Copper Here, There and Everywhere
STATEMENT OF RESPONSIBILITY
“To the best of our knowledge this document contains truthful and sufficient information regarding the development
of the business of Southern Copper Corporation (“SCC”) during 2008. SCC takes responsibility for its content accor-
ding to applicable requirements”
Armando Ortega Gomez
Vice President Legal and Secretary
Jose N. Chirinos Fano
Comptroller
CONVERSION INFORMATION: All tonnages in this annual report are metric tons unless otherwise noted. To con-
vert to short tons, multiply by 1.102. All distances are in kilometers, to convert to miles, multiply by 0.62137. All oun-
ces are troy ounces. U.S. dollar amounts represent either historical dollar amounts, where appropriate, or U.S. dollars
equivalents translated in accordance with generally accepted accounting principles in the United States. “SCC”,
“Southern Copper” or the “Company” includes Southern Copper Corporation and its consolidated subsidiaries.
1
CONTENTS
Letter to the Shareholders
Production Statistics
Copper Reserves
Selected Financial and Statistical Data
Expansion and Modernization Program
Exploration
Community Outreach
Results of Operations for the years ended
December 31, 2008, 2007 and 2006
Environmental Affairs
General Information
Description of Operations and Development regarding the Issuing Entity
Members of the Board of Directors
03
10
12
14
20
26
36
42
50
82
02 -
03
03
SOUTHERN COPPER 2008
03 03
LETTER TO SHAREHOLDERS
In 2008, as a result of world’s unsettled economy metal prices were
negatively impacted. Net sales declined 20.3%, from $6,085.7
million in 2007 to $4,850.8 million in 2008. But, the most dramatic
decrease occurred in fourth quarter 2008 compared with the fourth
quarter of 2007. The LME and COMEX copper prices averaged $1.77
and $1.75 per pound, respectively, in the fourth quarter of 2008,
compared with $3.26 and $3.25, respectively, in the fourth quarter
of 2007.
The pricing system in the mining industry, in many cases, allows for
prices to be settled after the product is already delivered, genera-
lly one or two months after the shipment, this gives customers a
better ability to match more closely their sales prices to the cost
of the material. So, in a period with a sudden change in prices,
adjustments have to be made to sales. In the fourth quarter of
2008 copper and molybdenum prices dropped sharply, this requi-
red a large downward adjustment in sales value of $419 million and
a decrease in net profit of approximately $261 million. We do not
expect these negative adjustments to be repeated in the near term.
Partially as a result of these price adjustments, Company earnings
in the fourth quarter of 2008, compared to the fourth quarter of
2007, decreased to a loss of $124.7 million from net earnings of
$310.9 million. For the year 2008, Company earnings were $1,406.6
million a decrease of 36.5% from 2007.
The decrease in net sales, in fourth quarter and in year 2008 was
partially offset with gains of $74.2 and $137.0 million, respectively,
on copper hedge transactions.
In fourth quarter of 2008, fuel, power, and repair material cost
decreased by 14%, 23%, and 21%, respectively, when compared with
the third quarter in 2008. In light of these decreases, our opera-
ting cash cost, before byproduct credits, in the fourth quarter 2008
were 26.4% lower than the third quarter 2008. The operating cash
cost per pound for the year 2008, including the benefit of bypro-
duct credits was 34.1 cents per pound.
Shovel and truck
in Cuajone mine,
Moquegua, Peru
After what has happened in 2008 and what could happen in 2009
and beyond, we believe Southern Copper Corporation has one of
the best copper ore reserves in the industry, as well as very signifi-
cant reserves of molybdenum, silver and zinc. We expect that these
reserve positions will allow our Company to operate profitably into
04 - 05 05
SOUTHERN COPPER 2008
the foreseeable future.
Our Company’s low operating costs, strong cash position of $716.7
million and low debt level of $1,290.0 million, with no significant
amortizations until 2015, will permit us to continue with a profitable
operation. At the same time, we have reduced significantly most of
our capital investments in new as well as in expansion projects; as
we believe this prudence and business discipline is needed during
the current low commodity cycle.
Copper production in 2008 was 488,929 tons, compared with
592,182 tons in 2007, a decrease of 17.4%, and principally due to
strike closed operations in three of our Mexican mines: Cananea,
Taxco and San Martin, and lower ore grades at the Toquepala and
La Caridad mines. Smelted and refined copper production in the
fourth quarter 2008 were 29.3% and 26.3% higher than in fourth
quarter 2007, mainly due to the full capacity production at our
modernized Ilo smelter plant, 7.1% higher concentrates production
at La Caridad mine and the processing of third party copper at the
Caridad smelter.
Molybdenum production was 16,390 tons in year 2008 compared
with 16,207 tons in 2007. This increase of 1.1% was due to higher
ore grade at La Caridad mine and higher recovery at Cuajone mine
partially offset by lower ore at Toquepala mine.
Refined zinc production for the year 2008 was 95,420 tons, 5.1%
higher than in 2007 due to the recovery of full capacity at the San
Luis Potosi refinery. Refined silver in year 2008 increased by 8.4%
compared with year 2007. Sulfuric acid production increased 5.5%
in year 2008 compared to year 2007.
In 2008, the Company exceeded its production objectives at the
open pit mines of Toquepala, Cuajone and La Caridad, as well as
in the IMMSA underground units of Charcas, Santa Eulalia, Santa
Barbara, the coking facility at Nueva Rosita and the La Caridad
precious metals plant.
05 05
As part of our share repurchase program approved by the Board
in 2008, Southern Copper has purchased 29.6 million shares of its
common stock at an average price of $13.52 per share. With these
repurchases the outstanding shareholders have increased their
stake in the Company by 3.5%.
As a result of world’s unsettled economy and the reduction in metal
prices, SCC has decided to reduce dramatically or put on hold capital
projects. In 2008 we expended $343.8 million on projects, $172.8
million on maintenance and replacement capital expenditures and
$37.0 million on exploration, a combined total of $553.6 million.
For 2009 we have reduced our capital and exploration budget from
$1,070 million to approximately $415.3 million. Of this amount, $311.2
million would be for projects, $81.4 million for maintenance and
replacement capital expenditures and $22.7 million for exploration.
The Company will continue with the environmental projects at its
mining and metallurgical facilities. At La Caridad metallurgical
complex the gas handling, and dust and effluent treatment projects
are being completed. These projects are at 93% and 70% of comple-
tion, respectively, and have a combined budget of $9.0 million for
2009.
The Agua Prieta lime plant modernization project, in the Mexican
state of Sonora, is moving forward to completion. When finished, this
project is expected to reduce the annual lime cost of our Mexican
operations by approximately $9.0 million. Due to its capital budget
of $14.0 million this project yields an attractive return.
In Peru, for the Cuajone expansion project we have signed a feasibi-
lity study contract and will only continue at this point with the engi-
neering and the environmental impact assessment.
Regarding our copper deposit projects at Los Chancas in Peru, El
Arco, Pilares and the underground polymetallic mine in Angangueo
in Mexico, we will continue to evaluate these projects, but will defer
making a final decision until better market conditions make it more
prudent to move forward on these projects.
06 - 07 07
SOUTHERN COPPER 2008
We believe that the measures implemented will allow us to conso-
lidate our position as one of the largest and most efficient metal
producers in the world, which we believe will give an economic
return to our shareholders, a contribution to the countries and loca-
lities where we operate, as well as a benefit for our workers, despite
the world’s economic problems.
On behalf of Southern Copper Corporation’s Board, we express our
thanks to all our personnel for their effort, work and dedication,
to our clients for their continued trust and loyalty, and to you, our
shareholders, for your permanent support.
German Larrea Mota-Velasco
President of the Board
Oscar Gonzalez Rocha Xavier Garcia de Quevedo
President and Chief Executive Officer President and Chief Executive Officer
Underground mine
worker in Charcas, San
Luis Potosi, Mexico
07 07
08 - 09 09
SOUTHERN COPPER 2008
PRODUCTION
STATISTICS
Southern Copper Corporation
and Subsidiaries.
Production Statistics.
Five-year Slected Production
Data.
09 09
Copper technology used currently in mid-range servers, increases considerably the high performance as compared
to traditional designs with aluminum circuits.
10 -
11
11
SOUTHERN COPPER 2008
PRODUCTION STATISTICS
Southern Copper Corporation and Subsidiaries
Five-year Production Statistics
Copper production Mines
Mined Material
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
Mined Material
Copper in concentrates
Molybdenum in concentrates
Cuajone
Mined Material
Copper in concentrates
Molybdenum in concentrates
Smelter/refineries in Peru
SX/EW
Smelt concentrates
Blister produced
Anode produced
Cathode produced
(tons)
(thousand)
(kilograms)
2008
2007
2006
2005
2004
343,762
418,726
70,203
488,929
16,390
106,920
383,059
406,059
498,207
93,976
592,183
16,208
121,013
473,672
409,625
506,084
99,575
605,559
11,837
136,592
502,993
426,951
574,976
114,953
689,929
14,803
143,609
575,266
386,364
603,907
114,100
718,007
14,373
133,778
576,372
499,706
95,420
10,841
467,414
90,766
10,001
591,794
51,035
12,379
629,353
101,523
12,487
594,278
102,556
10,796
(thousand)
131,646
114,147
4,667
130,267
140,868
6,228
131,607
151,775
5,813
134,505
157,456
5,324
115,120
160,852
6,004
(thousand)
118,054
196,065
4,442
116,438
182,117
3,821
112,410
174,404
3,523
109,855
163,659
5,279
101,265
194,389
4,657
38,799
1,003,311
-
307,496
248,742
36,670
846,245
9,342
232,901
178,397
35,805
1,107,458
30,756
298,435
273,299
36,498
1,206,252
325,623
-
285,205
42,125
1,213,030
320,722
-
280,679
11 11
Mexicana de Cobre – Caridad
Mined Material
Copper in concentrates
Molybdenum in concentrates
Cananea
Moved material
Copper in concentrates
Smelter/Refineries in Mexico
SX/EW
Smelt concentrates
Anode produced
Cathode produced
Rod produced
2008
2007
2006
2005
2004
(thousand)
85,379
96,929
7,281
80,819
102,259
6,159
46,606
58,071
2,501
75,465
122,317
4,200
72,430
110,385
3,712
(thousand)
4,820
6,165
74,672
63,909
114,595
111,280
102,508
118,741
93,160
123,228
31,403
574,573
173,213
140,326
76,283
57,305
684,806
204,354
173,341
96,607
63,770
723,984
242,410
200,357
96,582
78,454
894,735
282,412
233,682
113,165
71,975
820,459
250,890
202,146
69,529
Underground Mines
Contents in concentrates
Zinc
Lead
Copper in concentrates
Silver
Gold
(tons)
(kilograms)
(kilograms)
106,920
20,445
5,420
198,004
87
121,013
19,382
9,054
257,277
130
136,592
19,081
10,555
288,524
139
143,609
19,545
12,804
316,723
125
133,778
18,842
15,053
325,652
164
12 -
13
13
SOUTHERN COPPER 2008
COOPER RESERvES
Southern Copper Corporation and Subsidiaries
The table below details our proven and probable copper and molybdenum reserves as
estimated at December 31, 2008, calculated at copper price of $3.148 per pound and a
molybdenum price of $28.022 per pound.
Mineral Reserves
(thousand of tons)
Sulfides
Average Grade: Copper
Average Grade: Molybdenum
Leachable
Average Grade: Leachable
Material
Waste
Total Material
Stripping ratio
Peruvian Operations
Open Pit
Mexican Operations
Open Pit
Total Open
Pit
Cuajone
Toquepala
Cananea
La Caridad
IMMSA
2,446,155
0.517%
0.019%
19,257
0.454%
7,566,914
10,032,326
3.10
4,294,020
0.442%
0.021%
1,304,621
0.064%
13,835,964
19,434,605
3.53
6,684,931
0.378%
-
1,773,625
0.127%
6,833,021
15,291,577
1.29
3,800,122
0.223%
0.029%
1,145,308
17,225,228
0.379%
0.024%
4,242,811
48,340
0.470%
-
0.117%
1,122,993
6,068,423
0.60
0.106%
29,358,892
50,826,931
1.95
13 13
SELECTED FINANCIAL AND STATISTICAL DATA
Southern Copper Corporation and Subsidiaries
Five-year Production Statistics
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 investments shares in
Income of Peruvian Branch
Net earnings
Per share amount 1
Net earnings – Basic and diluted
Dividends paid
Consolidated balance sheet
Total assets
Cash and cash equivalent
Total debt
Stockholder´s equity
Consolidated statement of cash flows
Cash provided from operating activities
Dividend paid
Capital expenditures
Depreciation & depletion
Capital stock
2008
2007
2006
2005
2004
$ 4,851
2,659
2,202
$ 6,086
2,589
3,497
$ 5,460
2,406
3,054
$ 4,089
2,018
2,071
$ 3,097
1,614
1,483
8
$ 1,407
10
$ 2,216
9
$ 2,038
12
$ 1,400
5
$ 982
$
$
1.60
1.94
$
2.51
$ 2.27
$
$
2.31
1.71
$
1.59
$ 0.97
$
1.11
$ 0.22
$
5,764
717
1,290
3,381
1,721
1,711
517
327
$ 6,581
1,409
1,450
3,848
2,703
2,002
316
328
$ 6,376
1,023
1,528
3,667
2,059
1,509
456
275
$ 5,688
876
1,172
3,326
1,663
854
471
277
$ 5,319
711
1,330
2,814
1,172
191
228
193
Common shares outstanding (million) 1
NYSE Price – high
Price – low
854.9
41.34
$
9.19
$
883.4
$ 47.12
$ 16.84
883.4
19.37
$
11.55
$
883.4
$
11.77
$ 6.94
883.3
$ 9.02
$ 4.42
Book value per share
P/E ratio
Financial ratios
$
3.96
10.03
$ 4.36
14.05
$ 4.15
7.79
Current assets to current liabilities
Net debt as % of capitalization
Employees (at year end)
2.11
14.5%
11,494
2.84
1.0%
12,268
2.84
12.1%
12,225
$
3.77
7.04
2.15
8.2%
12,895
$ 2.29
7.08
1.70
18.0%
12,801
1The number of shares and values per share have been adjusted to reflect the 2008 and the 2006 stock splits.
14 - 15 15
SOUTHERN COPPER 2008
EXPANSION AND
MODERNIZATION
PROGRAM
The Ilo Smelter Modernization
Project. This project was
completed in January 2007
a n d has allowe d SCC to
increase sulfur capture over the
92% requirement established
in our agreement with the
Peruvian government: “PAMA”
(Environmental Compliance
and Management Program).
The average sulfur capture in
2008 was 95%.
15 15
Alloying with other metals, copper can acquire some additional invaluable features such as hardness, resistance to
tensile stress and greater resistance to corrosion.
16 - 17 17
SOUTHERN COPPER 2008
EXPANSION AND MODERNIZATION PROGRAM
Mexican OperatiOns
The Company will continue with the environmental projects at its
mining and metallurgical facilities. At La Caridad metallurgical
complex the gas handling and dust and effluent treatment projects are
being completed. These projects are at 93% and 70% of completion,
respectively, and have a combined budget of $9.0 million for 2009.
The Agua Prieta lime plant modernization project, in the Mexican
state of Sonora, is moving forward to completion. When finished, this
project is expected to reduce the annual lime cost of our Mexican
operations by approximately $9.0 million. The capital budget for
this project is $14.0 million.
peruvian OperatiOns
Concerning the expansion and modernization program that has
been taking place in recent years, we note the following:
The tailings disposal project for Toquepala and Cuajone is in progress.
This project will increase the height of the existing Quebrada Honda
Dam to impound future tailings from the Toquepala and Cuajone
mills. The installation of the main equipment and construction of
access roads for the main and lateral dams have been completed.
The first stage of this project will be under development until 2012
and will be completed in March 2009.
The replacement and installation work for the new primary crusher
in the Toquepala concentrator was completed; in order to avoid loss
of production, the primary crushing for the leaching dumps was
used while replacing the original concentrator crusher.
In 2008, the modernized Ilo smelter plant registered a 95% average
of sulfur capture.
17 17
Construction of the marine trestle at Ilo to offload sulfuric acid
was restarted upon the receipt of authorization from the Peruvian
Harbor National Authority. The project has reached 66% progress.
The Los Chancas project, located in the department of Apurimac in
southern Peru, is a copper and molybdenum porphyry deposit.
As a result of the pre-feasibility studies and after the preliminary
design of the pit, estimates show 355 million tons of mineralized
material with a copper content of 0.62%, 0.05% of molybdenum
and 0.039 grams of gold per ton. In the last quarter of 2008,
additional studies were started as well as a diamond drilling program
for additional 35,000 meters, in order to define the extent of the
deposit. Also a bidding process is under way for a feasibility study
to be developed in 2009. While we will continue to evaluate Los
Chancas we will defer making a final decision on development until
economic conditions improve.
Tia Maria: The Tia Maria project, which includes the Tia Maria and
the La Tapada deposits, is located in the department of Arequipa
on the southern coast of Peru and is part of a copper porphyritic
system. The feasibility studies in 2008 for Tia Maria show 193 million
tons of mineralized material with 0.302% copper content.
For La Tapada, the estimated mineralized resources show 445
million tons of mineralized material, with 0.434% copper content.
In 2008, the Company completed the basic engineering and started
the detailed engineering studies for the project. The environmental
impact assessment is expected to be completed in the second
semester of 2009.
As of December 31, 2008, we have spent $118.0 million for the Tia
Maria project. We are currently evaluating whether to put on hold
or to slow down the spending in light of current market conditions
and capital equipment cost.
We estimate spending $112.3 million on this project during 2009,
which includes funds necessary to complete environmental and
engineering studies, as well as spending previously committed.
When completed the new operating unit is expected to produce
120,000 tons of copper cathodes per year.
18 - 19 19
SOUTHERN COPPER 2008
Toquepala concentrator expansion: As of December 31, 2008, we
have spent $37.7 million for the Toquepala expansion. This project
is designed to increase annual Toquepala copper production by
approximately 100,000 tons per year. We completed the feasibility
study. The basic engineering is almost completed and detailed
engineering will be started. The environmental impact assessment
is also underway and is expected to be completed in the fourth
quarter of 2009. We expect to spend $65.5 million in 2009 to
complete studies and for previously committed purchase orders.
After that, we will put on hold making any new additional capital
spending commitments for this project.
Feasibility Study for Cuajone Expansion to 105,000 metric tons per
day was completed. However, any further spending is being deferred
pending improvement in economic conditions.
Worker in refinery, Ilo, Peru
19 19
20 - 21 21
SOUTHERN COPPER 2008
EXPLORATION
In addition to exploration
drilling programs at exis-
ting mines, we are currently
conducting exploration to
locate mineral deposits at
various other sites in Mexico,
Peru and Chile. During 2008,
SCC ‘s exploration expenses
were $37.0 million.
21 21
Copper is ductile, corrosion resistant, malleable and easily recyclable. The versatility of this valuable metal makes it
one of the most useful natural resources in the world.
22 - 23 23
SOUTHERN COPPER 2008
EXPLORATION
Mexican OperatiOns
In addition to exploratory drilling programs at existing mines, we are
currently conducting exploration to locate mineral deposits at various
other sites in Mexico. The following are some of the more significant
exploration projects:
el arco. The El Arco site is located in the state of Baja California in
Mexico. Preliminary investigations of the El Arco site indicate a deposit
of 846 million tons of mineralized material with average copper
grades of 0.51% and 0.14 grams of gold per ton, and 170 million tons of
leach mineralized materials with average copper grades of 0.56%. In
2008, we have continued the process of identifying water sources for
a leaching operation. Production wells will be tested to determine the
water potential of this area. Also, five diamond drill holes have been
drilled to a depth of 600 meters. The drilling indicates mineralized
material, with 0.50%-0.70% copper mineralization extending 270
meters below the previously known mineralization.
angangueo. The Angangueo site is located in the state of Michoacan
in Mexico. A deposit of 13 million tons of mineralized material has been
identified with diamond drilling. Testing indicates that the deposit
contains mineralized material containing 0.16 grams of gold and
262 grams of silver per ton, and is comprised of 0.79% lead, 0.97%
copper and 3.5% zinc. During 2005, we received the approval for our
environmental impact study and we are in the process of obtaining
land use approval. During 2008, we have continued negotiating with
the state of Michoacan to purchase various properties essential to the
operation. In addition, a feasibility study was commissioned; the results
are expected to be available by the end of first quarter 2009.
23 23
Buenavista. The Buenavista project site is located in the state of
Sonora in Mexico, adjacent to the Cananea ore body. Drilling and
metallurgical studies have shown that the site contains 36 million
tons of mineralized material containing 29 grams of silver, 0.69%
of copper and 3.3% of zinc per ton. A new “scoping level” study
indicates that Buenavista may be an economical deposit. During
2007, 2,100 meters were drilled to upgrade the mineralized material
and to acquire material for metallurgical testing. Results confirm the
previous geologic interpretation of the mineralized areas. Due to the
Cananea strike no work was performed in 2008.
carbon coahuila. In Coahuila, an intensive exploration program of
diamond drilling has identified two additional areas, Esperanza with
a potential for more than 30 million tons of “in place” mineralized
coal and Guayacan with a potential for 15 million tons of “in place”
mineralized coal, that could be used for a future coal-fired power plant.
During 2007 along with 5,767 meters of drilling, 23 million tons of
mineralized coal resources were identified at our Nueva Rosita No.
16 concession. Due to changed priorities, no work was done on this
project in 2008.
Los chalchihuites. The Chalchihuites project is located in the state
of Zacatecas. It is a contact deposit with mixed oxides and sulfides of
lead, copper, zinc and silver. A drilling program, in the late nineties,
defined 16 million tons of mineralized material containing 95 grams of
silver, 0.36% lead, 0.69% copper and 3.08% zinc per ton. Preliminary
metallurgical testing indicates a leaching precipitating-flotation
recovery process that can be applied to this ore. Due to other priorities
only the diamond drilling for metallurgical testing was performed in
2008.
sierra de Lobos. This project is located southwest of the city of
Leon, Guanajuato. Our target is a copper and zinc deposit with
grades between 0.5% and 1.0% copper and between 5% and 7%
zinc including a small contribution of gold and silver. In 2008, 1,636
meters were drilled. Results confirm the presence of copper and
zinc mineralization, but an economic deposit has not yet been
identified.
24 - 25 25
SOUTHERN COPPER 2008
pilares. During 2008, we bought Freeport-
McMoran’s 49% interest in Minera Pilares,S.A.
de C.V. (“Minera Pilares”), giving us 100%
ownership. Minera Pilares is located in the
state of Sonora, ten kilometers from the town
of Nacozari de Garcia. The work to clear and
prepare the access to the Porvenir tunnel
started at the end of 2008. Calculations
using Mine-Sight software indicated 52.9
million tons of mineralized material, with
0.92% copper content.
peruvian OperatiOns
In Peru, we have direct control of 194,190
hectares of mineral rights.
Los chancas. The Los Chancas project, located
in the department of Apurimac in southern
Peru, is a copper and molybdenum porphyry
deposit. As a result of the pre-feasibility
studies and after the preliminary design of
the pit, estimates show 355 million tons of
mineralized material with a copper content
of 0.62%, 0.05% of molybdenum and 0.039
grams of gold per ton. In the last quarter of
2008 additional studies were started as well
as a diamond drilling program for additional
35,000 meters, in order to define the extent
of the deposit. Also a bidding process is under
way for a feasibility study to be developed in
2009.
tantahuatay. The Tantahuatay project is
located in the department of Cajamarca
in northern Peru. The exploration work
conducted in 2008 was intended to evaluate
the upper part of the deposit mainly for gold
recovery. Work to date indicates 27.1 million
tons of mineralized material, with an average
silver content of 13.0 grams per ton and 0.89
grams of gold per ton. In 2008 we continued
with the feasibility study and with our efforts
to resolve the social and environmental
concerns of communities near the project.
We have a 44.25% share in this project.
Ore truck carrier in La Caridad, Sonora Complex, Mexico
Underground mine workers, Santa Barbara, Chihuahua, Mexico
25 25
Other peruvian prOspects
performed which is expected to continue in
2009.
In 2008 we conducted a total of 32,551.90
meters of diamond drilling in the area
surrounding the Tia Maria Project as well as
regional exploration conducted mainly in the
Ayacucho Region. For 2009 the exploration
program will be focused in central and southern
Peru with defined projects in the Tacna
and Ayacucho regions and we will continue
with prospecting programs in the different
mineralized strips.
chiLe
In Chile we have control of 35,258 hectares
of mining rights.
el salado. The El Salado prospect, located
in the Atacama Region, corresponds to a
copper-gold ore body which includes the
Diego de Almeida sector. During 2008 a
total of 3,232 meters of diamond drilling was
Other chiLean prOspects
D u r i n g 2 0 0 8 we co n ti n u e d w i th th e
exploration of Resguardo, (gold and copper
veins) located in northern Chile (Region
III-Atacama), with 3,729 meters of diamond
drilling. We also performed 1,000 meters of
diamond drilling at the Ticnamar prospect
located in northern Chile (Region I-Tarapaca).
Ticnamar is a porphiric deposit of copper and
molybdenum. The exploration program for
2009 mainly contemplates continuing with
the diamond drilling at El Salado, Resguardo
and Ticnamar and to obtain the necessary
permits to continue with the exploration of
the gold-silver Catanave prospect located in
the Region I.
Birds in Ite Bay
La Tapada deposit in Tia Maria project
26 - 27 27
SOUTHERN COPPER 2008
COMMUNITY
OUTREACH
S o u th e r n C o p p e r wo r k s
w i t h t h e u p p e r A n d e a n
communities of Moquegua and
Tacna, promoting sustainable
d evel o p m e nt with th ese
communities, respecting the
laws, ethics, the local culture
and tradition; furthermore, it
cooperates with Peru in the
achievement of its objectives.
27 27
Copper wire, for a long time, has been the preferred conductor, among all the cables used, for electric
supply and telecommunications.
28 - 29 29
SOUTHERN COPPER 2008
COMMUNITY OUTREACH
Mexican OperatiOns
Due to the extended strike at Cananea and its severe consequences
for both the local residents and the Company, it was decided to
undertake a social initiative. The Company contracted a consulting
group (Grupo Encuentro) who, using novel and original ideas for
community participation, approached local groups and helped to
improve relations between the Company and the local population.
Grupo encuentro
The project was carried out over a period of 100 days and it consisted
of participatory diagnosis and the identification of local leaders
who contributed to the success of the projects, as well as knowing
community needs and helping to develop social projects.
The activities included 18 workshops with various participants, 2 youth
camps, 8 in-depth interviews, 5 focus groups, 122 random interviews,
7 tours and the “Tree of Commitments” in which the children put into
practice skills and human values necessary to face the social and
economic reality of the community and made personal commitments
to the city.
Grupo Encuentro involved mothers and fathers, children, seniors,
workers, religious, teachers, traders and other actors in society in
the experience of the workshops and the activities at Cananea, all of
them benefited with the lessons learned from these experiences and
emotions.
During 2008, operations started in the community centers of the
mining units of Santa Eulalia, Santa Barbara and Planta de Nueva
Rosita, Coahuila. Activities offered in each of these centers benefit
more than 600 people, including women, men, children and older
adults. At present, workshops and talks are being presented on dance,
computers, carpentry, tailoring, baking, manual works and bijouterie,
all of which has generated a large degree of community participation.
29 29
IMMSA, in collaboration with the Secretariat
of the State of Coahuila, provided training
for 22 people at the following locations;
Rosita, Palau and Sabinas Coahuila, to work
in area production projects. As a result of the
efforts of the Secretariat and the National
Fund for Support to Solidarity Enterprises
(Fondo Nacional de Apoyo a las Empresas de
Solidaridad -FONAES) three of the 22 projects
are underway: a carpentry shop, a grocery, a
cibercoffee and pancake store. All of them
have been successful. It is hoped that these
type of projects can benefit more people in
the community and could help generating
self-employment.
In order to promote safety and health at
work among the personnel, their families
and the community at large, we carried out
a “Safety and Health Week 2008” at Planta
de Cobre, Units Santa Barbara, Charcas and
Taller Central.
In San Luis Potosi health fairs were conducted,
with 6,300 participants. These fairs focused
on the detection, promotion and appropriate
channeling of chronic degenerative diseases.
Ten lectures were conducted on preventive
medicine with the participation of over 300
people from the neighboring community.
Issues such as oral hygiene, breast cancer,
diabetes and hypertension, cervical cancer,
nutrition and sexuality were presented and
discussed at these lectures.
T h e p ro g r a m s o f “ L i te r a c y A d v i s e r,
Elementary and Secondary open for Adults”,
organized by the Community Development
Center of San Luis, in coordination with
the State Institute for Adult Education,
benefited over 400 people, and delivered 53
elementary certificates and 150 secondary
certificates.
peruvian OperatiOns
Southern Copper promotes sustainable
development projects in the upper Andean
communities of Tacna, Moquegua and
Arequipa, which are located close to our
principal operating facilities. This support
is from voluntary contributions made by our
Company to the “Asociacion Civil Ayuda del
Cobre” (Civil Aid Copper Association) under
an agreement signed with the Peruvian
government.
The projects within this program work
i n p a r tn e r sh i p with l o c a l p u b li c a n d
nongovernmental organizations to achieve the
benefit from legislation and the participation of
the neighboring communities; thereby taking
into account legislation and the historical and
cultural characteristics of each locality.
During 2008, Southern Copper has developed
the following programs and projects:
• Water resources.- We believe the most
significant achievement is the completion of
the construction and improvement of Marisol
Hydraulic Splitter, a large hydraulic project
that will benefit the Irrigation Commissions
of Cairani, Candarave, Huanuara and
Quilahuani, in the province of Candarave,
through the equitable distribution of water
from the Callazas river. According to Dr.
Julio Kuroiwa Zevallos, the director of the
National Hydraulic Laboratory, the Marisol
Hydraulic Splitter has an innovative design
for the continent. The total investment for
this project was $311,439.37.
Minor
irrigation
infrastructure work
continued in partnership with the irrigation
committees in Candarave, with an investment
of $205,741.63, and the construction of the
30 - 31 31
SOUTHERN COPPER 2008
Tacalaya-Camilaca’s hydraulic canal ($205,058.00). Both works are
part of the general irrigation system which relates to the Cularjahuira
Dike (which geotechnical study, conducted by the Company, will
make possible the construction of a new dam).
Southern Copper and the National Engineering University signed an
agreement for the Callazas Dam’s feasibility study. This project is
considered essential for the agricultural development in the region,
and it is included in the Development Plan of Tacna, the “Plan
Basadre” sponsored by the regional government of Tacna and the
Peruvian government. The Company will invest, through the Civil Aid
Copper Association, about $700,000.00. The project will include
three components: the design of the Callazas Dam, the study for
the improvement of major irrigation infrastructure and the study
of environmental and social impact. This project will ensure optimal
and rational use of water resources for agricultural activity during
the dry season.
Also, with an investment of $87,658.90, a geotechnical study for the
Cularjahuira Dike was completed. The dike is expected to benefit
the approximately 1,900 inhabitants of the districts of Camilaca and
Candarave. This study determined the feasibility of building a new
dam downstream.
• agronomy.- The Weeds Control Program was carried out in the
districts of Cairani, Huanuara and Quilahuani, in Candarave, with
the participation of local governments. The program led to the
formation of a control network, formed by the people benefited
from each locality. By means of this program, there was a
decrease in the presence of “kikuyu”, an invading plant, along
120 kilometers of channels and 30 hectares of alfalfa cultivation.
The total investment in the program was $42,033.15.
A Biological Control Campaign in the Tambo’s Valley, in partnership
with the National Service of Agrarian Health (Servicio Nacional
de Sanidad Agraria – SENASA) and the User´s Board, eradicated
the plague of ‘barreno’ –a type of damaging worm– in rice crops
in the districts of Cocachacra and Punta de Bombon (Arequipa
Region). The eradication was done with the release of controlled
31 31
wasps in a total area of 400 hectares. According to SENASA
assessments, in 350 hectares, the damage to the rice crops
by attack of the borer was reduced to less than 5%, thus the
program will continue.
Diseases were controlled in the production of oregano, a higher
quality product in the area. The use of guano (natural fertilizer
from sea birds) was promoted among the oregano producer’s
associations of the province. Additionally, the producers’
association should also benefit from the agreement Strengthening
Competitive Capacity of the Oregano Producers, signed with the
non-governmental organization “El Taller” and the municipalities
of Cairani, Huanuara y Quilahuani, in Candarave. The project
requires a total investment of $135,018.11.
In Candarave, the cultivation of thyme, a product used as
condiment and in the pharmaceutical industry, was promoted
as a alternative product for exportation. A field installation of
canola, a seed that contains Omega 3 and Omega 6 and which
produces vegetable oil, was successfully completed in alliance
with the governmental program Exporting Mountain (Sierra
Exportadora).
In addition, plantations of cereals such as oats and corn were
promoted, through an agreement signed with the Foundation for
Agrarian Development (Fundacion para el Desarrollo Agrario –
FDA) and the National Fund for Job Training and Employment
Promotion (FONDOEMPLEO).
• stockbreeding.- The Emergency Cattle Care Program was instituted
to take care of Candarave cattle producers, affected by the drought
period, through the delivery of hay and concentrate at low cost.
This action reduced the shortage of feed for cattle and helped to
maintain levels of cattle productivity.
A contingency fund has been established to assist producers in
dealing with emergencies, which will be used to reduce risks to the
productive local activity. An important part of the production of
forage is purchased by the program to support local producers, to
32 - 33 33
SOUTHERN COPPER 2008
whom it generates economic benefits. The investment is $66,455.91
and the participants in this program are over 800 families.
The Animal Health Program continues providing veterinary technical
assistance to producers from 17 communities located in districts of
Cairani, Candarave and Quilahuani, in the province of Candarave.
Preventive medicine and treatment for prevalent diseases in the
high Andean zone were distributed.
Also the Hampshire Sheep Genetic Improvement Project was
continued. It took place in 5 communities in the Candarave province,
through the use of registered breeders of high genetic quality in
local sheep herds from groups of engaged producers.
On the other hand, the implementation of the Agricultural Fair in
Tacna, like the Farming Fair of Candarave (in terms of organization,
logistics and awards), event in which the exhibition of the best
specimens of the various breeds of cattle, alpacas, sheep and
Peruvian Paso horses took place. Also, farming fairs in Huaytire and
Tacalaya were supported.
• nutrition.- The Nutrition Program called “Southern Forming Healthy
Communities” (PRONUT) was successfully launched through field
work in communities in the Tacna Region. The program’s objective
is to determine baseline statistics to establish or re-initiate goals of
the program and measure the social impact on beneficiaries.
These activities included the registration of the potential
beneficiaries and were performed by a team of nutritionists
and medical laboratory technicians, who, in parallel, tested the
nutritional status in children under 5 years old, pregnant women
and nursing mothers in Candarave.
The main goal of PRONUT is to significantly reduce the levels of
chronic malnutrition and anemia in children and women, so that
they can increase their medium and long term educational and/or
professional potential.
33 33
Concrete actions of the program include the implementation of
healthy baths, upgraded kitchens, family orchards and ecologic
bathrooms, small animal farming and continuous training to ensure
the sustainability of the program.
strengthening of productive capacities
The Alpaca Genetic Improvement Project continues in the community
of Huaytire, in the province of Candarave. The project uses modern
techniques for selection, care and breeding species for genetic
improvement in the medium term, which will benefit the production
chain and the potential for exportation. For this purpose, different
activities were performed, including the registration of available
animals, the acquisition of top quality breeders and the construction
of infrastructure for breeding. This construction is based on the
standardized design of the National Institute for Agrarian Innovation.
It’s built in an area of 180 square meters with capacity to hold up to
900 alpacas.
In addition, the Alpaca Producers Cluster continues in the community
of Tacalaya, which, with an initial investment of $79,015.72, aims for
a mass production of fur hats and alpaca fiber and by-products, with
the purpose of offering them in the local market and for export. This
program includes the development of fur, yarn and textile projects,
and process improvements in the manufacture of hats and the
packaging of oregano products.
The participation of women stands out, taking advantage of their
craftsmanship. They will bring in to the family an extra income from
textile workshops, like the one built with the support of the Company
in community of Santa Cruz (specialized equipment and tools were
bought for such activities).
It also highlights the project of strengthening the Torata User
Board´s capacities, which will allow for optimizing the management
of water use among farmers of the district in Moquegua, thereby
maximizing the potential of the sub basins of Torata and Chujulay
rivers.
34 - 35 35
SOUTHERN COPPER 2008
• education.- The rehabilitation and construction of educational
infrastructure of 56 schools was concluded. It is a process initiated in
2007 through the construction and/or rehabilitation of classrooms,
toilets, laboratories, perimeter fences and sport grounds.
During 2008, the schools from Cairani, Camilaca, Candarave,
Huanuara and Huaytire, in Candarave, were provided with furniture,
blackboards, libraries and computer equipment, which will benefit
local students. Other districts of the Moquegua Region also received
benefits.
• health.- The construction and rehabilitation of 27 health centers
was concluded, in the regions of Tacna (Cairani, Camilaca,
Candarave, Huanuara and Quilahuani districts) and Moquegua
(Mariscal Nieto and General Sanchez Cerro provinces, Carumas,
Cuchumbaya, Ichuña, Samegua, San Cristobal and Torata
districts).
Southern Copper promotes the sustainable development of
communities located within its area of influence, through the
Civil Aid Copper Association, which manages and invests in social
projects for sustainable development funds of the Voluntary
Contribution program. During 2008, the Company established a
local fund of $3’664,490.94 and a regional fund of $14’657,963.74,
to benefit the regions of Tacna and Moquegua.
Spreader at Toquepala mine, Peru
35 35
36 - 37 37
SOUTHERN COPPER 2008
RESULTS OF
OPERATIONS
S CC re p o r te d 2 0 0 8 n e t
earnings of $1,406.6 million
or diluted earnings of $1.60
per share, compared with net
earnings of $2,216.4 million
or diluted earnings of $2.51
per share in 2007 and net
earnings of $2,037.6 million
or diluted earnings of $2.31
per share in 2006.
N et s a l e s i n 20 0 8 we re
$4,850.8 million, compared
with $6 ,0 85 .7 million in
2007 and $5,460.2 million
in 2006. Sales decreased
by $1,234.9 million in 2008,
a 20.3% decline from the
previous year. The decrease
was principally attributable
to a decline in metal prices of
copper, molybdenum and zinc,
and less production in copper,
zinc and silver.
37 37
The unique combination of strength, ductility and resistance to tensile stress and to corrosion makes copper the
safest conductor and most preferred for electrical installations in buildings.
38 - 39
39
SOUTHERN COPPER 2008
RESULTS OF O PERATIONS
for the years ended December 31, 2008, 2007 and 2006.
SCC reported 2008 net earnings of $1,406.6 million or diluted earn-
ings of $1.60 per share, compared with net earnings of $2,216.4
million or diluted earnings of $2.51 per share in 2007 and $2,037.6
million or diluted earnings of $2.31 per share in 2006.
The decrease in 2008 earnings is mainly due to the lower production
and the fall in copper prices that began by the end of third quarter
and continued in the fourth quarter of 2008.
During 2008, price of copper on the London Metal Exchange (LME)
and the New York Commodity Exchange (COMEX), averaged $3.16
and $3.13 per pound, respectively, compared to $3.23 and $3.22 per
pound, respectively, in 2007.
Operating cash cost: The Company presents its operating costs both
including and excluding the revenues of its byproducts (molybdenum,
silver, zinc, etc.). Excluded from its calculation of operating cash cost
are depreciation, amortization and depletion, exploration, workers
participation provisions and other items of non-recurring nature.
The Company’s operating cash cost, as previously 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
(excluding by-products revenue)
2008
2007
2006
(in $ cents per pound)
0.341
(0.133)
0.159
1.714
1.380
1.283
39 39
As seen on the previous chart, our cash cost per pound for 2008,
when calculated with by-products revenue, are costs of 34.1 cents
per pound compared with a credit of 13.3 cents per pound in 2007.
The decrease in the by-products credit in 2008 period was largely
due to lower molybdenum prices, especially in the last quarter of the
year. The effect of lower molybdenum prices reduced the byproducts
credit by approximately 13.7 cents per pound for 2008.
Our per pound cash cost, excluding by-product revenues, was higher
by 33.4 cents per pound in 2008 compared to 2007 due to a decrease
of 17.4% in copper production, principally as a result of the Cananea
mine strike, which increased cash cost by 18.1 cents and the higher
power and fuel cost which increased cash cost by 9.9 cents.
Net Sales: Net sales in 2008 were $4,850.8 million, compared
with $6,085.7 million in 2007 and $5,460.2 million in 2006. Sales
decreased by $1,234.9 million in 2008, a 20.3% decline from the
previous year. The decrease was principally attributable to a decrease
in sales volume of 16.2% and a decline in metal prices.
Copper sales volume decreased 16.2% in 2008 due to a 17.4%
decrease in production principally due to the ongoing strike at the
Cananea mine and lower ore grades at the Toquepala and La Caridad
mines. In 2007, we also lost sales volume at Cananea due to a strike
but to a lesser extent than in 2008. In addition, zinc and silver sales
volume decreased as result of the strikes at some of our other
Mexican operations.
40 - 41
41
SOUTHERN COPPER 2008
The decline in metal prices began late in the third quarter of the year
and continued through the fourth quarter. Copper was 2.8% and
2.2% lower in 2008, depending on whether it was COMEX or LME
market, the molybdenum price was 5.0% lower and zinc prices were
42.2% lower.
Prices: Sales prices for the Company’s metals are established, mainly
by reference to the prices quoted in the London Metal Exchange (LME)
and The New York Commodity Exchange (COMEX), or published in the
Platt’s Metals Week, for dealer oxide mean prices for molybdenum.
Price / volume data
Average Metal Prices
Copper (per pound – LME)
Copper (per pound – COMEX)
Molybdenum (per pound)
Zinc (per pound – LME)
Silver (per ounce – COMEX)
Sales volume (in thousands)
Copper (pounds)
Molybdenum (pounds) (1)
Zinc (pounds)
Silver (ounces)
2008
2007
2006
$
$
$
$
$
3.16
3.13
28.42
0.85
14.97
$
$
$
$
$
3.23
3.22
29.91
1.47
13.39
$
$
$
$
$
3.05
3.09
24.38
1.49
11.54
2008
1´114,521
36,396
221,161
15,000
2007
1´330,557
35,945
251,766
18,311
2006
1´386,199
25,643
281,079
19,776
(1) The Company’s molybdenum production is sold in the form of concentrates.
Volume represents pounds of molybdenum contained in concentrates.
Cathode produced in
Ilo refinery, Perú
41 41
42 - 43 43
SOUTHERN COPPER 2008
ENVIRONMENTAL
AFFAIRS
The Company’s environmental
programs include, among
other features, water recovery
systems to conserve water
a n d minimize im p a c t o n
nearby streams, reforestation
programs to stabilize the
surfaces of the tailings dams
and the implementation of
scrub bin g te chnolo gy in
the mines to reduce dust
emissions.
43 43
Copper is essential for numerous functions in the world around us, as well as for our basic health needs, as it is one
of the vital elements necessary for our daily diet, which helps us to keep our body and our mind healthy.
44 - 45
45
SOUTHERN COPPER 2008
ENVIRONMENTAL AFFAIRS
The Company has instituted extensive environmental conservation programs
at its mining facilities in Mexico and Peru.
The Company has instituted extensive
environmental conservation programs at
its mining facilities in Mexico and Peru. The
Company’s environmental programs include,
among other features, water recovery systems
to conserve water and minimize impact on
nearby streams, reforestation programs to
stabilize the surfaces of the tailings dams and
the implementation of scrubbing technology in
the mines to reduce dust emissions.
MexicaN OPeratiONS
The Company’s operations are subject
to applicable Mexican federal, state and
municipal environmental laws, to Mexican
official standards, and to regulations for the
protection of the environment,
including
regulations relating to water supply, water
quality, air quality, noise levels and hazardous
and solid waste. Some of these laws and
regulations are relevant to legal proceedings
pertaining to the Company’s San Luis Potosi
copper facilities.
The principal legislation applicable to the
Company’s Mexican operations is the Federal
General Law of Ecological Balance and
Environmental Protection, which is enforced
by the Federal Bureau of Environmental
Protection (“PROFEPA”). PROFEPA monitors
compliance with environmental legislation
and enforces Mexican environmental laws,
regulations and official standards. PROFEPA
initiate administrative proceedings
may
against companies that violate environmental
laws, which in the most extreme cases may
result in the temporary or permanent closing
Production of trees for donations, Nursery, San Luis Potosi, Mexico
Safety Brigadiers, Mexico
45 45
of non-complying facilities, the revocation of
operating licenses and/or other sanctions or
fines. Also, according to the Federal Criminal
Code, PROFEPA must inform corresponding
authorities
environmental
non-compliance.
regarding
Mexican environmental regulations have
become increasingly stringent over the last
decade, and this trend is likely to continue and
has been influenced by the environmental
treaty entered into by Mexico, United States
and Canada in connection with NAFTA in
1999. However, the Company’s management
does not believe that continued compliance
with the federal environmental
law or
Mexican state environmental laws will have
a material adverse effect on the Company’s
business, properties, results of operations,
financial condition or prospects or will result
in material capital expenditures. Although
the Company believes that all of its facilities
are in material compliance with applicable
environmental, mining and other laws and
regulations, the Company cannot assure that
future laws and regulations would not have
a material adverse effect on the Company’s
business, properties, results of operations,
financial condition or prospects. Due to
the proximity of certain facilities of Minera
Mexico to urban centers, the authorities may
implement certain measures that may impact
or restrain the operation of such facilities.
For the Company’s Mexican operations,
environmental capital expenditures were
$34.1 million, $25.8 million and $5.3 million
in 2008, 2007 and 2006, respectively.
The Mexican Geological Services (“MGS”)
Royalties: In August 2002, MGS [formerly
named Council of Mineral Resources
(“COREMI”)] filed with the Third Federal
District Judge in Civil Matters an action
demanding from Mexcobre (La Caridad) the
payment of royalties since 1997. In December
2005, Mexcobre signed an agreement with
MGS. Under the terms of this agreement
the parties established a new procedure to
calculate the royalty payments applicable
for 2005 and the following years, and the
Company paid in January 2006, $6.9 million
of royalties for 2005 and $8.5 million as
payment on account of royalties from the
third quarter 1997 through the last quarter of
2004. On January 22, 2007 the Third Federal
Miners residential area in Esqueda, Sonora, Mexico
Views at Ite Bay, Peru
46 - 47
47
SOUTHERN COPPER 2008
District Judge issued a ruling regarding the
payment related to the period from the third
quarter of 1997 through the fourth quarter
of 2004. This ruling was appealed by both
parties in February 2007. The appeal was
lost by the Company in October 2007. The
Company filed a protective action (Amparo)
before the Ninth collegiate Civil Tribunal
which rendered a negative ruling on August
27, 2008. The Company is defending its
economic interest in the judicial process to
determine the final amount to be paid to
MGS. On an ongoing basis the Company is
required to pay a 1% royalty on La Caridad’s
copper production value after deduction of
treatment and refining charges and certain
other carrying costs.
San Luis Potosi Facilities: The municipality of
San Luis Potosi has granted Desarrolladora
Intersaba, S.A. de C.V. (“Intersaba”) licenses
for use of land and construction of housing
and/or commercial zones in the former Ejido
Capulines zone, where some residential
projects like “Villa Magna” and other new
residential projects are being developed
within an area designated as a buffer zone
due to IMMSA’s use of anhydrous ammonia
gas. This designation as a buffer zone was
granted by the risk area of SEMARNAT (the
federal environmental authority) within its
approval of the IMMSA’s Risk Analysis.
Regarding this situation, a number of actions
occurred, including the following:
1) Against the municipality of San Luis
Potosi, requesting the annulment of
Desarrolladora Intersaba’s authorizations
and licenses granted within the zinc plant’s
buffer zone.
In August 2006, the action regarding the
annulment of Villa Magna
licenses was
decided by a federal appeals court, which
denied IMMSA’s request. In September 2006,
IMMSA submitted its final appeal to the
Supreme Court of Justice and in February
2007, the court ruled against IMMSA.
IMMSA believes that even though the
outcome was adverse to its interest, the
construction of the “Villa Magna” housing
and commercial development will not
affect the operations of IMMSA’s zinc plant
by itself.
Reforestation workshop for elementary schools at the nursery in
San Luis
Production of trees for donations at the nursery, San Luis Potosi,
Mexico
47 47
In November 2008, a local court ruled that
IMMSA had to pay $0.9 million related to
this matter. IMMSA appealed such ruling.
4) Also, new lawsuits were filed by IMMSA
against the Municipality of San Luis Potosi
challenging other licenses granted in the
safeguard area.
2) In addition to the foregoing, IMMSA has
initiated a series of legal and administrative
procedures against the Municipality of San
Luis Potosi due to its refusal to issue IMMSA’s
use of land permit (licencia de uso de suelo)
in respect to its zinc plant. A federal judge
ruled that IMMSA’s use of land permit should
be granted. The municipal authorities
confirmed on February, 2009 that the
applicable local regulation allows IMMSA to
use the land for industrial purposes.
3) Additionally, Ejido Capulines, an agricultural
community, filed a protective action
against IMMSA’s Risk Analysis approved
by SEMARNAT. As previously noted, this
approval determines a buffer zone around
the San Luis facilities.
On November 4, 2008, a Federal Judge
considered that the Ejido Capulines did not
demonstrate any harm caused by IMMSA´s
Risk Analysis Authorization. On December,
2008 the Ejido Capulines appealed the
decision on the Federal Court Jurisdiction.
5) IMMSA filed on October 7, 2008 a lawsuit
against SEMARNAT before the Federal Tax
and Administrative Justice Court seeking
the nullity of a July 24, 2008 denial of
the Company’s request for a safeguard
declaration.
(Amparo) against
The Ejidal Commissariat of the “Ejido
Pilares de Nacozari”, initiated a protective
the second
action
expropriation decree (by means of which
2,322 hectares were expropriated for
public use), ignoring the judicial settlement
reached with the Company on this matter.
The judicial settlement had been ratified in
January 2006. The Company will defend
the settlement reached with the Ejido and
seek the dismissal of the case.
Mrs. Martinez, the wife of a miner, who died
in the Pasta de Conchos accident, initiated a
protective action against the negative ruling
issued by the Ministry of Economy denying
her request to launch a procedure to cancel
Firefighter in metallurgical plant
Firefither brigadiers for safety at work, Mexico
48 - 49
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SOUTHERN COPPER 2008
Industrial Minera Mexico’s coal concessions,
which she argued the accident should
trigger.
The First District Administrative Judge flatly
dismissed the case, but this ruling was later
revised by an appeals court. Mrs. Martinez
filed a new protective action against a new
ruling issued by the Ministry of Economy.
The Company is certain that an accident
cannot trigger a procedure of cancellation
of the coal concessions. Although the
Company cannot predict the outcome of
the procedures filed by Mrs. Martinez, the
Company asserts that the claims of Mrs.
Martinez are without merit and is vigorously
defending against the actions.
PeruviaN OPeratiONS
The Company’s operations are subject to
laws
applicable Peruvian environmental
and regulations. The Peruvian government,
through its Ministry of Energy and Mines
(“MINEM”) conducts annual audits of
the Company’s Peruvian mining and
metallurgical operations. Through these
environmental audits, matters related to
legal
environmental commitments, compliance
with
requirements, atmospheric
emissions, and effluent monitoring are
reviewed. The Company believes that it is in
material compliance with applicable Peruvian
environmental laws and regulations.
In 2003, the Peruvian Congress published
a new law announcing future closure and
remediation obligations for the mining
industry. In August 2006, in accordance
with this law and its amendments, the
Company prepared and submitted
to
MINEM a closure plan. In March 2008, the
Company submitted to the MINEM feasibility
Closure Plan. The MINEM has subjected the
Closure Plan to public consultation from late
September until late November 2008. Also
in November 2008, the Company submitted
to MINEM a closure plan of the Marine
Trestle in the Ilo Smelter area to ship sulfuric
acid, as part of a legislative requirement to
submit one year after the approval of the
Environmental Impact Studies. The Marine
Trestle is under construction.
In addition, the Company has initiated the
Environmental Impact Studies (EIA) for the
Elementary school student in Esqueda, Sonora, Mexico
Plant feed pound at SX/EW plant in Toquepala, Peru
49 49
expansion of its concentrators in Toquepala and Cuajone mines, and
for its Tia Maria project, located in the Arequipa region, which will
have mining and leaching operations.
For the Company’s Peruvian operations, environmental capital
expenditures were $0.5 million, $21.6 million and $161.0 million in
2008, 2007 and 2006, respectively.
Acid plant in Ilo smelter, Peru
Flotation cells in Cuajone concentrator, Peru
50 - 51 51
SOUTHERN COPPER 2008
GENERAL
INFORMATION
The Company was organized
o n D e c e m b e r 1 2 , 1 9 5 2 ,
according to the Laws of the
State of Delaware of the United
States of America, under
the original denomination
of Southern Peru Copper
Corporation (“SPCC”), which
was renamed on October 11,
2005, to Southern Copper
Corporation (SCC).
51 51
Copper is a natural bactericide, which stops the multiplying of bacteria in water distribution systems (plumbing and
air conditioning). Similarly, copper doorknobs, railings and plates in public buildings can help to minimize the risk of
transferring bacteria.
52 - 53
53
SOUTHERN COPPER 2008
GENERAL INFORMATION
Information related to its constitution and its
inscription in the Public Registry:
See: “Brief historical review
constitution of the Company” on page 58.
from the
Brief Description:
Southern Copper Corporation is one of the
largest integrated copper producers in the
world. We produce copper, molybdenum,
zinc, lead, coal and silver. All of our mining,
smelting and refining facilities are located in
Peru and in Mexico and we conduct exploration
activities in those countries and Chile. Our
operations make us one of the largest mining
companies in Peru and also in Mexico. We are
one of the largest copper mining companies
in the world with significant copper reserves.
We were incorporated in Delaware in 1952 and
have conducted copper mining operations
since 1960. Since 1996, our common stock
has been listed on both the New York and the
Lima Stock Exchanges.
Our Peruvian copper operations
involve
mining, milling and flotation of copper
ore to produce copper concentrates and
molybdenum concentrates, the smelting of
copper concentrates to produce anode copper,
and the refining of anode copper to produce
copper cathodes. As part of this production
process, we also produce significant amounts
of molybdenum concentrate and refined silver.
We also produce refined copper using SX/EW
technology. We operate the Toquepala and
Cuajone mines high in the Andes mountains,
approximately 984 kilometers southeast
of the city of Lima, Peru. We also operate a
smelter and refinery west of the Toquepala
and Cuajone mines in the coastal city of Ilo,
Peru.
Our Mexican operations are conducted
through our subsidiary, Minera Mexico S.A.
de C.V. (“Minera Mexico”), which we acquired
on April 1, 2005. Minera Mexico engages
principally in the mining and processing
of copper, molybdenum, zinc, silver, gold
and lead. Minera Mexico operates through
subsidiaries that are grouped into three
separate units. Mexicana de Cobre S.A.
de C.V. (together with its subsidiaries, the
“Mexcobre Unit”) operates La Caridad,
an open-pit copper mine, a copper ore
concentrator, a SX/EW plant, a smelter,
refinery and a rod plant. Mexicana de Cananea
S.A. de C.V. (together with its subsidiaries,
the “Cananea Unit”) operates Cananea, an
open-pit copper mine, which is located at the
site of one of the world’s largest copper ore
deposits, a copper concentrator and two SX/
EW plants. Industrial Minera Mexico, S.A. de
C.V. and Minerales Metalicos del Norte, S.A.
(together with its subsidiaries, the “IMMSA
Unit”) operate five underground mines that
produce zinc, lead, copper, silver and gold, a
coal mine and several industrial processing
facilities for zinc and copper.
We utilize many up-to-date mining and
processing methods,
including global
positioning systems and computerized
mining operations. Our operations have
a high level of vertical integration that
allows us to manage the entire production
process, from the mining of the ore to the
production of refined copper and other
products and most related transport and
logistics functions, using our own facilities,
employees and equipment.
53 53
Economic Group
SCC, indirectly, makes part of “Grupo Mexico S.A.B. de C.V.” who owns 100% of Americas
Mining Corporation (“AMC”) shareholding.
Name of the company
SEVERAL ACTIVITIES
1
Grupo Mexico, S.A.B. de C. V.
2 Grupo Mexico Servicios, S.A. de C.V.
RAILROAD ACTIVITIES
Inscription
in the
Location RPMV %
Mexico
Mexico
100.00
3
Mexico Proyectos y Desarrollo, S.A. de C.V.
Mexico
100.00
MINING ACTIVITIES
4
5
6
7
8
9
10
11
12
13
14
Americas Mining Corporation (“AMC”)
Southern Copper Corporation (SCC)
Americas Sales Company, Inc.
Minera Mexico, 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.
Southern Peru Limited
Southern Peru Copper Corporation, Agencia en Chile
Southern Peru Copper Corporation, Sucursal del Peru
Compañia Minera Los Tolmos, S.A.
EE.UU.
EE.UU.
EE.UU.
Mexico
Mexico
Mexico
Mexico
EE.UU.
Chile
Peru
Peru
√
√
99.99
79.00
100.00
99.95
99.99
99.99
99.98
100.00
100.00
99.291
97.30
NOTA:
1 Includes 82.69% of patrimony and 16.60% of common shares.
Corporate Capital and Common Stock
The authorized number of shares
Issues an Paid Capital: Common Shares
Nominal Value of Common Shares
shares
2,000’000,000
884’596,086
0.01
$
Total number and percent of shares
Americas Mining Corporation
Common Shares
Total
Shares
Interest
675’100,000
179’800,000
854’900,000
79.00%
21.00%
100.00%
54 - 55
55
SOUTHERN COPPER 2008
AuthorizAtions obtAined for the development
of the business
MExICAN OPERATIONS
La Caridad Mine
“La Caridad Concentrator” started operating in 1979, with a milling
capacity of 90,000 tons per day.
“Molybdenum Plant” started operating in 1982, with a production
capacity of 2000 tons of copper-molybdenum concentrate per day.
“La Caridad SX/EW Plant” started operating in May, 1995 to December
31, 2008, with a capacity of 60 tons per day.
La Caridad Metallurgic Complex
La Caridad Smelter started operating in July, 1986, with a production
capacity of 493 tons of anode per day and was expanded to 932 tons
in March,1997.
“La Caridad Refinery” started operating in July, 1997, with a
production capacity of 493 tons of copper cathode per day and was
expanded to 822 tons in January, 1998.
“La Caridad Precious Metals Plant” started operating in May, 1999,
with a production capacity of 43,836 ounces of silver per day, 247
ounces of gold per day and 342 kilograms of selenium per day.
“La Caridad Wire Rod Plant” started operating in April, 1998, with
a production capacity of 300 tons of wire rod per day and was
expanded to 411 tons in March,1999.
Cananea Mine
“Cananea Concentrator” started operating in September, 1986, with a
capacity of 62,500 tons per day, the capacity was expanded to 70,000
tons in 1988 and to 76,700 tons in 1998.
“Cananea SX/EW I Plant” started operating in 1980, with a capacity of 30
tons per day.
“Cananea SX/EW II Plant” started operating in 1989, with a capacity of 60
tons per day and was expanded to 120 tons in 2001.
Underground Mines
1.- The Santa Barbara Unit a has milling capacity of 6,000 tons of
ore per day.
2.- The Santa Eulalia Unit has a milling capacity of 1,500 tons of ore
per day.
3.- The San Martin Unit has a milling capacity of 4,400 tons of ore
per day.
4.- The Charcas Unit has a milling capacity of 4,000 tons of ore per
day.
55 55
5.- The Taxco Unit has a milling capacity of 2,000 tons per day.
6.- The Coquizadora Coal Plant, in Coahuila Unit, has a capacity of
100,000 tons of coke per year.
7.- The Zinc Refinery has capacity to produce 285 tons of refined zinc
per day.
8.- The San Luis Potosi Copper Smelter has a production capacity of
66 tons of blister copper per day.
PERUVIAN OPERATIONS
Toquepala
1. “Toquepala Concentrator”. Authorized by Directorial Resolution
No. 455-91-EM/DGM/DCM dated July 5, 1991 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 de Mineria” authorized the expansion
of the Toquepala Concentrator to a 43,000 Metric Tons/Day
throughput.
2. “Toquepala Leaching Plant (SX/EW)”. Authorized by Directorial
Resolution No. 166-96-EM/DGM dated May 7, 1996, approved the
operation of the Toquepala SX/EW Plant. The resolution granted
60 hectares of surface land and authorized a throughput of
11,850 Tons/Day.
Based on Report No. 663-98-EM/DGM/DPDM dated November
10, 1998 the “Director General de Mineria” authorized the
expansion of the Toquepala SX/EW Plant to 18,737 Metric Tons/
Day throughput. Directoral Resolution dated May 19, 2003,
based on Report No. 291-2003-EM-DGM/DPDM, authorized the
operation of the SX/EW Plant to a throughput of 18,737 Metric
Tons/Day.
Cuajone
1. “Botiflaca Concentrator in Cuajone“.
Authorized by Directorial Resolution No. 150-81-EM/DCM dated
August 14, 1981 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 de Mineria” authorized the expansion of the
Cuajone Concentrator to 87,000 Metric Tons/Day throughput.
56 - 57
57
SOUTHERN COPPER 2008
Based on Report N° 080-2002-EM-
DGM/DPDM, dated March 13, 2002, the
“Director General de Mineria” authorized
the expansion of the Ilo Copper Refinery to
a capacity of 800 Metric Tons/Day.
3. “Sulfuric Acid Plant”. Authorized by
Directorial Resolution No. 024-96-EM/
DGM dated January 19, 1996, approved
the operation of the Sulfuric Acid Plant,
installed at the Smelter, 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 de Mineria” authorized
the
expansion of the Ilo Sulfuric Acid Plant to
a capacity of 300,000 Metric Tons/Year
production.
4. “Coquina Wash Plant and Sea shell
Concentrates”. 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) recovered from nearby mines.
Seashell is produced separating sand and
other materials from the coquina using sea
water washing screens.
2. “Cuajone Leaching Plant
(LX/EW)”.
Authorized by Directorial Resolution No. 155-
96-EM/DGM dated May 6, 1996 approved
the operation of the Cuajone Leaching Plant.
The resolution granted 400 hectares of
surface land and authorized a throughput of
2,100 Tons/Day. By recourse No. 1733227,
dated November 7, 2007, registered in the
DGM of the Mining Ministry, the expansion of
the Toquepala SX/EW Plant was requested,
from 2100 to 3100 Metric Tons/Day.
Ilo
1. “Ilo Smelter“. Authorized (definitely) by
Directorial Resolution No. 0078-69-EM/
DGM dated August 21, 1969 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 de Mineria” authorized the expansion
of the Ilo Smelter to a 3,100 Metric Tons/Day
throughput of copper concentrates.
2. “Ilo Refinery”: Authorized by Report No.
056-94-EM/DGM/DRDM dated May 27,
1994 the “Director General de Mineria”
authorized the operation of the
Ilo
Copper Refinery at 533 Metric Tons/Day
throughput of blister copper.
Based on Report No. 506-98-EM/DGM/
DPDM dated September 2, 1998 the
“Director General de Mineria” authorized
the expansion of the Ilo Copper Refinery
to a capacity of 658 Metric Tons/Day
throughput of blister copper.
Open pit in Cuajone mine, Peru
57 57
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DESCRIPTION OF OPERATIONS AND DEVELOPMENT
REGARDING THE ISSUING ENTITY
PURPOSE
The purpose of Southern Copper Corporation (SCC) is to engage
in activities 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 copper, molybdenum, gold, silver, lead, zinc, iron and any other
class of minerals and materials 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 mining deposits. SCC belongs to the CIIU 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
(“SPCC”), 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. 03025091 of the
Juridical People of the Registry Office of Lima and Callao.
Actions following company
incorporation:
Capital increase:
By Public Deed dated May 31, 1995, signed before notary public of
Lima, Dr. Carlos A. Sotomayor Bernos, the Branch capital increase was
formalized. It was made through money contribution by the Company
59 59
in favor of its Peru Branch and by the owners
of labor shares, pursuant to Legislative Decree
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 contribution
made by the Labor Shares (today 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
Capital.
1995,
Exchange of Labor Shares for Common
Shares:
Dated September 7,
“Southern
Peru Copper Holding Company” was also
incorporated pursuant to the Laws of the State
of Delaware, aiming at acting as a holding
company that owns all Southern Peru Copper
Corporation shares, and at performing an
exchange of the shares that were then called
“Labor Shares” (today Investment Shares)
issued by the branch in Peru, delivering 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 Investment Shares).
On December 31, 1995, Southern Peru Copper
Corporation changed its corporate name to
“Southern Peru Limited”, and “Southern
Peru 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 Corporation and
Southern Peru Limited was agreed. The
first company absorbed 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 percentage in the
corporate capital or in the Net Worth Share
Account (investment shares), which were kept
the 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 Corporation, Peru Branch, or the
abbreviated name of “Southern Peru” and/or
the acronym SPCC.
Change of Economic Group:
In November 1999, Grupo Mexico S.A.B. de C.
V., a firm incorporated pursuant to the Laws
of the Republic of Mexico, acquired in the
United Stated 100% of ASARCO Incorporated,
the main shareholder of Southern Peru
Copper Corporation at that time. In this way,
SPCC became a subsidiary of Grupo Mexico,
who keeps its shareholding through Americas
Mining Company (AMC).
Acquisition of Minera Mexico, S.A. de C.V.
(“MM”) and other corporate changes:
S CC s h a re h o l d e r s , i n a s h a re h o l d e r
extraordinary meeting dated March 28, 2005,
approved issuance of Common Shares and
required actions related to the acquisition of
MM, a firm incorporated pursuant to the Laws
of the Republic of Mexico. This transaction was
approved for more than 90% of the stocks
and circulating capital of SCC. To acquire MM,
SCC issued 67,207,640 shares in exchange
for MM shares. Once the shares related to
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SOUTHERN COPPER 2008
the acquisition were issued, Americas Mining
Corporation increased its share in SCC from
54.2% to approximately 75.1%.
SCC $500 Million Share Repurchase
Program:
In 2008, the Company’s Board of Directors
authorized a $500 million share repurchase
program. During 2008 the Company purchased
28.5 million shares of its common stock at a
cost of $384.7 million. These shares will be
available for general corporate purposes. The
Company may purchase additional shares
from time to time, based on market conditions
and other factors. This repurchase program
has no expiration date and may be modified
or discontinued at any time.
Americas Mining Corporation Increased its
Participation in SC:
I n 2 0 0 8 G r u p o M e x i c o , t h r o u g h i t s
wholly owned subsidiary AMC, purchased
approximately 11.8 million shares of the
Company’s common shares. As a result of
these transactions Grupo Mexico’s ownership
of SCC’s outstanding capital stock increased
from 75.1% to 79.0%1 at December 31th,
2008.
Change in the Certificate of Incorporation:
O n M a rch 28 , 20 0 5 , fo llowin g B o a rd
o f D i re c to r s re co m m e n d a ti o n s , S CC
shareholders approved in an extraordinary
meeting the amendments to the Articles
of I n co r p o ratio n D e e d , cha n g i n g th e
composition and obligations of some Board
committees.
Special Independent Director:
The changes to the Articles of Incorporation
Deed 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 Appointment
C o m m i t t e e o f t h e B o a r d . A s p e c i a l
independent director may only be removed
from the Board upon a justified cause.
The number of special independent directors
in that Directory at any time shall equal (a) the
total number of directors in the Board multiplied
by (b) the percentage of Common Shares all the
shareholders (that are not Grupo Mexico and
Cerro Baul in Cuajone, Moquegua, Peru
Aerial view of Toquepala mine, Peru
1By February 23rd, 2009, Americas Mining Corporation participation in SCC has increased to 79.5%
61 61
its affiliates) have, rounding up to the following
integer whole number. Notwithstanding the
abovementioned, the total number of people
appointed as special independent directors
(not belonging to Grupo Mexico) cannot be less
than two or more than six.
Special Nominating Committee:
The Special Nominating Committee functions
as a special committee to nominate special
independent directors to the Board. Pursuant
to our Amended and Restated Certificate
of Incorporation, as amended, a special
independent director is any director who (i)
satisfies the independence requirements of
the New York Stock Exchange or NYSE (or any
other exchange or association on which the
Common Stock is listed) and (ii) is nominated
by the Special Nominating Committee. The
Special Nominating Committee has the right
to nominate a number of special independent
directors based on the percentage of our
Common Stock owned by all holders of our
Common Stock, other than Grupo Mexico and
its affiliates.
The Special Nominating Committee consists
of three directors, two (2) of whom are Luis
Miguel Palomino and Carlos Ruiz Sacristan
(each an “Initial Member” and, together with
their successors, “Special Designees”) and
such other director, currently Xavier Garcia de
Quevedo Topete, as may be appointed by the
Board of Directors or the “Board Designee”.
The Board Designee will be selected annually by
the Board of Directors. The Special Designees
will be selected annually by the members
of the Board who are special independent
directors or Initial Members. Only special
independent directors can fill vacancies on the
Special Nominating Committee. Any member
of the Special Nominating Committee may be
removed at any time by the Board of Directors
for cause. The unanimous vote of all members
of the nominating committee will be necessary
for the adoption of any resolution or the taking
of any action.
Our Amended and Restated Certificate of
Incorporation, as amended, provides that the
number of special independent directors on
the Board of Directors at any given time shall
be equal to (a) the total number of directors
on the Board of Directors multiplied by (b) the
percentage of Common Stock owned by all of
the stockholders (other than Grupo Mexico
Flotation cells in Toquepala concentrator, Peru
62 - 63
63
SOUTHERN COPPER 2008
and its affiliates), rounded up to the next whole
number. Notwithstanding the foregoing, the
total number of persons nominated as special
independent directors cannot be less than two
or greater than six.
Notwithstanding the foregoing, the power of
the Special Nominating Committee to nominate
special independent directors is subject to the
rights of the stockholders to make nominations
in accordance with our by-laws.
The provisions of the Amended and Restated
Certificate of Incorporation, as amended,
relating to special independent directors may
only be amended by the affirmative vote of a
majority of the holders of shares of Common
Stock (calculated without giving effect to any
super majority voting rights) other than Grupo
Mexico and its affiliates.
in
Transactions with affiliates:
Amendments to the Deed also prohibit
the Company to commit
important
transactions with the affiliates, except
if the transaction has been revised 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 in which Common
Shares are listed) independence regulations.
An important transaction of the affiliate
is defined as an important transaction,
commercial negotiation or financial share 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 to 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 Amendment of its
Articles of Incorporation Deed to the Secretary
of State in the State of Delaware, and it came
into effect as from 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
Copper Corporation to Southern Copper
Corporation or SCC. The change was adopted
because the new corporate name reflects
more precisely the Company’s operations
reach outside the Republic of Peru after its
acquisition of Minera Mexico and the latter’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
Articles of Incorporation Deed to remove
others’ provisions in our Deed related with 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
following agreement of most of Board members
stipulating the number of directors will not be
less than six or more than fifteen.
The Deed amendment was submitted 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 headquarters corporate
name should comprise the corresponding name
of the ancillary organizations linked to it, as is
the case of the Peru Branch through which the
Corporation develops its mining activities in
Peru.
After consulting with Peruvian lawyers, the
Board of Directors, taking into consideration
the net worth and assets importance of the
Branch, the need to continue acknowledging
the position of the Peruvian Branch with its
63 63
local and international copper clients, the
need to preserve its proceeds and its position
in good name in the copper market, and the
need to prevent any possible client 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 to 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 Bylaws:
Dated January 26, 2006, the Board approved
amendment to Southern Copper Corporation’s
bylaws (i) aiming at removing the provisions
related to Class A Common Shares among other
changes.(ii) adding a new provision for advance
notice to shareholders seeking to nominate
directors or to propose other business at
annual or special meetings of the Common
Stockholders (as applicable) (iii) substitute
Grupo Mexico for ASARCO Incorporated in
the “Change in Control” definition in the
Corporation’s by-laws (iv) and eliminate the
80% supermajority vote requirement for
certain corporate actions. The modification
of the Modified Certificate of Incorporation
increased the capital stock from 167’207,640
shares to 320’000,000 shares. These
modifications were submitted for approval of
the shareholders at the shareholders annual
meeting held on April 27, 2006 which was
adjourned and reconvened for May 4, 2006,
and later on adjourned and reconvened for
May 11, 2006.
At the annual meeting, on April 27, 2006, the
proposal to amend the by-laws to eliminate
certain extraneous provisions relating to
the retired series of Class A Common Stock
had an affirmative vote of 79.85% of the
required votes. Because the required vote
for the approval of this proposal was 80%
and because there were still votes that
needed to be tabulated, the annual meeting
for this proposal was adjourned until May
4, 2006. On May 4, 2006, at the adjourned
and reconvened meeting the stockholders
approved the proposal with an affirmative
vote of 80.61% of the required votes.
On April 27, 2006, stockholders approved (i)
the amendment to the by-laws to introduce
a new provision for advance notice to
shareholders seeking to nominate directors or
to propose other business at annual or special
meetings of the Common Stockholders (as
applicable); (ii) the amendment to the by-laws
to substitute Grupo Mexico for ASARCO
Incorporated in the “Change in Control”
definition in the Corporation’s by-laws; (iii) the
amendments to the Amended and Restated
Certificate of Incorporation to increase the
number of shares of Common Stock, which
the Corporation is authorized to issue from
167’207,640 shares to 320’000,000 shares;
and (iv) the selection of the independent
accountants.
On April 27, 2006, the proposal to amend the
by-laws to eliminate the 80% supermajority
vote requirement for certain corporate actions
had received preliminary votes, representing
an affirmative vote of 78.35% of the required
votes. Because the required vote for the
approval of this proposal was 80% and
because there were still votes that needed
to be tabulated, the annual meeting for this
proposal was adjourned first until May 4, 2006,
and subsequently until May 11, 2006. On May
11, 2006, at the adjourned and reconvened
meeting stockholders did not approve the
proposal having received an affirmative vote of
79.61% of the required votes.
SCC is indirectly, part of Grupo Mexico S.A.B.
de C.V. which owns 100% of Americas Mining
Corporation (AMC) shareholding, owner of
79.0% of SCC shares.
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SOUTHERN COPPER 2008
65 65
Information about plans and investment policies:
See Expansion and Modernization Program on page No. 14.
Relationship between the Issuer and the Government:
On November 20, 1996, SCC and the Peruvian Government (Ministry
of Energy and Mines) signed a contract that will remain effective until
the year 2010 and 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 the Solvent Extraction
(SX) operation in Cuajone. Also, on April 18th, 1995, SCC and the
Peruvian Government (CONITE) signed a contract that will remain
effective during ten years and guarantees the availability of foreign
currencies, free remittance of dividends to the exterior, 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
mining sAfety:
MExICAN OPERATIONS
A key element of our business philosophy is “Safety is a first and
an essential part of our operations”. We are committed to the
welfare of our employees and it is the basis for the implementation
of the Safety and Health Administration System at Work, known by its
Spanish acronym SIASST. SIASST focuses on safe workplaces and the
performance of work in a safe manner.
With the implementation of the SIASST before the end of 2008, all
our Minera Mexico mines, plants and refineries signed agreements
to voluntarily opt to join the Labor and Social Insurance Secretariat’s
(STPS), Self Safety and Health Program at Work. This program
promotes the establishment of administration systems, based on
national and international standards, to encourage the operation of
work centers with safety and hygiene.
Truck drivers
in Toquepala mine, Peru
Through this program, the STPS gives awards at three different levels,
and our Company’s Minera Mexico operations were entitled to the third
recognition, “Safe Company”, as its work accident rates were below the
national average and, in addition, had the following achievements:
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SOUTHERN COPPER 2008
1) Compliance with regulations on safety and
health.
2) Actions of continuous improvement in
safety and health.
3) Accomplishments in the administration of
safety and health at work.
Also, once the implementation phase of
the SIASST is concluded, which considers
implementing an administration system of
safety and health, the Company will move in a
continuous improvement process and obtain
the OSHA 18001 certification.
Part of the results of the implementation
of the SIASST has been the reduction of
accidents at Minera Mexico’s operations in
2008, which decreased by 28.66% in total
accidents and 36.89% in disabling accidents,
when compared to 2007. In respect to safety
indicators in 2008, Minera Mexico achieved
a reduction of: 22.13% in the frequency rate,
3.95% in the severity rate, and 25.58% in
the loss rate, all compared to 2007. As for
fatalities, unfortunately the results were
similar to 2007 with three recorded cases.
PERUVIAN OPERATIONS
The Safety and Health results in 2008, for
the open pit mining operations in Toquepala
and Cuajone mines, metallurgical operations
in Ilo Unit, which includes a smelter and
refinery plants, are as follows: Frequency
I n d e x 1 .9, S e v e r i t y I n d e x 1 7 2 .9 a n d
Accidentability rate 0.3. These indicators
correspond to 18 lost time accidents. In
2008, no fatal accidents were registered.
The Ilo Unit received In 2008 the “John T.
Ryan” Award from MSA, offered to the best
security indicators in mining operations in
Peru. The evaluators for this award were:
the General Mining Director from Ministry
of En e rg y a n d M i n e s (“ M I N EM ” ), th e
President of the Mining Engineers Institute
of Peru, The President of the National
Mining, Petroleum and Energy Society and
the Dean of the Engineers Association of
Peru.
generic description of mAin
Assets
MExICAN OPERATIONS
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 tons per day,
consists of 2 primary crushers, 4 secondary
crushers, 10 tertiary crushers, 10 primary
mills, a distributed control system, 5 mills
for regrinding, 103 primary flotation cells,
10 column cells, 70 exhaustion flotation
cells, 7 thickeners, 3 ceramic filters.
3. Major Cananea mine equipment includes
44 trucks for ore hauling with individual
capacities ranging from 240 to 360 tons.
4. For ore loading there are 8 shovels with
individual capacities ranging from 39 to 70
tons.
5. The mine auxiliary equipment including has
7 drillers, 5 front loaders, 5 motor graders
and 24 tractors.
6. In
the
Solvents
Extraction
and
Electrowinning (SX/EW) I and II Plants
of Cananea, breaker system No. 1 has
a capacity of 32,000 tons per day and
a 120” plate feeder, a 54”x79” breaker,
a belt feeder, a 7-belt system and a
distributor car. System No. 2 has a capacity
of 48,000 tons per day and has one 60” x
89” breaker, a 78” belt feeder, 3 conveyor
67 67
belt systems and distributing car. The
Leaching System consists of 3 irrigation
systems (Kino, Quebalix 1 and Quebalix
2) and are the 7 ponds of rich solution in
copper PLS. Plant I has 3 solvent extraction
tanks with a nominal capacity of 960 m3/hr
of PLS, and 52 electrowinning cells. Plant I
has a daily production capacity 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 216 cells distributed in two bays.
Plant II has a daily production capacity of
120 tons of copper cathodes with 99.999%
purity.
We intend to increase our Cananea unit’s
production of copper cathodes with a new
SX/EW plant, (SXEW III) with an annual
capacity of 33,000 tons. The plant would
produce copper cathodes of ASTM grade
1 or LME grade A. The project includes
the installation of storage for deliverables
required for operation of the plant and
the installation of an emergency power
plant and a fire protection system. Due
to the ongoing strike at Cananea, this
project has been temporarily put on hold
until we satisfactorily resolve the labor
issue.
La Caridad
1. La Caridad Production Unit has 51 mining
concession titles with a total area of
86,529.26 hectares.
2. La Caridad concentrator plant with a milling
capacity of 90,000 tons per day consisting
of 2 primary crushers, 6 secondary crushers,
12 tertiary crushers, 12 ball mills, a master
primary crushing system, a master fine
crushing system, a master milling control
system, 100 primary flotation cells, 4 re-
milling mills, 96 cleaning flotation cells, 12
thickener and 6 drum filters.
3. There are 27 trucks for ore hauling with
individual capacities of 240 tons, 6 shovels
with a capacity of 43 cubic yard. As for
mine auxiliary equipment there are 6
drillers, 5 front loaders, 3 motor graders
and 20 tractors.
4. Approximately 547.5 million tons of
leaching ore with an average grade of
approximately 0.26% copper have been
extracted from the La Caridad open-pit
mine and deposited in leaching dumps
from May 1995 to December 31, 2008.
All copper ore with a grade lower than
the mill cut-off grade 0.30%, but higher
than 0.15% copper, is delivered to the
leaching dumps. In 1995, we completed
the construction of a SX/EW facility at
La Caridad that has allowed processing
of this ore and certain leach ore reserves
that were not mined and has resulted in
a reduction in our copper production
costs. The SX/EW facility has an annual
capacity of 21,900 tons of copper
cathodes.
5. “La Caridad Solvent Extraction and
Electrowinning (SX/EW) Plant” has 9
irrigation systems for the dumps and 2
PLS ponds – pregnant leach solution, a
head tank that permits the combination
of the solutions of both ponds and feeds
the Solvent Extraction plant with a more
homogenous concentration. The plant
has 3 trains of solvent extraction with a
nominal capacity of 2,070 cubic meters
per hour, and 94 electrowinning cells
distributed in one single electrolytic bay.
The plant has a daily production capacity
of 62 tons of copper cathodes with
99.999% purity.
6. Lime Plant, located in the Agua Prieta city
in the State of Sonora, with a production
capacity of 132,000 tons per year.
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SOUTHERN COPPER 2008
La Caridad Metallurgic Compound
Copper concentrates from Cananea and La
Caridad are transported by rail and truck,
respectively, to the La Caridad smelter where
they are processed and cast into copper anodes
of 99.2% purity. Sulfur dioxide off-gases
collected from the flash furnace, Teniente
converter and conventional converters are
processed into sulfuric acid, at two sulfuric acid
plants. Approximately 2% to 3% of this acid is
used by our SX/EW plants and the balance is
sold to third parties.
Almost all of the anodes produced in the
smelter are sent to the La Caridad copper
refinery. The actual installed capacity of the
smelter is 1’000,000 tons per year, a capacity
that is sufficient to treat all the concentrates
of the La Caridad and Cananea mining
complexes. The smelter includes a flash
type concentrates drier, a steam drier, a flash
furnace, one El Teniente modified converted
furnace, two electric slag-cleaning furnaces,
three Pierce-Smith converters, three rafinnate
furnaces and two casting wheels. The anode
production capacity is 300,000 tons per year.
Refinery
La Caridad includes an electrolytic copper
refinery
that uses permanent cathode
technology. The installed capacity of the
refinery is 300,000 tons per year. The
refinery consists of an anode plant with a
preparation area, an electrolytic plant with
an electrolytic cell house with 1,115 cells and
32 liberator cells, two cathode stripping
machines, an anode washing machine, a slime
treatment plant and a number of ancillary
installations. The refinery is producing grade
A copper cathode of 99.99% purity. Anodic
slimes are recovered from the refining process
and sent to the slimes treatment plant where
additional copper is extracted. The slimes are
then filtered, packed and shipped to the La
Caridad precious metals refinery to produce
silver and gold.
The operations of the precious metal
refinery are divided into two stages: (i)
the antimony is eliminated from the slime,
and (ii) the slime is dried in a steam dryer.
After this the dried slime is smelted and a
gold and silver alloy is obtained, which is
known as dore. The precious metal refinery
plant has a hydrometallurgical stage and a
pyrometallurgical stage, besides a steam
dryer, dore casting system, Kaldo furnace,
20 electrolytic cells in the silver refinery,
one induction furnace for fine silver, one
silver ingot casting system, two reactors for
obtaining fine gold. The process ends with
the refining of the gold and silver alloy.
Rod Plant
A rod plant at the La Caridad complex was
completed in 1998 and reached its full annual
operating capacity of 150,000 tons in 1999.
The plant is producing eight millimeter
copper rods with a purity of 99.99%. The
rod plant includes a vertical furnace, one
retention furnace, one molding machine, one
laminating machine, one coiling machine and
one coil compacter.
Other facilities include a lime plant with
a capacity of 132,000 tons per year; two
sulfuric acid plants, one with a capacity of
2,625 tons per day and the second with a
capacity of 2,135 tons per day; three oxygen
plants, each with a production capacity
of 275 tons per day; and two power turbo
generators, one of them uses residual heat
from the flash furnace, the first with a 11.5
megawatt capacity and the second with a 25
megawatt capacity.
Underground Mines
IMMSA
Our IMMSA unit (underground mining poly-
metallic division) operates five underground
mining complexes situated
in central and
northern Mexico and produces zinc, lead,
69 69
copper, silver, gold and has a coal mine. These
complexes include industrial processing facilities
for zinc, lead, copper and silver. All of IMMSA’s
mining facilities employ exploitation systems
and conventional equipment. We believe that
all the plants and equipment are in satisfactory
operating condition. IMMSA’s principal mining
facilities include Charcas, Santa Barbara, San
Martin, Santa Eulalia and Taxco.
Charcas
The Charcas mining complex is located 111
kilometers north of the city of San Luis Potosi
in the State of San Luis Potosi, Mexico. Charcas
is connected to the state capital by a paved
highway of 130 kilometers. 14 kilometers
from the southeast of the Charcas complex
is the “Los Charcos” railroad station which
connects with the Mexico-Laredo railway.
Also, a paved road connects Charcas to the
city of Matehuala via a federal highway and
begins at the northeast of the Charcas town
site. The complex includes three underground
mines (San Bartolo, Rey-Reina and La Aurora)
and one flotation plant that produces zinc,
lead and copper concentrates, with significant
amounts of silver. The Charcas mining district
was discovered in 1573 and operations in the
20th century began in 1911. The Charcas mine
is characterized by low operating costs and
good quality ores and is situated near the zinc
refinery. The Charcas mine is now Mexico’s
largest producer of zinc.
The Charcas complex’s equipment includes
sixteen jumbo drilling tools, twenty-one scoop
trams for mucking and loading, seven trucks
and three locomotives for internal ore haulage
and three hoists. In addition, the mill has one
primary crusher, one secondary crusher and
two tertiary crushers, four mills and three
flotation circuits.
Santa Barbara
The Santa Barbara mining complex is located
approximately 26 kilometers southwest of
the city of Hidalgo del Parral in southern
Chihuahua, Mexico. The area can be reached
via paved road from Hidalgo del Parral, a city
on a federal highway. Chihuahua, the state
capital is located 250 kilometers north of the
Santa Barbara complex. Additionally, El Paso
on the Texas border is located 600 kilometers
north of Santa Barbara. Santa Barbara
includes three main underground mines
(San Diego, Segovedad and Tecolotes) and a
flotation plant and produces lead, copper and
zinc concentrates, with significant amounts
of silver. Gold-bearing veins were discovered
in the Santa Barbara district as early as 1536.
Mining activities in the 20th century began in
1913.
The major mine equipment at Santa Barbara
includes eighteen jumbo drilling tools, one
Simba drilling tools, thirty-six scoop trams,
thirteen trucks and eleven locomotives for
internal ore haulage, seven trucks for external
haulage and six hoists. For treating the
ore, there are six primary jaw crushers, one
secondary crusher and two tertiary crushers,
three mills and three flotation circuits. The
concentrator plant has a milling capacity of
6,000 tons of ore per day.
San Martin
The San Martin mining complex is located in
the municipality of Sombrerete in the western
part of the state of Zacatecas, Mexico,
approximately 101 kilometers southeast of
the city of Durango and nine kilometers east
of the Durango State boundary. Access to
the property is via a federal highway between
the cities of Durango and Zacatecas. A paved
six kilometer road connects the mine and
town of San Martin with the highway. The
city of Sombrerete is about 16 kilometers
east of the property. The complex includes
an underground mine and a flotation
plant and produces lead, copper and zinc
concentrates, with significant amounts of
silver. The mining district in which the San
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SOUTHERN COPPER 2008
Martin mine is located was discovered in
1555. Mining operations in the 20th century
began in 1949. San Martin lies in the Mesa
Central between the Sierra Madre Occidental
and the Sierra Madre Oriental.
The major mine equipment at San Martin
includes eight jumbo drilling tools, thirteen
scoop trams, nine trucks and three hoists.
For treating the ore, there are two primary
jaw crushers, two secondary crushers and
one tertiary crusher, two mills and three
flotation circuits. The concentrator plant has
a mill capacity of 4,400 tons of ore per day.
Santa Eulalia
The mining district of Santa Eulalia is located
in the central part of the state of Chihuahua,
Mexico, approximately 26 kilometers east of
the city of Chihuahua. This district covers
approximately 48 square kilometers and is
divided into three fields: east field, central
field and west field. The west field and the
east field, in which the principal mines of
the complex are found, are separated by six
kilometers. The Buena Tierra mine is located
in the west field and the San Antonio mine is
located in the east field. The mining district
was discovered in 1590, although exploitation
did not formally begin until 1870.
Major mine equipment at the Santa Eulalia
mine include five Jumbo drilling tools, nine
scoop trams for mucking and loading, two
trucks and two hoists. For treating the
ore, there are two primary crushers, one
secondary crusher and one tertiary crusher,
two mill crushers, one mill and two flotation
circuits. The concentrator plant has a milling
capacity of 1,450 tons of ore per day.
Taxco
The Taxco mining complex is located on the
outskirts of the city of Taxco in the northern
part of Guerrero State, Mexico, approximately
71 kilometers from the city of Cuernavaca,
Morelos, where access through the highway to
the complex is possible. The complex includes
several underground mines (San Antonio,
Guerrero and Remedios) and a flotation plant
and produces lead and zinc concentrates, with
some amounts of gold and silver. The mining
district in which the Taxco mines are located
was discovered in 1519. Mining activities in the
20th century commenced in 1918. The Taxco
district lies in the northern part of the Balsas-
Underground mine worker in Santa Barbara, Chihuahua, Mexico
Analysis in concentrator’s Lab in Toquepala, Peru
71 71
Mexcala basin adjacent to the Paleozoic Taxco-
Zitacuaro Massif.
The major mine equipment at the Taxco
complex include four Jumbo drilling tools,
ten scoop trams for mucking and loading, five
trucks and three locomotives for internal ore
haulage and three hoists. For treating the ore,
there are two primary crushers, one secondary
crusher and two tertiary crushers, three mills
and two flotation circuits. The concentrator
plant has a milling capacity of 2,000 tons of
ore per day.
The Nueva Rosita coal and coke complex
The Nueva Rosita coal and coke complex,
which began operations in 1924, is located in
the state of Coahuila, Mexico on the outskirts
of the city of Nueva Rosita near the Texas
border. It includes a) an underground coal
mine, which has been closed as a result of a
gas explosion in February 2006; b) an open pit
mine with a yearly capacity of approximately
350,000 tons of coal; c) a coal washing plant
completed in 1998 with a capacity of 900,000
tons per year that produces clean coal of a
higher quality; and d) a re-engineered and
modernized 21 coke oven facility capable of
producing 105,000 tons of coke (metallurgical,
nut and fine) per year of which 95,000 tons
are metallurgical coke. There is also a by-
product plant to clean the coke gas oven in
which tar, ammonium sulfate and light crude
oil are recovered. There are also boilers to
produce 80,000 steam pounds that are used
in the by-products plant. The re-engineering
and modernization of 21 ovens was completed
in April, 2006 and it is presently operating with
no problems to report.
At present, the coke oven installation supplies
the San Luis Potosi copper smelter with low-
cost coke, resulting in significant cost savings
to the smelter. The surplus production is sold
to Peñoles and other Mexican consumers in
northern Mexico. We expect to sell 37,438
tons of metallurgical coke in 2009.
Zinc Refinery
The San Luis Potosi electrolytic zinc refinery
was built in 1982. It was designed to produce
105,000 tons of refined zinc per year by treating
up to 200,000 tons of zinc concentrate from
our own mines, principally Charcas, located only
113 kilometers from the refinery. The refinery
produces special high grade zinc (99.995%
Overview La Caridad, Sonora Complex, Mexico
Worker in casting wheel in La Caridad smelter, Mexico
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SOUTHERN COPPER 2008
zinc), high grade zinc (over 99.9% zinc) and
zinc-based alloys with aluminum, lead, copper
or magnesium in varying quantities and sizes
depending on market demand.
The electrolytic zinc refinery’s major equipment
includes a roaster with a capacity of 85 m2
of roasting area, a steam recovery boiler and
an acid plant. There is a calcine processing
area with five leaching stages: neutral, hot
acid, intermediate acid, acid, purified fourth
and jarosite, as well as two stages for solution
purifying. Additionally, the equipment includes
a cell house with two electrowinning circuits
to finally obtain metallic zinc; an alloy and
molding area with two induction furnaces and
four molding systems, two of them with chains
to produce 25 kilogram ingots; and two casting
wheels to manufacture one ton Jumbo pieces.
This refinery has a production capacity of
105,000 tons of refined zinc per year.
Smelter
The San Luis Potosi copper smelter has been
in operation since 1925 and has gone through
several phases of modernization, principally
over the last ten years. The smelter presently
has the capacity to process 230,000 tons of
copper concentrate per year.
The plant operates one blast furnace (with
a second on stand-by) that smelts incoming
materials, mainly copper concentrates and
copper by-products from lead plants, to produce
a copper matte. The copper matte is then treated
in one of the two Pierce Smith converters,
producing copper blister (95.7% copper),
which in 2008 contained approximately 2.1
ounces of gold and 360 ounces of silver per
ton of copper blister produced. Of a total
copper concentrate intake of 40,878 tons in
2008, approximately 29% was supplied by the
IMMSA unit’s mines and the remaining amount
was purchased from third parties. 25% of the
blister production is sold to the La Caridad
copper smelter and the remaining 75% is sold
to third party refineries throughout the world.
The San Luis Potosi copper smelter’s
equipment
locomotives,
include two yard
two drag-shovels, twenty dump cars and six
mechanic front loaders for the furnace charge
mixing. Smelting and conversion equipment
include three blast furnaces, two Pierce Smith
converter furnaces, two molding furnaces, six
electric front loaders, six towing units, three
narrow way locomotives, two bridge cranes,
two 7-ton cranes and three hoists. Venting
system equipment includes nine fans with
different capacities and two filtering bag
houses. This plant has a smelting capacity of
24,000 tons of blister copper per year.
PERUVIAN OPERATIONS
Toquepala
1. The Toquepala Production Unit comprises
three Economic Administrative Units:
1 comprising 24 mining
TOQUEPALA
concession over a 6,218 hectares surface.
SIMARRONA including 14 mining concession
over 5,516 hectares, and TOTORAL with
21 mining concession distributed over
5,384 hectares. In addition, the Toquepala
Production Unit owns 16 mining concession
over 8,789 hectares outside the above
previous Economic Administrative Units.
Overall the Toquepala Production Unit
holds 75 mining concession over 25,045
hectares.
2. Two P&H 4100A shovels with a capacity
of 73 tons (42.8 m3), 1 P&H 4100A shovel
73 73
with a capacity of 78 tons (45.9 m3), 3 P&H 2100BL shovels with
a capacity of 20 tons (11.5 m3), 1 BUCYRUS 495BI shovel with a
capacity of 73 tons (42.8 m3), 1 P&H 120A electric drill, 2 P&H 100XP
electric drills, 2 BUCYRUS 49RIII rotary drills. 1 LE TOURNEAU
1400 front-end loader with a capacity of 36.4 tons (21.4 m3.).
Auxiliary equipment, 1 crawler CAT D11-R, 1 crawler CAT D10-N, 2
crawler CAT D10-R, 3 crawler KOMATSU D375A; 1 motor grader CAT
16 H; 2 CAT motor grader 24-H, 5 KOMATSU WD600 wheel tractors,
2 wheel tractors CAT 844C, 1 wheel tractor CAT 834H; 4 irrigation
tanks with a capacity of 20,000 gallons, 1 front loader CAT 992D.
3. 19 KOMATSU 930E trucks, each with a capacity of 283 tons, 5 CAT
793C trucks each one with a capacity of 231 tons, 18 KOMATSU 830E
trucks each with a capacity of 218 tons.
4. “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 optimizing control system (SGS), 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 42.5 cubic meter flotation cells, 72 AGITAIR
1.13 cubic meter 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. A molybdenum plant with a capacity of 2,000 tons per day,
equipment is as follow: 35 INERTGAS MOD. 66-D, EINCO (100 ft3),
42 AGITAIR 1.13 cubic meter cells, 4 Column Cells and 1 LAROX
filter press (PF6). This plant uses nitrogen gas.
Cuajone
1. The Cuajone Production Unit comprises
two Economic
Administrative Units: CUAJONE
1, comprising 22 mining
concessions over 7,410 hectares; and COCOTEA with 17 mining
concessions over 7,291 hectares. Additionally, Cuajone Production
Unit with 10 mining concessions over 5,458 hectares, outside
above two Economic Administrative Units. Overall, the Cuajone
Production Unit comprises 49 mining concessions over a 20,159
hectare surface.
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SOUTHERN COPPER 2008
2. Two P&H 4100A shovels with a capacity of 73 tons (42.8 m3),
1 BUCYRUS electric shovel 495BII with a capacity of 73 tons
(42.8 m3), 1 P&H 2800XPB shovel with a capacity of 54 tons,
1 P&H 2100BL shovel with a capacity of 23 ton (11.4 m3), 1 LE
TOURNEAU 1800 front-end loader with a capacity of 43 tons, 2
P&H 120A electric drills, 1 P&H 100XP electric drill, 1 BUCYRUS
BE49RIII electric drill, 6 CAT 966 front-end loaders with of 3.8
cubic meters of capacity, 3 CAT 988 front-end loaders with 6.1
cubic meters of capacity, 4 CAT-824 wheel tractors, 1CAT-834
wheel tractor, 1 CAT 844 wheel tractor, 1 KOMATSU WD600
wheel tractor, 7 CAT-D10 dozers, 1 CAT-D9 dozer, 1 CAT-16H
motor-graders , 2 CAT-24H motor-graders.
3. Seven KOMATSU 930E trucks each with a capacity of 290 tons,
20 DRESSER 830E trucks each with a capacity of 218 ton and
7 CAT 793C trucks each one with a capacity of 231 ton.
4. “Cuajone Concentrator” Beneficiation plant with a milling capacity
of 87,000 tons per day, consisting of 1 primary crusher, 3 secondary
crushers, 7 tertiary crushers, 11 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, 14 WEMCO 300 (ft3) flotation cells, 6
WEMCO-60 metric cubic flotation cells, 1 LAROX filter press PF96,
2 middling thickeners, 3 tailings thickeners, 1 high-rate tailings, 1
VOLVO FM12 truck, recycled water pipe line. The molybdenum plant
with a capacity of 2358 tons / day, its equipments are as follow:
8 cells with a capacity of 400 DENVER FT3, 6 cells OK-8 with a
capacity of 25 HP, 16 cells GALIGHER with a capacity of 800 FT3,
16 cells DENVER with a capacity of 100 FT3, and other equipments.
This plant uses nitrogen gas.
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 HP-500 with a capacity of 390 ton/H, to process
Cuajone’s oxides. In addition, 1 agglomeration mill, 2 front end
loader, 3 trucks each with a capacity of 109 tons for agglomerated
ore hauling to the leach dumps. Copper in solution produced at
Cuajone is sent to Toquepala through an 8” pipe laid alongside the
Cuajone - Toquepala railroad track.
75 75
In Leaching Toquepala, there are irrigation systems distributed
in the south dump and for the northwest dump. The percolation
solution, or PLS, of the dumps is stored in 5 collection dams
from which the solutions are pumped into a plant feed pond.
The feed pond receives the percolation solutions from the
different collection ponds through the PLS pumping systems.
The PLS contained in the feed pond is transferred by gravity to
the solvent extraction plant (ES) where the PLS is concentrated
and purified obtaining electrolyte. The plant has 3 solvent
extraction trains each with a nominal capacity of 1,068 cubic
meters per hour of PLS and 162 cells of electrodeposits
distributed in two electrolytic ships, one with 122 cells and
the other one with 40 cells. Electrodeposition (DE) has 4
rectifiers with a capacity of 23,000 amps each that provides
the necessary current to convert the electrolyte ionic copper
to metallic copper.
ilo metAllurgic compleX
ILO
1. The Ilo metallurgical complex has one Administrative &
Economic Unit named ILO with 15 non-metallic mining
concessions over 2,419 hectares. Additionally, the metallurgical
complex has 12 mining concessions over 4,812 hectares,
making a total of 27 mining concessions with a total area of
7,231 hectares.
2. Ilo Smelter with a smelting capacity of 1’200,000 tons
of concentrate, one Isasmelt furnace, 2 Rotary Holding
Furnaces, 4 Pierce Smith converters, 2 slag cleaning
furnaces, 2 refining furnaces and 1 twin anode casting
wheel. The ISASMELT Furnace is a bath concentrate
smelting technology, uses a oxygen enriched air lance
that is immersed in a volume of molten slag, The matte-
slag mixture is tapped to the Rotary Holding Furnaces to
separate the matte and slag. The matte with 62% of copper
is processed in the Peirce Smith converters to produce a
99.3% blister copper. The blister copper is treated in the
refining furnaces to produce the anodic copper which is
76 - 77
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SOUTHERN COPPER 2008
cast in the twin casting wheel. The final product of the
Smelter is the 99.7% copper anode.
The Ilo Smelter also has a sea water pumping plant
which is used in the furnace jacket water cooling system.
Additionally, the Smelter has two desalination plants (110
m3/h), a potable water plant and a sewage treatment
plant.
3. Two sulfuric acid plants with a total capacity of 1’144,000
tons/year. The smelter gases are processed in acid
plants to produce 98.5% sulfuric acid, The smelter
sulfur capture is above 92%. The acid production
process has the following steps: cooling and cleaning
of the smelter gas, drying, gas conversion of the SO2
and SO3 absorption. Sulfuric acid is stored in tanks for
a final transportation to different consumers.
4. Two cryogenic oxygen plants with a total capacity of
1,317 tons of 95% oxygen per day. The oxygen is used in
the ISASMELT furnace, separation furnaces and PEIRCE
SMITH converters.
5. Ilo refinery and Electrolytic Plant: with a capacity of
280,000 ton per year (cathodes), 926 commercial cells
and 52 starting cells. And 16 first liberator cells, 24 second
liberator cells, a precious metals plant with 1 Wenmec
selenium reactor, 1 cupel furnace, 24 silver refining cells
and 1 hydrometallurgical system for gold recovery.
6. Coquina plant with a production capacity of 135,000
tons per year of seashells. Coquina Mining Plant extracts
seashells to supply the raw material to the Lime Plant
and fluxes to the ISASMELT furnace. The mining ratio is
25:100, the sea shell product has a content above 80%
of CaCO3.
7. Burnt Lime plant with a capacity of 65,000 tons per
year. Processes seashells received from Coquina plant
77 77
obtaining 80% CaO Lime through the decomposition of the
calcium carbonate. Lime is used in Toquepala and Cuajone
concentrators and in effluents plants associated to acid plant.
Others
Industrial railroad to haul concentrates and supplies between
Toquepala, Cuajone and Ilo with 29 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, 49 sulfuric acid tanks, 6 patrol cars.
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SOUTHERN COPPER 2008
Employees
MExICAN OPERATIONS
At December 31
Employees
Workers
Total
PERUVIAN OPERATIONS
At December 31
Employees
Workers
Total
ChILEAN OffICE
At December 31
2008
2007
2006
2005
2004
1,836
5,973
7,809
2,142
6,512
8,654
2,142
6,512
8,654
2,264
7,049
9,313
2,255
6,985
9,240
2008
2007
2006
2005
2004
1,912
1,756
3,668
1,895
1,702
3,597
1,839
1,715
3,554
1,835
1,730
3,565
1,804
1,740
3,544
2008
2007
2006
2005
2004
Total
10
10
10
10
0
CORPORATE OffICE
At December 31
2008
2007
2006
2005
2004
Total
7
7
7
7
7
TOTAL EMPLOyEES IN SCC
At December 31
Total Mexico
Total Peru
Total Oficina Corporativa
Total Chile
Total
2008
2007
2006
2005
2004
7,809
3,668
7
10
11,494
8,654
3,597
7
10
12,268
8,654
3,554
7
10
12,225
9,313
3,565
7
10
12,895
9,240
3,544
7
0
12,801
79 79
Principles of Corporate Governance
General Management Resolutions the National
Commission for Corporate and Securities
Supervision (CONASEV, by its acronym in
Spanish) No. 096-2003-EF/94.11 y No. 140-
2005-EF/94.11
The information referred to both resolutions will
be submitted to the CONASEV of the Republic
of Peru, together with the Annual Report.
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 22’959,334 common shares.
These common shares are quoted in New York
Stock Exchange and the Lima Stock Exchange
and are entitled to one vote per share.
Economic relations with other companies due
to loans that commit more than 10% of the
stockholder’s equity of the issuing entity.
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.
To date, there are no loans with other
companies that compromise more than 10%
of SCC’s property.
ADMINISTRATIVE JUDICIAL OR ARBITRATION
PROCESSES
LITIGATION
See Note
Statements.
to Consolidated
Financial
Changes of those responsible
for the
preparation and revision of the financial
information
Jose N. Chirinos acts as Director of Comptroller
and Finance and Marco A. Garcia acts as
Finance Manager.
Information related to the stock entered in the
Stock Market Public
Common Stock:
On November 29, 1995 the Company offered
to exchange the recently issued common
shares for all and any labor shares of the
In connection with the Minera Mexico
acquisition (April 1, 2005), 134’415,280
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 Climax Molybdenum B.V., subsidiaries
of two of SCC’s founding shareholders and
affiliates, sold their share in SCC.
On August 30, 2006 the Executive Committee
of the Board of Directors declared a two-for-
one split of the Company’s outstanding
common stock. On October 2, 2006 common
shareholders of record at the close of
business on September 15, 2006, received one
additional share of common stock for every
share owned. The Company’s common stock
began trading at its post-split price on October
3, 2006. The split increased the number of
shares outstanding to 294’460,850 from
147’230,425.
80 - 81
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SOUTHERN COPPER 2008
On June 19, 2008 the Executive Committee
of the Board of Directors declared a three-
for-one split of the Company’s outstanding
common stock. On July 10, 2008 common
shareholders of record at the close of
business on June 30, 2008, received two
additional shares of common stock for every
share owned. The split increased the number
of shares outstanding to 883’410,150 from
294’470,050.
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.
All share and per share amounts have been
retroactively adjusted to reflect the stock
split.
Consequently, as from December 31, 2008,
854’900,000 common shares of the Company
were under circulation with a nominal value of
$0.01 per share.
Corporate Bonds
On May 9, 2006, SCC issued $400 million
7.5% Notes due 2035. 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 obligations of the
On January 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 aggregate 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, limitations on sale and
leaseback transactions, rights of the holders
Copper deposit in new Tia Maria unit in Arequipa, Peru
Thickener at Cuajone concentrator, Peru
81 81
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, 2008, we are in compliance with
these covenants.
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 Peruvian
bond program. On July 28, 2005, a portion of
the proceeds from the financing, noted above,
were used to repay this facility.
In 1998, Minera Mexico 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 a 2028 maturity date. During
2006 and 2005, the Company repurchased
$23.3 million and $143.0 million of the Series
A bonds, respectively. 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, 2008, 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 2.32% at December
31, 2008). 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 Mexico’s direct or
indirect voting interest in our Company to less
Core detail at Tia Maria, Peru
Cuajone leach plant geomembrane, Peru
82 - 83
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SOUTHERN COPPER 2008
than a majority would constitute an event of default under the facility.
At December 31, 2008, 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 principal properties and was guaranteed
by its principal subsidiaries. In 2005, the Company prepaid the total
amount of this financing, using in part proceeds from the July 27,
2005 Note issuance.
We expect that we will meet our cash requirements for 2009 and
beyond from internally generated funds, cash on hand and from
additional external financing if required.
Members of the Board of Directors at December 31, 2008
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
Officer of Grupo Mexico, S.A.B. de C.V. (“Grupo Mexico”) (holding)
since 1994. Mr. Larrea has been Chairman of the Board of Directors
and Chief Executive Officer of Grupo Ferroviario Mexicano, S.A.
de C.V. (railroad company) since 1997. Mr. Larrea was previously
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, S.A. de C.V. (holding), Compañia Perforadora Mexico,
S.A. de C.V. (drilling company), Mexico Compañia Constructora, S.A.
de C.V. (construction company), and 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 Banco Nacional de Mexico, S.A (Citigroup), which forms
part of Grupo Financiero Banamex, S.A. de C.V., Consejo Mexicano
de Hombres de Negocios, and Grupo Televisa, S.A.B. He and Mr.
Genaro Larrea Mota-Velasco are brothers.
83 83
Oscar Gonzalez Rocha, Director.
Mr. Gonzalez Rocha has been our President since December 1999
and our President and Chief Executive Officer since October 21,
2004. He has been a Director of the Company since November 1999.
Previously, he was the Company´s President and General Director
and Chief Operating Officer from December 1999 to October 20,
2004. Mr. Gonzalez Rocha has been a Director of Grupo Mexico from
2002 to present. He was General 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 was an alternate Director of Grupo Mexico
from 1998 to April 2002. Mr. Gonzalez Rocha is a civil engineer with a
degree from the Autonomous National University of Mexico (UNAM).
Emilio Carrillo Gamboa, Director.
Mr. Carrillo Gamboa has been a Director of the Company since May
30, 2003 and is one of our independent Director nominee. Mr. Carrillo
Gamboa is a prominent lawyer in Mexico and has been the Senior 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
Mexican corporations as well as charitable organizations. Since March
9, 2005, he has been Chairman of the Board of The Mexico Fund, Inc.
(NYSE - msxf), a non-diversified closed-end management investment
company. Mr. Carrillo Gamboa was Director General of Telefonos de
Mexico, S.A. de C.V. (“TELMEX”) and from July 1987 to February 1989,
he was Mexico’s Ambassador to Canada. Mr. Carrillo Gamboa currently
serves on the boards of Grupo Modelo, S.A.B. de C.V. (beer brewing),
Kimberly-Clark de Mexico, S.A.B. de C.V. (consumer products), SAN LUIS
Corporacion, S.A.B. de C.V. (automotive parts), Empresas ICA, S.A.B.
de C.V. (construction), Grupo Posadas, S.A.B. de C.V., Grupo Mexico
and subsidiaries, Grupo Nacional Provincial, S.A.B., Medica Integral
GNP, S.A. de C.V., Profuturo GNP, S.A. de C.V. Afore, and Gasoductos de
Chihuahua, S. de R.L. de C.V. and subsidiaries. He is a member of the
Valuation, Contract Review and Nominating and Corporate Governance
Committees of the Mexico Fund and a member of the Audit Committee
of the following companies: Empresas ICA, S.A.B. de C.V. since 2002,
Grupo Modelo, S.A.B. de C.V. since 2002, Kimberly-Clark de Mexico,
S.A.B. de C.V. since 2002, SAN LUIS Corporacion, S.A.B. de C.V. since
2002, The Mexico Fund, Inc. since 2002, Grupo Mexico and subsidiaries
since 2004, and Grupo Posadas, S.A.B. de C.V. since 2006. Except for
Medica Integral GNP, S.A. de C.V., Profuturo GNP, S.A. de C.V. Afore, and
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Gasoductos de Chihuahua, S. de R.L. de C.V. and subsidiaries, 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, S.A.B. de C.V. Mr. Carrillo Gamboa has a law
degree from the Autonomous National University of Mexico (UNAM).
He also attended a continuous legal education program at Georgetown
University Law School, and practiced at the World Bank.
Alfredo Casar Perez, Director.
Mr. Casar Perez has been a Director of the Company since October
26, 2006. He has been a member of the Board of Directors of Grupo
Mexico since 1997. He is also a member of the Board of Directors of
Ferrocarril Mexicano, S.A. de C.V., an affiliated company of Grupo
Mexico, since 1998 and its Chief Executive Officer since 1999. From
1992 to 1999, Mr. Casar Perez served as General Director and member
of the Board of Directors of Compañia Perforadora Mexico, S.A. de
C.V. and Mexico Compañia Constructora, S.A. de C.V., two affiliated
companies of Grupo Mexico. Mr. Casar Perez served as Project
Director of ISEFI, a subsidiary of Banco Internacional in 1991 and
Executive Vice-President of Grupo Costamex in 1985. Mr. Casar Perez
also worked for the Real Estate Firm, Agricultural Ministry, and the
Mexican College. Mr. Casar Perez holds a degree in Economics from
the Autonomous Technological Institute of Mexico, ITAM, and one in
Industrial Engineering from the Anahuac University. He also holds a
Master’s degree in Economics from the University of Chicago.
Alberto de la Parra Zavala, Director.
Mr. de la Parra has been a Director of the Company since July 26, 2007.
He has been the General Counsel of Grupo Mexico since February
2007. He was a Partner of Galicia y Robles, S.C., a prominent Mexican
law firm, from February 2002 to January 2007. Mr. de la Parra was
a Partner of Santamarina y Steta, S.C., one of the largest law firms in
Mexico, from 1997 to 2002. He also worked for one year as a foreign
associate with the law firm White & Case LLP in New York City. Mr. de
la Parra is an accomplished Mexican attorney with broad experience in
corporate and financial matters, including mergers and acquisitions.
He has represented Mexican and international clients before Mexican
authorities, including the Banking and Securities Exchange Commission,
and the Stock Exchange. Additionally, Mr. de la Parra is the Corporate
Secretary of the Board of Directors of Grupo Mexico, and of some of its
subsidiaries. Mr. de la Parra has a law degree from the Escuela Libre de
Derecho of Mexico.
85 85
xavier Garcia de Quevedo Topete, Director.
Mr. Garcia de Quevedo has been a Director of the Company since
November 1999. He has been the President of Minera Mexico since
September 2001 to date and the President and Chief Executive
Officer of Southern Copper Minera Mexico and our Chief Operating
Officer since April 12, 2005. He has been the President and Chief
Executive Officer of Americas Mining Corporation since September
7, 2007. Mr. Garcia de Quevedo initiated his professional career in
1969 with Grupo Mexico. He was President of Grupo Ferroviario
Mexicano, S.A. de C.V. and of Ferrocarril Mexicano, S.A. de C.V.
from December 1997 to December 1999, and General Director of
Exploration and Development of Grupo Mexico from 1994 to 1997.
He has been a Director of Grupo Mexico since April 2002. He was
also Vice-President of Grupo Condumex for eight years. Mr. Garcia
de Quevedo is the Chairman of the Mining Chamber of Mexico. He is
a Chemical Engineer with a degree from the Autonomous National
University of Mexico (UNAM). He also attended a continuous business
administration and finance program at the Technical Institute of
Monterrey in Mexico.
harold S. handelsman, Director.
Mr. Handelsman has been a Director of the Company since August 2002
and is one of our independent Director nominees. Mr. Handelsman has
been an 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 Hyatt Corporation since
1978, currently serving as Senior Vice-President and Secretary. He is
also Executive Vice-President and Assistant Secretary of Global Hyatt
Corporation. He is also a Director of a number of private corporations.
He received a B.A. degree from Amherst College in 1968 (cum laude)
and a J.D. from Columbia University in 1973 (James Kent Scholar).
Genaro Larrea Mota-Velasco, Director.
Director. Mr. Larrea was our Vice-President, Commercial from December
1999 until April 25, 2002, and has been a Director since November 1999.
From April 1983 to August 2002, Mr. Larrea held several positions in the
areas of finance, commercial and logistics with Grupo Mexico. He has
been a Director of Grupo Mexico since 1994. He is currently Chairman
of the Board of Directors of Corporacion Scribe SAB. Mr. Larrea has a
Bachelor’s degree in Business Administration from Newport University
and a Global Leadership Program certificate from Thunderbird
University. He and Mr. German Larrea Mota-Velasco are brothers.
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Daniel Muñiz Quintanilla, Director.
Mr. Muñiz has been the Chief Financial Officer of Grupo Mexico since
April 2007. Prior to joining Grupo Mexico, Mr. Muñiz was a practicing
corporate-finance lawyer from 1996 to 2006. During this time he
worked at Cortes, Muñiz y Nuñez Sarrapy; Mijares, Angotia Cortes y
Fuentes; and Baker & McKenzie (London and Mexico City offices). He
holds a Master’s degree in Financial Law from Georgetown University,
and a Master’s degree in Business Administration from Instituto de
Empresa in Madrid.
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 was
General Counsel of Grupo Mexico from May 2001 to February 2007.
Previously, he headed the Unit on International Trade Practices of the
Ministry of Economy of Mexico with the rank of Subsecretary 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.
Dr. Palomino has been a Director of the Company since March 19,
2004 and is one of our independent Director nominees. Dr. Palomino
has been a Managing Partner of RMG Consultores (a financial
consulting firm) since May 2007 and was previously Principal and
Senior Consultant of Proconsulta International (financial consulting)
since 2003. Previously he was First Vice-President and Chief
Economist, 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. Dr. 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, Philadelphia,
and graduated from the Economics Program of the University del
Pacifico, Lima, Peru.
Gilberto Perezalonso Cifuentes, Director.
Mr. Perezalonso has been a Director of the Company since June
2002 and is one of our independent Director nominees. He was Chief
Executive Officer of Corporacion Geo S.A. de C.V. from February
87 87
2006 to February 2007. Mr. Perezalonso was the Chief Executive
Officer of Aeromexico (Aerovias de Mexico, S.A. de C.V.) from 2004
until December 2005. From 1998 until April 2001, he was Executive
Vice-President of Administration and Finance of Grupo Televisa,
S.A.B. From 1980 until February 1998, Mr. Perezalonso held various
positions with Grupo Cifra, S.A. de C.V., the most recent position
being that of General Director of Administration and Finance. Now
he is a member of the Advisory Council of Banco Nacional de Mexico,
S.A. de C.V., member of the Board of Investment Committee of Afore
Banamex, member of the Board of the Investment Committee of
Siefore Banamex No. 1, and is a member of the Boards of Gigante, S.A.
de C.V., Masnegocio Co. S. de R.L. de C.V., Cablevision, S.A. de C.V.,
Grupo Televisa, S.A.B., Telefonica Moviles Mexico, S.A. de C.V. and
Construction Company Marhnos. Mr. Perezalonzo is also a member
of the Audit Committee of Grupo Televisa S.A.B. Mr. Perezalonso
has a law degree from the Iberoamerican University and a Master’s
degree in Business Administration from the Business Administration
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 Foreign 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 Government
(1985-1988), Dean of Graduate Studies at the National Autonomous
University of Mexico (UNAM), Political Science Department (1984-
1985), and professor of said university (1981-1983). Mr. Rebolledo holds
a law degree from UNAM, an MA in philosophy from Tulane University,
and an LLM from Harvard Law School.
Carlos Ruiz Sacristan, Director.
Mr. Ruiz Sacristan has been a Director of the Company since February
12, 2004 and is one of our independent Director nominees. 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 Sacristan has held various distinguished positions in the Mexican
government, the most recent being that of Secretary of Communication
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SOUTHERN COPPER 2008
and Transportation of Mexico from 1995 to 2000. While holding that
position, he was also Chairman of the Board of Directors of the Mexican-
owned companies in the sector, and member of the Board of Directors
of development banks. Mr. Ruiz Sacristan is currently a member of the
Board of Directors and of the Audit and Environmental and Technology
Committees of Sempra Energy. Mr. Ruiz Sacristan holds a Bachelor’s
degree in Business Administration from the Anahuac University of
Mexico City, and an MBA degree from Northwestern University of
Chicago.
eXecutive officers
German Larrea Mota-Velasco
Chairman of the Board
Oscar Gonzalez Rocha
President and Chief Executive Officer
xavier Garcia de Quevedo Topete
President and Chief Executive Officer Southern Copper Minera Mexico and our
Chief Operating Officer
Genaro Guerrero Diaz Mercado
Vice-President, finance and Chief financial Officer
Jose de los heros Ugarte
Vice-President, Commercial
Vidal Muhech Dip
Vice-President, Projects
Armando Ortega Gomez
Vice-President, Legal,
General Counsel and Secretary
Jose N. Chirinos fano
Comptroller.
89 89
Next of kin
Messrs. German Larrea Mota-Velasco, Chairman of the Board
of the 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 78.97% of the stock of
the Company. The Company has taken advantage of the exceptions
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 financially literate in accordance
with the qualifications of the NYSE and the Securities and Exchange
Commission (“SEC”), as such qualifications are interpreted by the
Company’s Board of Directors in its business judgment. In 2008
we had four special independent directors nominated by the Special
Nominating Committee, Messrs. Harold S. Handelsman, Luis Miguel
Palomino Bonilla, Gilberto Perezalonso Cifuentes, and Carlos
Ruiz Sacristan. In 2008, Mr. Emilio Carrillo Gamboa was our fifth
independent director. At its meeting on January 24, 2008, the Board
of Directors determined that Messrs. Harold S. Handelsman, Luis
Miguel Palomino Bonilla, Gilberto Perezalonso Cifuentes, Carlos
Ruiz Sacristan and Emilio Carrillo Gamboa were independent of
management in accordance with the requirements of the NYSE as
such requirements are interpreted by our 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.
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Special Committees of the Board
SCC’s Board of Directors has organized the following Special
Committees:
1, Executive Committee, sitting five members who substitute for the Board
when sessions or decisions are required concerning urgent matters, or
which the Board would have expressly delegated its mandate.
2, Audit Committee, sitting 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 independence 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 affidavit statement.
3, Compensation Committee, comprising of four Board members, its
principal objective is to evaluate and establish the remunerations
of senior officials and key employees at the Company and its
subsidiaries, and eventual raises in subsidiaries.
4, Special Committee Nominees, comprising of 2 independents Board
members and, one nominees by the Board, its principal objective
is to promote and evaluate people who are propose as Special and
Independents Directors.
5, 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 principles, and overseeing the evaluation of the
Board’s and Management’s performance.
6, Administrative Committee Designated by the Board for (Employee
Retirement Income Security Act – ERISA - USA) Benefits Plans.
The Vice-President for Finance and Chief Financial Officer is
the Board-appointed Trustee for the Company’s Benefits Plans
subject to US regulations, including ERISA. This Officer will
appoint an Administrative Committee sitting four management
members whose purpose is to administrate and manage those
plans and to oversee the performance of the trust agents and
others charged with investing the plans’ monies.
91 91
Administration and board income
Total remunerations of Board and Administration members, in relation
to the Company´s g ross income is 0.20%.
Annual Meeting
The annual meeting of stockholders of Southern Copper Corporation
will be held on Thursday, April 30, 2009 at 9:00 hours. Mexico D.F.
time, at Campos Eliseos No. 400, 9 floor, Col. Lomas de Chapultepec,
Mexico D.F., Mexico.
Corporate Offices:
United States
11811 North Tatum Blvd.
Suite 2500
Phoenix, AZ 85028
U.S.A.
Phone. +(602) 494-5328
Fax +(602) 494-5317
Mexico
Campos Eliseos No. 400
9 floor
Col. Lomas de Chapultepec
Mexico D.F.
Phone. +(52-55) 1103-5320, Ext. 5855
Fax +(52-55) 11 03 55 83
En el Peru
Avenue Caminos del Inca Nro. 171 Chacarilla del Estanque
Santiago de Surco
Lima 33, Peru
Phone. +(511) 512-0440, Ext. 32111
Fax +(511) 512-0486
Transfer Agent, Registrar and Stockholder Services
The Bank of New York Mellon Corporation (BONY)
Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310-1900
Phone +(800) 524-4458
1Proxy status, extension 3225 for Spanish
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SOUTHERN COPPER 2008
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 Mellon
Corporation. For more information, contact The Bank of New York
Mellon Corporation at Phone +(800) 524-4458.
Stock Exchange Listing.
The principal markets for SCC’s Common Stock are the New York Stock
Exchange 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,
‘investment shares’ (formerly named labor shares) that are quoted
in the Lima Stock Exchange under the symbol 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) 313-2478, Fax +(511) 313-2556.
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
USA: 11811 North Tatum Blvd., Suite 2500, Phoenix, AZ 85016, U.S.A.,
Phone: (602) 494-5328, Fax: (602) 494-5317.
NYSE Symbol: PCU.
Mexico: Campos Eliseos No. 400, 9 floor, Col. Lomas de Chapultepec
Mexico D.F.
Phone +(52-55) 1103-5000, Extension 5855
Fax +(52-55) 11 03 55 83
93 93
Peru: Avenue Caminos del Inca 171 (B-2), Chacarilla del Estanque,
Santiago de Surco – Lima 33 - Peru/ Lima Stock Exchange Symbol:
PCU. Phone. +(511) 512-0440, Ext. 32111 Fax +(511) 512-0486
web Page:
www.southerncoppercorp.com
E-mail address:
southerncopper@southernperu.com.pe
form 10-K2. Certification is required by New york Stock Exchange
Attached Form 10-K contains 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 these Annual Report.
The Company has filed with the NYSE the 2008 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 certifications required under Section 302 of the Sarbanes-
Oxley Act of 2002, as exhibits to the Annual Report on 2008 Form
10-K. The Company anticipates filing on a timely basis, the 2009
NYSE certification.
2Form 10-K, Phone. +(511) 512-0440, Ext. 3354
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SOUTHERN COPPER 2008
MEMBERS OF THE BOARD OF
DIRECTORS
German Larrea Mota-Velasco
Oscar Gonzalez Rocha
Emilio Carrillo Gamboa
Alfredo Casar Perez
Alberto de la Parra Zavala
Xavier Garcia de Quevedo Topete
Harold S. Handelsman
Genaro Larrea Mota-Velasco
Daniel Muñiz Quintanilla
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
95 95
EXECUTIVE OFFICERS
German Larrea Mota-Velasco
Chairman of the Board
Oscar Gonzalez Rocha
President and Chief Executive Officer
xavier Garcia de Quevedo Topete
President and Chief Executive Officer Southern Copper Minera Mexico and our
Chief Operating Officer
Genaro Guerrero Diaz Mercado
Vice-President, finance and Chief financial Officer
Jose de los heros Ugarte
Vice-President Commercial
Vidal Muhech Dip
Vice-President, Projects
Armando Ortega Gomez
Vice-President, Legal, General Counsel and Secretary
Jose N. Chirinos fano
Comptroller
96
SOUTHERN COPPER 2008
Cactus at Tia Maria Project landscape.
DISEÑO: ZIMAT DESIGN CENTER
SOUTHERN COPPER CORPORATION
CORPORATE OFFICES
UNITED STATES
11811 North Tatum Blvd.
Suite 2500, Phoenix, AZ 85028, U.S.A.
Phone: +(602) 494 5328
Fax: +(602) 494 5317
MEXICO
Campos Eliseos No. 400 Piso 9
Col. Lomas de Chapultepec
Mexico D.F.
Phone: +(52-55) 1103-5320, Anexo 5855
Fax: +(52-55) 1103-5583
PERU
Av. Caminos del Inca 171 (B-2)
Chacarilla del Estanque, Santiago de Surco
Lima 33 - Peru
Phone: +(511) 512-0440, Anexo 3354
Fax: +(511) 512-0486
web page
www.southerncoppercorp.com
e-mail
southerncopper@southernperu.com.pe