of 290 tm, 5 trucks CAT 793C each one with a capacity of 231 tm, 18 trucks Komatsu 830E each one with a capacity of 218 tm, 9 trucks Titan 2200 each one with a capacity of 181 tm, 1 truck Dresser 445E with a capacity of 109 tm. 4. 3 P&H 4100A shovels with a capac- ity of 73 tm (43 m3 ), 3 P&H 2100BL shovels with a capacity of 23 tons (11.4 m3), 1 Bucyrus 495BI shovel with a capacity of 73 tons (43 m3), 1 P&H 120A electric drill, 2 P&H 100XP electric drills, 2 Bucyrus 49RIII rotary drill, 1 Le Tourneau 1400 front-end loader of 21.4 m3. Mining Safety: Peruvian Operations In 2005, the open pit operations at the mines of Toquepala and Cuajone, as well as operations performed at the Ilo metallurgical complex which in- cludes our Smelter and refinery, were awarded a prize by the Mining Safety Institute - Instituto de Seguridad Minera (ISEM), in recognition for our excellent statistical results in obtaining a reduction of personal accidents and consequently in the Indexes of Frequency Safety, Severity and Acci- dents. Mexican Operations The Mexican Mining Chamber (CAMIMEX), which recognizes those en- terprises with a low accident level, in 2005, granted our metallurgical complex of La Caridad the highest award for safety in the mining industry, which is the Silver Helmet. Likewise, as during the past three years, the concentrator mine of La Caridad obtained the Silver Helmet, this prize was awarded in definitive manner. The mining units Santa Eulalia and Cananea were awarded a diploma for safety for reducing accidents to at least 25%. Generic Description of Main Assets Operations in Peru TOQUEPALA 1. The Toquepala Production Unit comprises three Economic Administra- tive Units: TOQUEPALA 1 comprising 30 mining claims over a 6,698 hectare surface. SIMARRONA including 12 mining claims over 5,800 hectares, and TOTORAL with 18 mining claims distributed over 5,620 hectares. In addition, the Toquepala Production Unit owns 33 mining claims over 22,699 hectares outside the above Economic Administra- tive Units. Overall the Toquepala Production Unit holds 93 mining claims over 40,817 hectares. 2. Toquepala Concentrator Beneficiation Plant, with Milling capacity of 60,000 tons per day, consists of 1 Primary Crusher, 3 Secondary Crushers, 6 Tertiary Crushers, 8 Bar Mills, 24 Ball Mills, 8 Ball Mills for Re-crushing, 1 Ball Mill 9500 HP, 1 distribute control system (DCS), 1 page 44 ANNUAL REPORT page 45 SOUTHERN COPPER CORPORATION CUAJONE 1. The Cuajone Production Unit com- prises two Economic Administrative Units: CUAJONE 1, comprising 23 mining claims over 6,690 hectares; and COCOTEA with 15 mining claims over 7,711 hectares. Additionally the Cuajone Production Unit with 12 mining claims over 8,433 hectares outside the above two Economic Administrative Units. Overall, the Cuajone Production Unit comprises 50 mining claims over a total 22,234 hectare surface. 2. Cuajone Concentrator Beneficiation Plant with Milling capacity of 87,000 tons per day, consisting of 1 primary crushers, 3 secondary crushers, 7 tertiary crushers, 10 primary ball mills, 4 ball mills for re-crushing, 1 vertical mill, as well as 4 flotation cells OK-160, 30 OK-100 flotation cells, 8 column cells, 28 WEMCO flotation cells, 48 Denver flotation cells, 1 Larox Filter Press PF96, 2 Middling Thickeners, 3 Tailings Thickeners, 1 High-Rate Tailings, 1 truck Volvo FM12, recycled water pipe line. 3. 3 trucks Komatsu 930E each one with a capacity of 290 metric tons, 18 trucks Dresser 830E each one with a capacity of 240 metric tons and 8 trucks CAT 793C trucks each one with a capacity of 218 metric tons 4 Wabco trucks each one with a capacity of 109 metric tons. 4. 2 P&H 4100A Shovels with a capacity of 73 metric tons (43 m3), 1 Bucyrus electric shovel 495BII with a capacity of 73 metric tons (43 m3), 1 P&H 2800XPB shovel with a capacity of 54 metric tons, 1 P&H 2100BL Shovel with a capacity of 23 metric tons (11.4 m3), 1 Le Tourneau 1800 front end loader with a capacity of 42 metric tons, 2 electric drills P&H 120A, 1 P&H 100XP electric drill, 1 Bucyrus 49R electric drill, 4 front end loaders CAT 966 of 3.8 m3 of capacity, 3 front end loaders CAT 950 of 3.1 m3 of capacity, 3 front end loaders CAT 988 of 6.1 m3 of capacity, 1 wheel tractor Komatsu. OTHERS One SX/EW plant in Toquepala and one SX plant in Cuajone. The SX Cuajone Plant has 1 primary jaw crusher and 1 secondary cone crusher with a capac- ity of 4,170 metric tons per day, to process Cuajone’s oxides. In addition, 1 agglomeration mill, 1 front end loader, 3 trucks each with a capacity of 109 metric tons for agglomerated ore hauling to the leach dumps. Copper in solution produced in Cuajone is sent to Toquepala through an 8 pipe laid alongside the Cuajone - Toquepala railroad track. The Toquepala Plant has 2 spray systems, 1 for the south dump and 1 for the northwest dump, 4 pregnant solution (PLS) ponds, each with its own pumping system to send the solution to the SX/EW Plant. The plant has 3 lines of SX, each with a nominal capacity of 1,068 m3/hr of pregnant solu- tion an 162 electrowinning cells arranged in two lines, one with 122 cell and the other with 40. ILO 1. Ilo Smelter with a smelting capacity of 1,120,000 tons of concentrate per year. It has 2 reverberatory furnaces, 7 Peirce-Smith converters, 1 El Te- niente Modified Converter and 2 casting wheels. 2. Ilo Refinery – Anode Plant: 2 Basculant Maerz Ovens each with a 400 MT capacity, 1 casting wheel (70 MT / hour) – Electrolitic Plant: with a 280,000 MT / year capacity (Cathodes), 926 commercial cells and 52 page 44 ANNUAL REPORT page 45 SOUTHERN COPPER CORPORATION starting cells. – Precious Metals Plant: with 1 Wenmec Selenium Reac- tor, 2 copella furnace, 22 silver refining cells and 1 hydrometallurgical system for gold recovery. 3. Sulfuric Acid Plant with production capacity of 300,000 metric tons per year. (Average 1,000 x day). 4. Oxygen Plant with a production capacity of 100,000 metric tons per year (Average 272 x day). 5. Coquina Plant with a production capacity of 200,000 metric tons per year of seashells. 6. Lime Plant with a capacity of 80,000 metric tons per year. OTHERS Industrial railroad to haul concentrates and supplies between Toque- pala, Cuajone and Ilo with 30 Locomotives, 264 dump cars, 91 flat cars, 254 boxcars, 8 closed boxcars, 11 closed hopper-type cars, 34 open hopper-type cars, 36 various tank wagons, 24 sulfuric acid tanks, 5 patrol cars. Operations in Mexico CANANEA 1. The Cananea production unit has 46 mining concession titles with a total area of 13,282 hectares. 2. The Cananea Concentrator Plant, with a milling capacity of 76,700 met- ric tons per day, consists of 2 Primary Crushers, 4 Secondary Crushers, 10 Tertiary Crushers, 10 Primary Mills, a Distributed Control System, 5 Mills for Re-grinding, 103 Primary Flotation Cells, 10 Column Cells, 70 Exhaustion Flotation Cells, 7 Thickener, and 2 Drum Filters. 3. There are 41 Trucks for ore hauling with individual capacities that go from 240 to 360 metric tons. 4. For ore loading there are 8 Shovels with individual capacities that go from 39 to 70 metric tons. 5. The mine auxiliary equipment has 9 Drillers, 3 Front Loaders, 5 Motor Graders and 25 Tractors. 6. In the Solvents Extraction and Elec- trowinning (SX-EW) I and II Plants of Cananea, the crushing system No.1 has a capacity of 10,000 tons per day and an apron feeder, a conveyor belt feeder, a system of 7 conveyor belts and a distributor car. System No.2 has a capacity of 15,000 tons per day and has one crusher, a conveyor belt feeder, system of 3 conveyor belts and distributing car. There are 4 irrigation systems for the dumps, and 6 dams for Preg- nant Leach Solution (PLS). Plant I has 3 solvent extraction tanks with a nominal capacity of 960 m3/hr of PLS, and 46 electrowinning cells. Plant I has a daily production capac- ity of 30 tons of copper cathodes with 99.999% purity. Plant II has 5 trains of solvent extraction with a nominal capacity of 3,300 m3/hr of PLS and 176 cells distributed in two bays. Plant II has a daily production capacity of 120 tons of copper cath- odes with 99.999% purity. page 46 ANNUAL REPORT page 47 SOUTHERN COPPER CORPORATION La Caridad 1. La Caridad Production Unit has 244 mining concession titles with a total area of 55,085 hectares. 2. La Caridad Concentrator Plant with a milling capacity of 90,000 metric tons per day consists of 2 Primary Crushers, 6 Secondary Crushers, 12 Tertiary Crushers, 12 Ball Mills, a Master Milling Control System, 168 Primary Flotation Cells, 4 Re-grinding Mills, 60 Cleaning Flotation Cells, 6 Thickener and 6 Drum Filters. 3. There are 33 trucks for ore hauling with individual capacity that go from 170 to 240 metric tons. 4. For ore loading there are 8 Shovels with individual capacities that go from 22 to 52 metric tons. 5. As for mine auxiliary equipment there are 6 Drillers, 3 Front Loaders, 4 Mo- tor Grader and 21 Tractors. 6. La Caridad Solvent Extraction and Electrowinning (SX-EW) Plant has 9 irrigation systems for the dumps and 2 dams of rich copper solution (PLS), a container of heads that permits to combine the solutions of both dams and feed the Solvent Extraction plant with a more homogenous concentration. The plant has 3 trains of solvent extraction with a nominal capacity of 2,070 m3/hr, and 94 electrowinning cells distributed in one single electrolytic bay. The plant has a daily pro- duction capacity of 62 copper cathodes metric tons with 99.999% purity. 7. Lime Plant, located near the Aguaprieta city in the State of Sonora, with a production capacity of 132,000 metric tons per year. La Caridad Metallurgic Complex 1. La Caridad Copper Smelter Beneficiation Plant, with a fusion capacity of 1,000,000 tons of concentrate per year. It has a flash type Concentrates Drier, a Steam Drier , an Outokumpu Flash Furnace, and El Teniente Modified Converted Furnace, 2 Electric Furnaces for the cleaning of slag, 3 Peirce Smith type Converters, 3 raffinate Furnaces and 2 Casting Wheels. 2. La Caridad Copper Refinery Beneficiation Plant, is an electrolytic plant with a production capacity of 300,000 annual tons of copper cathodes with 99.999% percent of purity. It has an Anode Preparation Machine, an Electrolytic Cell House with 1,115 Cells and 32 Releaser Cells, 2 Cathode Stripping Machines, and a Worn Anode Washing Machine. 3. La Caridad Precious Metal Refinery Beneficiation Plant has a Hydromet- allurgic Stage and a Pyrometallurgic Stage, besides a Steam Drier, Dore Molding System Kaldo Furnace, 20 Electrolytic Cells in the silver refinery, 1 Induction Furnace for Silver, 1 Silver Ingot Molding System, 2 Reactors for obtaining fine Gold. 4. La Caridad Wire Rod Transformation Plant has a production capacity of 150,000 annual metric tons of copper wire rod. It consists of an ASARCO Vertical Furnace, 1 Retention Furnace, 1 Molding Machine, 1 Laminating Machine, 1 Coiling Machine and 1 Coil Compacter. 5. Two Sulfuric Acid Plants, the first with an annual capacity of 2,625 metric tons sulfuric acid production at 100%, and the second one with a 2,135 metric tons sulfuric acid production capacity at 100%. 6. Three Oxygen plants, two with a production capacity of 200,000 metric tons per year and the third one with a capacity of 100,000 metric tons per year. page 46 ANNUAL REPORT page 47 SOUTHERN COPPER CORPORATION 7. Two power Turbogenerators that use the kiln residual heat from the fur- nace, the first with a 11.5 Mw capacity and the second with a 25 Mw ca- pacity. Underground Mines (IMMSA) 1. The Underground Mines (IMMSA) Production Unit consists of 6 mining economic units: Santa Barbara, Santa Eulalia, San Martin, Charcas, Taxco and Pasta de Conchos. In total, the Underground Mines (IMMSA) Produc- tion Unit has 244 mining concession titles with a total area of 35,194 hect- ares. 2. The Santa Barbara Mining Unit has 12 Jumbo drilling equipments, and 2 Simba drilling equipments, 33 Scoop Tram types equipment for mucking and loading, 9 Trucks and 6 Locomotives for internal ore haulage, 5 Trucks for external haulage and 6 hoists. For treating the ore, there are 4 Primary jaw crushers, one Secondary and 2 Tertiary, 3 Mills and 3 Flotation Cir- cuits. The unit’s concentrator plant has a milling capacity of 6,000 tons of ore per day. 3. The Charcas Unit works with 9 Jumbo type drilling equipments, 16 Scoop Tram type equipments for mucking and loading, 5 Trucks and 4 Locomo- tive for internal ore haulage and 3 hoists. For treating the ore, there are 2 Primary Crushers, one Secondary, one Tertiary, 4 Mills and 3 Flotation Circuits. The Unit’s concentrator plant has a milling capacity of 4000 ore metric tons daily. 4. In the San Martin Mining Unit, there are 11 Jumbo type drilling equip- ments, and one Simba type drilling equipment, 14 Scoop Tram type equipments for mucking and loading, 13 Trucks for internal ore Haulage and 3 Malacates. For treating the ore, there are 3 Primary jaw crushers, 1 Secondary and 2 Tertiary, 2 Mills and 3 Flotation Circuits. The unit’s con- centrator plant has a milling capacity of 4,400 tons of ore per day. 5. The Taxco Unit has 5 Jumbo type drilling equipments, 12 Scoop Tram type equipment for mucking and loading, 6 Trucks and 4 Locomotives for internal ore haulage and 3 hoists. For treating the ore, there are 2 Primary Crushers, 3 Secondary, 3 Mills and 2 Flotation Circuits. The unit’s concen- trator plant has a milling capacity of 2,000 metric tons of ore per day. 6. In the Santa Eulalia Unit, there are 3 Jumbo type drilling equipment, 9 Scoop Tram type equipment for mucking and loading, 3 Trucks and, 4 hoists, 2 Primary Crushers, 2 mill Crushers, 1 Mill and 2 Flotation Cir- cuits. The unit’s concentrator plant has a milling capacity of 1,450 tons of ore per day. 7. In the Pasta de Conchos Mining Unit within the mine there are 5 continu- ous mining equipment, 6 Transport- ing Cars, 2 Locomotives, 1 Long Wall Equipment and a Cutting Machine. There is also a hoist to transport materials inside the unit. There is a BRADFORD Breaker in the surface to feed the Washing Plant. There is a Set of 21 Coke Ovens, with a capacity of 100,000 Coke tons per year. There is a by-product Plant to clean the coke gas in which Tar, Ammonium Sulfate and Light Crude Oil are recovered. There are also two Boilers to produce 80,000 steam pounds that are used in the by-products Plant. 8. The Electrolytic Zinc Refinery works with a Roaster with a capacity of 85 m2 of roasting area, a Steam Recov- ery Boiler and an acid Plant. There is a Calcines Processing Area with 5 page 48 ANNUAL REPORT page 49 SOUTHERN COPPER CORPORATION leaching stages: Neutral, Hot Acid, Intermediate Acid, Acid, Purified Fourth and Jarosite, as well as two stages for Solution Purifying. There is a Cell House, with two Electrowin- ning Circuits, to finally obtain Metal- lic Zinc. There is an Alloy and Molding area with 2 Induction Furnaces and four Molding Systems, two of them with chains to produce 25 kilograms ingots and two Casting Wheels to manufacture one ton Jumbo pieces. This refinery has a production capac- ity of 104,000 tons of refined zinc per year. 9. San Luis Potosi Copper Smelter works with 2 yard locomotives, 2 Traxcavos, 20 Dump Cars, and 6 Mechanic Front Loaders for the furnace charge mix- ing. For smelting and conversion it has 3 Blast Furnaces, 2 Pierce Smith Converter Furnaces, 2 Molding Fur- naces, 6 Electric Front Loaders, 6 Towing Units, 3 Narrow Way Locomo- tives, 2 Bridge Cranes, two 7-tons Cranes and 3 Hoists. For the Venting System it has 9 Fans with different ca- pacities and 2 Filtering Bag Houses. This plant has a smelting capacity of 24,000 tons of blister copper per year. Employees: At December 31 Operations in Peru: At December 31 Staff Employees Workers Total 2005 756 1,079 1,730 3,565 2004 723 1,081 1,740 3,544 2003 726 1,089 1,751 3,566 2002 724 1,075 1,776 3,575 2001 765 1,116 1,845 3,726 Employees: At December 31 Operations in Mexico At December 31 Employees Workers Total 2005 2,264 7,049 9,313 2004 2,255 6,985 9,240 2003 2,328 6,819 9,147 2002 2,353 6,786 9,139 2001 2,814 7,780 10,594 Employees: At December 31 Operations in Chile At December 31 Total 2005 10 2004 10 2003 0 2002 0 2001 0 Total employees in SCC: Total Peru Total Mexico Total Chile Total SCC 3,565 9,313 10 12,888 3,544 9,240 10 12,794 3,566 9,147 0 12,713 3,575 9,139 0 12,714 3,726 10,594 0 14,320 Investment shares or labor shares Participation Less than 1% Between 1% - 5% Between 5% - 10% More than 10% Total Shareholders 2,360 - - 2 2,362 Percent of Shares 4.1% 0.0% 0.0% 95.9% 100.0% page 48 ANNUAL REPORT page 49 SOUTHERN COPPER CORPORATION common are listed shares listed on the New York Stock Exchange and the Lima Stock Exchange and are entitled to one vote per share. Along with the exchange of labor shares the holders of common shares of the Company exchanged their shares for class A common shares, with the right to five votes per share. In connection with the Minera Mexico acquisition (April 1, 2005), 67,207,640 new common shares were issued and class A common shares of the Company were converted to common shares, and preferential votes were eliminated. On June 9, 2005, Cerro Trading Company, Inc., SPC Investors L.L.C., Phelps Dodge Overseas Capital Corporation and Cli- max Molybdenum B.V., subsidiaries of two of SCC’s founding shareholders and affiliates, sold their share in SCC. Consequently, as of December 31, 2005, 147,228,025 common shares of the Company are outstanding, with a nominal value of $0.01 per share. Principles of Good Corporate Governance I. General Management Resolutions CONASEV Nº 096-2003-EF/94.11 and N° 140-2005-EF/94.11 The information relating to both resolutions will be submitted to the National Commission for the Supervision of Corporations and Securities (CONASEV) of the Republic of Peru, together with the Annual Report. Economic relations with other companies due to loans that commit more than 10% of the stockholders’ equity of the issuing entity. To date, there are no loans with other companies that compromise more than 10% of SCC’s stockholders’ equity. ADMINISTRATIVE JUDICIAL OR ARBITRATION PROCESSES Litigation: See Note to Consolidated Financial Statements. Changes of those responsible for the preparation and revision of the financial information Jose N. Chirinos continues to act as Director of Comptroller and Finance and Marco A. Garcia as Finance Manager. Information related to the stock entered in the Stock Market Public Registry Common Stock: On November 29, 1995 the Company offered to exchange the recently is- sued common shares (investment shares now) for all and any labor shares of the Peruvian Branch of the Company, at a ratio of one common share per four S-1 shares and one common share per five S-2 shares. The exchange expired on December 29, 1995, with 80.8% of the total labor shares in circulation exchange for 11,479,667 common are listed shares. These page 50 ANNUAL REPORT page 51 SOUTHERN COPPER CORPORATION Corporate Bonds: On July 27, 2005 SCC issued $200 million 6.375% Notes due 2015 and $600 million 7.5% Notes due 2035. The notes are senior unsecured obli- gations of the Company. The net proceeds from the issuance and sale of the notes were used to repay outstanding indebtedness of our Peruvian and Mexican Operations, under its $200 million and $600 million ($480 million outstanding) credit facilities, respectively, and the balance will be used for general corporate purposes. SCC filed a Registration Statement on Form S-4 with respect to these Notes on October 28, 2005. On Janu- ary 3, 2006 the Company completed an exchange offer for $200 million, 6.375% Notes due 2015 and $600 million, 7.5% Notes due 2035. In the exchange offer, $197.4 million of the 6.375% old notes due 2015 were tendered in exchange for an equivalent amount of new notes and an ag- gregate of $590.5 million of the 7.5% old notes due 2035 were tendered in exchange for an equivalent amount of new notes. The new notes have been registered under the U.S. securities law. The indentures relating to the notes contain certain covenants, including limitations on liens, limita- tions on sale and leaseback transactions, rights of the holders of the notes upon the occurrence of a change of control triggering event, limitations on subsidiary indebtedness and limitations on consolidations, mergers, sales or conveyances. All of these limitations and restrictions are subject to a number of significant exceptions, and some of these covenants will cease to be applicable before the notes mature if the notes attain an investment grade rating. At December 31, 2005, we are in compliance with these cov- enants. In January 2005, the Company signed a $200 million credit facility with a group of banks led by Citibank, N.A. Proceeds of this credit facility were used to prepay $199 million the outstanding bonds of the Company’s Pe- ruvian bond program. On July 28, 2005, a portion of the proceeds from the July 27, 2005 financing, noted above, were used to repay this facility. In 1998, Minera México issued $500 million of unsecured debt, which we refer to as its Yankee bonds. The Yankee bonds were offered in two series: Series A for $375 million, with an interest rate of 8.25% and a 2008 matu- rity date, and Series B for $125 million, with an interest rate of 9.25% and page 50 ANNUAL REPORT page 51 SOUTHERN COPPER CORPORATION a 2028 maturity date. During 2005, the Company repurchased $143.0 mil- lion of the Series A bonds. The bonds contain a covenant requiring Minera Mexico to maintain a ratio of EBITDA to interest expense of not less than 2.5 to 1.0, as such terms are defined by the bonds. At December 31, 2005, Minera Mexico is in compliance with this covenant. In 1999, the Company established a $100 million credit facility with Mitsui & Co. The facility has a 15-year term with an interest rate of Japanese LIBO plus 1.25% (Japanese LIBO for this loan was 4.67% at December 31, 2005). The facility is collateralized by the assignment of copper sales receivables of 31,000 tons of copper per year and requires an escrow account to fund scheduled payments. The facility requires that we maintain a minimum stockholders’ equity of $750 million and a ratio of debt to equity no greater than 0.5 to 1.0, all as such terms are defined by the facility. Reduction of Grupo México’s direct or indirect voting interest in our Company to less than a majority would constitute an event of default under the facility. At December 31, 2005, we are in compliance with these covenants. On October 29, 2004, Minera Mexico borrowed $600 million pursuant to a facility with a final maturity date in 2009. The credit facility bore interest at LIBOR plus 200 basis points. The proceeds from the credit facility were used to repay in full the amounts outstanding under a common agreement with holders of Minera Mexico’s secured export notes and other financial institutions. The loan was secured by a pledge of Minera Mexico’s princi- pal properties and was guaranteed by its principal subsidiaries. In 2005, the Company prepaid the total amount of this financing, using in part pro- ceeds from the July 27, 2005 Note issuance. While we recently prepaid all amounts outstanding under our Peruvian bond program, we are authorized by Peru’s Comisión Nacional Supervisora de Empresas y Valores (CONASEV) to issue additional bonds. We expect that we will meet our cash requirements for 2006 and beyond from internally generated funds, cash on hand and from additional exter- nal financing if required. page 52 ANNUAL REPORT page 53 SOUTHERN COPPER CORPORATION Common Shares Monthly Stock Prices 2005 Lima Stock Exchange ISIM Code: US8436111046 Symbol: PCU Period 200501 200502 200503 200504 200505 200506 200507 200508 200509 200510 200511 200512 Open $ 46.34 $ 47.15 $ 62.00 $ 56.00 $ 51.00 $ 46.70 $ 42.90 $ 51.50 $ 49.70 $ 54.82 $ 55.00 $ 64.00 Close $ 46.75 $ 63.00 $ 55.90 $ 51.00 $ 46.70 $ 43.00 $ 51.00 $ 48.70 $ 55.50 $ 54.51 $ 63.21 $ 67.00 Low $ 43.00 $ 47.00 $ 52.50 $ 50.2 0 $ 43.67 $ 41.70 $ 42.40 $ 47.60 $ 47.51 $ 49.98 $ 53.90 $ 64.00 High $ 47.00 $ 64.30 $ 65.00 $ 59.50 $ 53.00 $ 49.50 $ 51.11 $ 54.35 $ 56.00 $ 60.60 $ 63.56 $ 71.00 Average $ 44.64 $ 52.71 $ 59.46 $ 56.86 $ 46.59 $ 42.18 $ 46.38 $ 50.32 $ 50.85 $ 53.68 $ 58.80 $ 68.95 Common Shares Monthly Stock Prices 2005 New York Stock Exchange Symbol: PCU Period 200501 200502 200503 200504 200505 200506 200507 200508 200509 200510 200511 200512 Open $ 46.20 $ 47.36 $ 61.28 $ 55.89 $ 51.15 $ 46.62 $ 42.88 $ 52.52 $ 49.87 $ 55.74 $ 54.75 $ 67.20 Close $ 47.09 $ 62.91 $ 55.46 $ 51.14 $ 46.46 $ 42.84 $ 51.20 $ 48.98 $ 55.96 $ 55.24 $ 63.61 $ 66.98 Low $ 43.17 $ 46.25 $ 52.50 $ 51.14 $ 44.26 $ 41.63 $ 42.88 $ 47.44 $ 47.85 $ 50.20 $ 54.26 $ 66.55 High $ 47.09 $ 62.91 $ 64.20 $ 59.20 $ 53.13 $ 49.25 $ 51.80 $ 54.25 $ 55.96 $ 58.92 $ 63.61 $ 70.60 Average $ 44.59 $ 51.16 $ 58.56 $ 55.23 $ 47.96 $ 44.66 $ 47.72 $ 50.74 $ 50.59 $ 53.96 $ 59.10 $ 68.27 page 52 ANNUAL REPORT page 53 SOUTHERN COPPER CORPORATION Common Shares Monthly Stock Prices 2005 Lima Stock Exchange Acciones de Inversion Symbol: SPCCPl1 Period 200501 200502 200503 200504 200505 200506 200507 200508 200509 200510 200511 200512 Open S/.24.20 30.00 38.00 37.00 32.00 27.15 31.50 33.90 33.00 35.95 39.00 40.60 Close S/.27.90 37.00 37.00 38.00 27.02 31.50 35.50 33.00 35.95 38.00 39.10 40.00 Low S/.22.96 29.50 36.00 35.50 27.00 27.15 31.00 31.90 31.50 35.95 38.36 40.00 High S/.27.90 37.50 42.00 38.00 32.00 31.70 35.50 33.90 35.95 39.00 41.00 45.00 Average S/.25.23 31.10 39.08 36.82 29.68 30.06 32.47 32.61 32.40 38.27 39.63 43.51 Common Shares Monthly Stock Prices 2005 Lima Stock Exchange Acciones de Inversion Symbol: SPCCPl2 Period 200501 200502 200503 200504 200505 200506 200507 200508 200509 200510 200511 200512 Open S/. - - - - - - - - S/.30.05 32.51 - - Close S/. - - - - - - - - S/.30.05 32.51 - - Low S/. - - - - - - - S/.30.05 32.51 - - High S/. - - - - - - - - S/.30.05 32.51 - - Average S/. - - - - - - - - S/.30.05 32.51 - - page 54 ANNUAL REPORT page 55 SOUTHERN COPPER CORPORATION Members of the Board of Directors at December 31, 2005 Board of Directors German Larrea Mota-Velasco, Director. Mr. Larrea has been Chairman of the Board since December 1999, Chief Executive Officer from December 1999 to October 2004, and a director of the Company since November 1999. He has been Chairman of the Board of Directors, President and Chief Executive Of- ficer of Grupo Mexico (holding) since 1994. Mr. Larrea is also the Chairman and Chief Executive Officer of Americas Mining Corporation (AMC) (mining division) since 2003. Mr. Larrea has been Chairman of the Board of Directors and Chief Executive Officer of Grupo Minero Mexico (mining division) since 1994, and of Grupo Ferroviario Mexicano (railroad division) since 1997. Mr. Larrea was previous- ly Executive Vice Chairman of Grupo Mexico, and has been member of the Board of Directors since 1981. He is also Chairman of the Board of Directors and Chief Executive Officer of Empresarios Industriales de Mexico (holding); Perforadora Mexico (drilling company), Mexico Compañia Constructora (con- struction company), Fondo Inmobiliario (real estate company), since 1992. He founded Grupo Impresa, a printing and publishing company in 1978, remaining as the Chairman and Chief Executive Officer until 1989 when the company was sold. He is also a director of Grupo Financiero Banamex, (Citi- group) S.A. de C.V., Banco Nacional de Mexico, S.A., Consejo Mexicano de Hombres de Negocios, and Grupo Televisa, S.A. de C.V. He and Mr. Genaro Larrea Mota-Velasco are brothers. Oscar Gonzalez Rocha, Director. Mr. Oscar Gonzalez Rocha has been our Chief Executive Officer since October 21, 2004 and its President since De- cember 1999. He has been a director of the Company since November 1999. Previously, he was our General Director and Chief Operating Officer from December 1999 to October 20, 2004. Mr. Gonzalez has been a director of Grupo Mexico from 2002 to present and Managing Director of Mexicana de Cobre, S.A. de C.V. from 1986 to 1999 and of Mexicana de Cananea, S.A. de C.V. from 1990 to 1999. He has been an alternate director of Grupo Mexico from 1988 to April 2002. Emilio Carrillo Gamboa, Director. Mr. Emilio Carrillo Gamboa has been a director of the Company since May 30, 2003 and is our fifth independent director nominee. Mr. Carrillo Gamboa is a prominent lawyer in Mexico and has been a partner of the law firm Bufete Carrillo Gamboa, S. C., a law firm specializing in corporate, financial, commercial, and public utility issues, for the last five years. Mr. Carrillo Gamboa has extensive business experience and currently serves on the boards of many prestigious international and page 54 ANNUAL REPORT page 55 SOUTHERN COPPER CORPORATION Mexican corporations as well as charitable organizations. Since March 9, 2005 he is Chairman of the Board of the Mexico Fund, Inc. (NYSE — msxf), a nondiversified closed-end management investment company. He is also Chairman of the Board of Holcim-Apasco, S.A. de C.V. (cement company). Mr. Carrillo was Director General of Telefonos de Mexico S.A. de C.V. (TEL- MEX) and from July 1987 to February 1989, he was Mexico’s Ambassador to Canada. Mr. Carrillo is a director of the following companies: Grupo Modelo, S.A. de C.V. (beer brewing), Kimberly-Clark de Mexico, S.A. de C.V. (consum- er products), San Luis Corporacion, S.A. de C.V. (automotive parts), Empre- sas ICA Sociedad Controladora, S.A. de C.V. (construction), Holcim Apasco, S.A. de C.V., The Mexico Fund, Inc., Bank of Tokyo – Mitsubishi (Mexico), S.A., Gasoductos de Chihuahua, S. de R.L. de C.V. and subsidiaries, Innova, S. de R.L. de C.V. and subsidiaries, and Grupo Mexico and subsidiaries. He is member of the Valuation, Contract Review and Nominating and Corporate Governance Committees of the Mexico Fund and a member of the Audit Com- mittee of the following companies: Empresas ICA Sociedad Controladora, S.A. de C.V. since 2002, Holcim-Apasco, S.A. de C.V. since 2002, Grupo Mod- elo, S.A. de C.V. since 2002, Kimberly-Clark de Mexico, S.A. de C.V. since 2002, San Luis Corporacion, S.A. de C.V. since 2002, The Mexico Fund, Inc. since 2002, and Grupo Mexico since 2003. Except for Bank of Tokyo – Mit- subishi (Mexico), S.A., Gasoductos de Chihuahua, S. de R.L. de C.V., and Innova, S. de R.L. de C.V., which are private companies, the rest are public companies listed on the Mexican Stock Exchange, and two are listed on the NYSE: The Mexico Fund, Inc., and Empresas ICA Sociedad Controladora, S.A. de C.V. Mr. Carrillo Gamboa has a law degree from the Autonomous Na- tional University of Mexico, attended a continuous legal education program at Georgetown University Law School, and practiced at the World Bank. Jaime F. Collazo Gonzalez, Director. Mr. Collazo has been a director of the Company since April 28, 2004 and our Vice President, Finance and Chief Financial Officer from April 28, 2004 to March 10, 2005. He has been Direc- tor of Administration, Auditing and Information Technology of Grupo Mexico since March 2004. From 1998 to 2003, Mr. Collazo Gonzalez held the posi- tion of Managing Partner of Administration and Business Consulting, SC (a business consulting firm). Previously, he held several positions with IBM de Mexico, S.A., the last one being Vice President and Chief Financial Officer, prior to his retirement in 1998. He holds a Bachelor’s degree in Administra- tion from Universidad Tecnologica de Mexico and a Master degree in Busi- ness Administration from Instituto Tecnologico y de Estudios Superiores de Monterrey. page 56 ANNUAL REPORT page 57 SOUTHERN COPPER CORPORATION Xavier Garcia de Quevedo Topete, Director. Mr. Garcia de Quevedo has been a director of the Company since November 1999 and our Executive Vice President and Chief Operating Officer since April 12, 2005. He has been the President and Chief Executive Officer of Minera Mexico, S. A. de C. V. from September 2001 to April 2005. He was Managing Director of Grupo Fer- roviario Mexicano, S.A. de C.V. and of Ferrocarril Mexicano, S.A. de C.V. from December 1997 to December 1999, and Director General of Exploration and Development of Grupo Mexico from 1994 to 1997. He has been a Director of Grupo Mexico since April 2002. J. Eduardo Gonzalez Felix, Director. Mr. Eduardo Gonzalez Felix has been a director of the Company and our Vice President, Finance and Chief Financial Officer since March 11, 2005. He has been the President and Chief Financial Officer of Grupo Mexico’s Mining Division (Americas Mining Corporation or AMC) from January 2004 to March 2005 and its Chief Financial Officer from 1999 to March 2003. Mr. Gonzalez has been the Chief Financial Officer of Minera Mexico from mid-2001 to December 2003. He had also headed Grupo Mexico’s Trea- sury and Investor Relations departments from 1999 to 2001. Prior to joining Grupo Mexico, Mr. Gonzalez was a Senior Associate at McKinsey & Company, Inc., heading work for clients in various countries and industry sectors. Mr. Gonzalez holds two degrees from the University of Arizona in Economics and Political Science and a Master in Busi- ness Administration in Finance and International Business from the University of Chicago, Graduate School of Business. He has also concluded extensive graduate studies and research in Political Philosophy and European Union Economics at the Oxford University in England. Mr. Gonzalez has also worked at the Kimberly-Clark Corporation and at the Chicago Board of Trade. Harold S. Handelsman, Director. Mr. Handelsman has been a director of the Company since August 2002 and is a special independent director nominee. Mr. Handelsman has been Executive Vice President and General Counsel of The Pritzker Organization, LLC, a private investment firm, since 1998. Mr. Handelsman has also been a senior executive officer of the Hyatt Corpo- ration since 1978 and currently serves as Executive Vice President of Global Hyatt Corporation, and is a director of a number of private corporations. He received a B.A. degree from Amherst College in 1968 and a J.D. degree from Columbia University in 1973. Genaro Larrea Mota-Velasco, Director. Mr. Larrea was our Vice President, Commercial from December 1999 until April 25, 2002, and has been a director since November 1999. He was Managing Commercial Director of Grupo Mexico from 1994 to August 30, 2001, and has been a director of Grupo Mexico since 1994. He and Mr. German Larrea Mota-Velasco are brothers. Armando Ortega Gomez, Director. Mr. Ortega has been our Vice President- Legal and Secretary since April 25, 2002 and a director since August 2002. He has been our General Counsel since October 23, 2003. Previously, he was our Assistant Secretary from July 25, 2001 to April 25, 2002. He has been General Counsel of Grupo Mexico since May 2001. He is also Assistant Secretary of Grupo Mexico. Previously, he headed the Unit on International Trade Practices of the Ministry of Economy of Mexico with the rank of Deputy Vice Minister from January 1998 to mid-May 2001, and was negotiator for international matters for said Ministry from 1988 to May 2001. Luis Miguel Palomino Bonilla, Director. Mr. Luis Miguel Palomino Bonilla has been a director of the Company since March 19, 2004 and is a special independent director nominee. Mr. Palomino has been the principal and senior consultant of Proconsulta International (a financial consulting firm) since 2003. Previously he was First Vice President and Chief Economist, page 56 ANNUAL REPORT page 57 SOUTHERN COPPER CORPORATION Latin America for Merrill Lynch Pierce Fenner & Smith, New York (investment banking) from 2000 to 2002. He was Chief Executive Officer, Senior Country and Equity Analyst of Merrill Lynch, Peru (investment banking) from 1995 to 2000. Mr. Palomino has held various positions with banks and financial institutions as an economist, financial advisor and analyst. He has a PhD in finance from the Wharton School of the University of Pennsylvania, Phila- delphia, and graduated from the Economics Program of the University of the Pacific, Lima, Peru. University of Mexico, Political Science Department (1984-1985), and profes- sor of said university (1981-1983). Mr. Rebolledo holds a law degree from the National Autonomous University of Mexico, an MA in philosophy from Tulane University, and an LLM from Har- vard Law School. Carlos Ruiz Sacristan, Director. Mr. Car- los Ruiz Sacristan has been a director of the Company since February 12, 2004 and is a special independent director nominee. Since November 2001, he has been the owner and managing partner of Proyectos Estrategicos Integrales, a Mexican investment banking firm specialized in agricultural, transport, tourism, and housing projects. Mr. Ruiz has held various distinguished posi- tions in the Mexican government, the most recent being that of Secretary of Communication and Transportation of Mexico from 1995 to 2000. While hold- ing that position, he was also Chairman of the Board of Directors of the Mexi- can-owned companies in the sector, and member of the Board of Directors of development banks. Mr. Ruiz holds a bachelor’s degree in business adminis- tration from the Anahuac University of Mexico City, and an MBA degree from Northwestern University of Chicago. Gilberto Perezalonso Cifuentes, Director. Mr. Gilberto Perezalonso Cifuen- tes has been a director of the Company since June 2002 and is a special independent director nominee. From 1980 until February 1998, Mr. Pereza- lonso held various positions with Grupo Cifra S.A. de C.V., the most recent position being that of General Director of Administration and Finance. From 1998 until April 2001, he was Executive Vice President of Administration and Finance of Grupo Televisa, S.A. Mr. Perezalonso was the Chief Execu- tive Officer of Aeromexico (Aerovias de Mexico, S.A. de C.V.) from 2004 until December 2005. He is also currently Treasurer of the Asociacion Vamos Mexico A.C., consultant to the Presidency of Grupo Televisa, S.A. and a member of its Board and its Executive Committee. He is also a member of the investment committee of IBM de Mexico. He is a member of the advisory council of Banco Nacional de Mexico, S.A. de C.V., the board and of the investment committee of Afore Banamex, the board and of the investment committee of Siefore Banamex No. 1, and is a member of the Boards of Gigante, S.A. de C.V., International Center for Human Development, Costa Rica, Masnegocio Co. S. de R.L. de C.V., and Financiera Compartamos, S.A. de C.V., SFOL. Mr. Perezalonso is a member of the Audit Committee of Tele- visa S.A. de C.V. and Cablevision, S.A. de C.V. Mr. Perezalonso has a law degree from the Iberoamerican University and a Master’s Degree in Business Administration from the Business Administra- tion Graduate School for Central America (INCAE). Mr. Perezalonso has also attended the Corporate Finance program at Harvard University. Juan Rebolledo Gout, Director. Mr. Rebolledo has been a director of the Company since May 30, 2003. Mr. Rebolledo has been International Vice President of Grupo Mexico since 2001. He was Deputy Secretary of For- eign Affairs of Mexico from 1994 to 2000 and Deputy Chief of Staff to the President of Mexico from 1993 to 1994. Previously, he was Assistant to the President of Mexico (1989-1993), director of the National Institute for the Historical Studies of the Mexican Revolution of the Secretariat of Govern- ment (1985-1988), Dean of Graduate Studies at the National Autonomous page 58 ANNUAL REPORT page 59 SOUTHERN COPPER CORPORATION Executive Officers Next of kin German Larrea Mota-Velasco Chairman of the Board Oscar Gonzalez Rocha President and Chief Executive Officer Xavier Garcia de Quevedo Topete Executive Vice-President and Chief Operating Officer Eduardo Gonzalez Felix Vice-President, Finance and Chief Financial Officer Mario Vinageras Barroso Vice-President, Commercial Vidal Muhech Dip Vice-President, Projects Armando Ortega Gomez Vice-President, Legal, General Counsel and Secretary Jose N. Chirinos Fano Comptroller Messrs. German Larrea Mota-Velasco, Chairman of the Board ofthe Company and Genaro Larrea Mota-Velasco, a Director of the Company are brothers or kindred in second degree of consanguinity. A company of which more than 50% of the voting power is held by a single entity, a controlled company, need not comply with the requirements of the New York Stock Exchange (NYSE) corporate governance rules requiring a majority of independent Directors and independent compensation and nomination/corporate governance committees. SCC is a controlled company as defined by the rules of the NYSE. Grupo Mexico owns indirectly 75.1% of the stock of the Company. The Company has taken advantage of the excep- tions to comply with the corporate governance rules of the NYSE. The Board of Directors of the Company determined that Messrs. Luis Miguel Palomino Bonilla, Gilberto Perezalonso, and Emilio Carrillo, the three members of the Company’s Audit Committee, are independent of management and financial- ly literate in accordance with the qualifications of the NYSE and the Securi- ties and Exchange Commission (SEC), as such qualifications are interpreted by the Company’s Board of Directors in its business judgment. To the best of the Company’s knowledge, no other relationship of affinity and/ or consanguinity exists among the other members of the Board, and between them and the Executive Officers of Southern Copper Corporation. Special Committees of the Board SCC’s Board of Directors has organized the following Special Committees: 1) Executive Committee, comprised of five members who substitute for the Board when sessions or decisions are required concerning urgent mat- ters, or when the Board has expressly delegated its mandate. 2) Audit Committee, comprised of three independent Board members who are knowledgeable in accounting and financial matters. Its main purpose is to (a) assist the Board in monitoring (i) the quality and integrity of the Company’s financial statements; (ii) the qualifications and indepen- page 58 ANNUAL REPORT page 59 SOUTHERN COPPER CORPORATION dence of the independent auditors;(iii) the appropriate performance of the internal audit function; and (iv) the Company’s compliance with legal and regulatory provisions; and (b) prepare the report for the proxy state- ment. 3) Compensations Committee, comprised of four Board members, its prin- cipal objective is to evaluate and establish the remunerations of senior officials and key employees at the Company and its subsidiaries, and eventual raises in remuneration. Administration and Board Income Total remunerations of Board and Ad- ministration members, in relation to the Company´s gross income is 0.20%. Annual Meeting 4) Stock Incentive Plan, comprised of three independent Board members who are knowledgeable in accounting and financial matters. Their objec- tive is to determine compensation schemes for senior officials and key employees at the Company through awards of ordinary Company stock as a way to improve management of corporate affairs and create a link between their interest and that of the shareholders. The annual meeting of stockholders of Southern Copper Corporation will be held on Thursday, April 27, 2006 at 17: 00 hours. Mexico D.F. time, at Avenue Baja California Nº 200, Fith Floor, Colo- nia Roma Sur, Mexico City, Mexico. 5) Special Nominating Committee, comprised of two independent directors and one appointed by the Board. The principal purpose is to propose and evaluate candidates to fill the positions of special independent di- rectors. 6) Corporate Governance Committee. Its four Board members have as their principal role to advise the Board on its functions and needs, develop and recommend the approval of the Company’s good governance prin- ciples, and overseeing the evaluation of the Board’s and Management’s performance. 7) Administrative Committee Designated by the Board for (Employee Re- tirement Income Security Act - ERISA – USA) Benefit Plans. ERISA is the law that protects employee retirement and other benefit plans. The Vice-President for Finance and Chief Financial Officer is the Board-Ap- pointed Trustee for the Company’s Benefit Plans subject to US regula- tions, including ERISA. This Officer will appoint an Administrative Com- mittee comprised of four management members whose purpose is to administer and manage those plans and to oversee the performance of the trust agents and others charged with investing plans’ funds. page 60 ANNUAL REPORT page 61 SOUTHERN COPPER CORPORATION Corporate Offices USA 2575 E. Camelback Rd. Suite 500 Phoenix, AZ 85016 U.S.A. Phone: +(602) 977-6595 Fax: +(602) 977-6700 Peru Avenue Caminos del Inca No. 171 Chacarilla del Estanque Santiago de Surco Lima 33, Peru Phone: +(511) 372-1414, Ext. 3211 Fax: +(511) 372-0262 Transfer Agent, Registrar and Stockholder Services The Bank of New York 101 Barclay Street New York, NY 10286 Phone: +(800) 524-4458 Dividend Reinvestment Program SCC stockholders can have their dividends automatically reinvested in SCC common shares. SCC pays all administrative and brokerage fees. This plan is administered by The Bank of New York. For more information, contact The Bank of New York at +(800) 524-4458. Stock Exchange Listing The principal markets for SCC’s Common Stock are the New York Stock Ex- change and the Lima Stock Exchange. The SCC Common Stock symbol is PCU on both the NYSE and on the Lima Stock Exchange. Others The Branch in Peru has issued, in accordance with Peruvian law, ‘invest- ment shares’ (formerly named labor shares) that are listed on the Lima Stock page 60 page 61 SOUTHERN COPPER CORPORATION Exchange under the symbols S-1 and S-2. Transfer Agent, registrar and stockholders services are provided by Banco de Credito of Peru at Avenue Centenario 156, La Molina, Lima 12, Peru. Phone +(511) 348-5999, Fax +(511) 349-0592. Other Corporate Information For other information on the corporation or to obtain additional copies of the annual report, contact the Corporate Communications Department at our corporate offices. Southern Copper Corporation 2575 E. Camelback Rd., Suite 500, Phoenix, AZ 85016, U.S.A., Phone: +(602) 977-6595, Fax: +(602) 977-6700. NYSE Symbol: PCU. Avenue Caminos del Inca 171 (B-2), Chacarilla del Estanque, Santiago de Surco – Lima 33 - Peru./ Lima Stock Exchange Symbol: PCU. Web Page: www.southerncoppercorp.com Email address: southerncopper@southernperu.com.pe Form 10-K. Certification required by New York Stock Exchange. The enclosed Form 10-K contains which Management’s Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Combined Financial Statements and the accompanying notes are an integral part of this Annual Report. The Company has filed with the NYSE the 2005 certification that the Chief Executive Officer is unaware of any violation of the corporate governance standards of the NYSE. The Company has also filed with the SEC the certifi- cations required under Section 302 of the Sarbanes-Oxley Act of 2002, as exhibits to the Annual Report on 2005 Form 10-K. The Company anticipates filing on a timely basis, the 2006 NYSE certification. page 63 SOUTHERN COPPER CORPORATION page 62 ANNUAL REPORT Members of the Board of Directors German Larrea Mota-Velasco Oscar Gonzalez Rocha Emilio Carrillo Gamboa Jaime Fernando Collazo Gonzalez Xavier Garcia de Quevedo Topete Eduardo Gonzalez Felix Harold S. Handelsman Genaro Larrea Mota-Velasco Armando Ortega Gomez Luis Miguel Palomino Bonilla Gilberto Perezalonso Cifuentes Juan Rebolledo Gout Carlos Ruiz Sacristan Audit Committee Emilio Carrillo Gamboa, Chairman Luis Miguel Palomino Bonilla, and Gilberto Perezalonso Cifuentes Executive Officers German Larrea Mota-Velasco Chairman of the Board Oscar Gonzalez Rocha President and Chief Executive Officer Xavier Garcia de Quevedo Topete Executive Vice President, Chief Operating Of- ficer Eduardo Gonzalez Felix Vice-President, Finance and Chief Financial Officer Mario Vinageras Barroso Vice-President Commercial Vidal Muhech Dip Vice-President, Projects Armando Ortega Gomez Vice-President, Legal, General Counsel and Secretary Jose N. Chirinos Fano Comptroller Administration of the Branch Oscar Gonzalez Rocha President and Chief Executive Officer Jose N. Chirinos Fano General Director of Comptroller and Finance Edgard Corrales Aguilar Exploration Director Jose I. De los Heros Ugarte Commercial Director Hans A. Flury Royle Legal Director Manuel A. Plenge Espinoza Director of Logistic Mauricio Pero Diez de Medina General Director of Operaciones Elsiario Antunez de Mayolo Remis Director of Cuajone Operations Ezio Buselli Canepa Director of Environmental Services Alberto J. Giles Ponce Human Resources Director Fernando Mejia Correa Director of Toquepala Operations William E. Torres Pino Director of Ilo Operations page 63 SOUTHERN COPPER CORPORATION page 64 ANNUAL REPORT 

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