Southern Copper Annual Report 2014

Plain-text annual report

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, 9 floor Col. Lomas de Chapultepec, Mexico D.F. Phone: + (52-55) 1103-5320, Extension 5855 Fax: + (52-55) 1103-5583 PERU Avenue Caminos del Inca 171 (B-2) Chacarilla del Estanque, Santiago de Surco Lima 33 - Peru Phone: +(511) 512-0440, Extension 3354 Symbol: SCCO E-mail southerncopper@southernperu.com.pe www.southerncoppercorp.com 2014 IN DETAIL ANNUAL REPORT E L L A T E D A 4 1 0 2 T R O P E R L A U N N A 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 2014. SCC takes responsibility for its contents according to applicable requirements”. HANS A. FLURY ROYLE Assistant Secretary RAUL JACOB RUISANCHEZ Vice-President Finance and Chief Financial Officer CONVERSION INFORMATION: All tonnages in this annual report are metric tons unless otherwise noted. To convert to short tons, multiply by 1.102. All distances are in kilometers, to convert to miles, multiply by 0.62137. All ounces are troy ounces. U.S. dollar amounts represent either historical dollar amounts, where appropriate, or U.S. dollar equivalents translated in accordance with generally accepted accounting principles in the United States. “SCCO”, “SCC”, “Southern Copper” or the “Company” includes Southern Copper Corporation and its consolidated subsidiaries. INDEX LETTER TO SHAREHOLDERS 02 PRODucTiOn STATiSTicS 08 cOPPER RESERVES 11 SELEcTED AnD FinAnciAL DATA 15 cAPiTAL inVESTMEnT PROGRAM AnD EXPLORATiOn (EXPAnSiOn & MODERniZATiOn) 17 DEVELOPMEnT - cOMMuniTY OuTREAcH 25 RESuLTS OF OPERATiOnS for the years ended December 31, 2014, 2013 and 2012 47 cOMMiTMEnT - EnViROnMEnTAL AFFAiRS 53 GEnERAL inFORMATiOn Description of Operations and Development Regarding The issuing Entity 63 MEMBERS OF THE BOARD OF DiREcTORS 96 02 LETTER TO SHAREHOLDERS in 2014, we obtained approval of the environmental impact studies for our major Peruvian projects of Tia Maria and the Toquepala concentrator expansion. We need authorization from the Peruvian Minister of Mining to start construction. Tia Maria will add 120,000 annual tons of copper and Toquepala 100,000 tons, as well as 3,100 tons of molybdenum, to our production capacity. in addition, Buenavista projects in Mexico, while still in process, have already increased our annual production of copper and molybdenum. When completed, the Buenavista projects will add additional annual production capacity of 308,000 tons of copper and 4,600 tons of molybdenum. These major projects will enhance Scc’s leadership as one of the lowest cost copper producers in the world. 1 On April 14, 2015 the construction permit for the Toquepala expansion project was received. LETTER TO SHAREHOLDERS 03 capital expenditures for 2014 were $1,535 million and for 2015, the Board of Directors approved a capital expenditure program of $2,685 million mainly to complete the Buenavista expansion, expansion of Toquepala and construction of our new project in Peru “Tia Maria. Regarding our other projects, we are pleased to note that in Mexico we continue with our Buenavista investment program of $3.4 billion. The new copper-molybdenum concentrator will additionally produce 2.3 million ounces of silver and 21,000 ounces of gold per year. At December 31, 2014, the project has a 92.2% progress with an investment of $978.5 million. The project is expected to be completed in the third quarter of In 2014, we obtained approval of the environmental impact studies for our major Peruvian projects of Tia Maria and the Toquepala concentrator expansion. We need authorization from the Peruvian Minister of Mining to start construction. ANNUAL REPORT 201404 During the construction of the SX-EW III plant, more than 7,600 direct and indirect jobs were created. Total investment in this project was $ 444 million. 2015. in addition, our crushing, conveying and in the global economy. Our investment program aims to spreading system for leachable ore project (Quebalix increase copper production capacity by approximately iV) will increase production by improving SX-EW 1.2 million metric tons by 2018. copper recovery, reducing processing time and mining and hauling costs. The project has a 49.4% progress Despite international conditions that negatively impact with an investment of $117.7 million. prices of our main products -copper and molybdenum-, we are making efforts to increase our efficiency and At the cuajone mine, in Peru, we implemented the output, thereby achieving lower costs. HPGR project and the variable cut-off ore grade project, which produced an estimated 23,500 tons copper production for 2014 increased 9.7% to of copper. The project is expected to generate cost 676,599 metric tons from 617,019 metric tons in savings, improve copper recovery and reduce power 2013. in the 4Q14, copper production increased 9.2% consumption in the crushing process. to 183,616 metric tons from 168,210 metric tons in 3Q14. This increase was the result of higher production Based on the progress of our projects, Scc believes, at our Mexican operations, mainly at the Buenavista it is well positioned to take advantage of the expected mine, and at our Peruvian operations. copper market recovery, with the gradual improvement LETTER TO SHAREHOLDERS05 In June 2014, SX-EX III plant, with a capacity of 120,000 tons, produced its first cathode. In December, the plant reached a production of 32,927 tons. It is the plant with the greatest flow of solutions in the world. in 2014, operating cash cost per pound of copper sales volume for molybdenum and gold helped to produced without by-product revenues was slightly offset some of the negative factors. lower than in 2013, a decrease of 0.5% mainly due to the diluting effect on unit cost of higher production We believe we hold the world’s largest copper reserve at all our open pit mines, more significantly from position. At December 31, 2014, our copper ore Buenavista. This increase in production volume reserves totaled 69.9 million tons of contained copper, offset the cost of higher inflation, which increased calculated at a copper price of $2.90 per pound. fuel, power and other operating materials for our production process. Our principal operations are in Mexico and Peru, where we have an active ongoing exploration program. Our cash cost per pound for 2014 when calculated in 2014, we continued with our internationalization with by-product revenues was $1.05 per pound, program, looking for new deposits in Latin America. compared to $1.00 per pound in 2013. The by- Also, we have an ongoing exploration program in chile, product credit in 2014 was six cents less than in Argentina and Ecuador. 2013. This was due to lower prices for silver and gold, and lower sales volume of silver and zinc. in addition, our social programs continue to operate Higher prices for zinc and molybdenum and higher run in each of the countries where we have a presence ANNUAL REPORT 201406 for exploration, mining, concentration, smelting, refining and marketing of our products. neighboring populations of our operational areas benefit from the social programs of the company. On behalf of Southern copper corporation’s Board, we express our thanks to all our personnel for their effort, hard 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 OScAR GONzALEz ROcHA cHAiRMAn OF THE BOARD PRESiDEnT AnD cHiEF EXEcuTiVE OFFicER AnnuAL REPORT 2014 07 The new copper molybdenum concentrator will additionally produce 2.3 million ounces of silver and 21,000 ounces of gold per year. At December 31, 2014, the project has a 92.2% progress with an investment of $978.5 million. ANNUAL REPORT 2014PRODUCTION STATISTICS Southern Copper Corporation and SubSidiarieS Five-year produCtion StatiStiCS Copper production Mines (tons) Mined Material (thousand) copper in concentrates copper SX/EW Total copper Molybdenum in concentrates Zinc in concentrates Silver in concentrates (thousand ounces) Smelter & refineries production 2014 2013 2012 2011 2010 758,965 532,291 144,308 676,599 23,120 66,614 12,992 641,456 568,428 502,909 398,953 498,361 516,572 465,973 397,030 118,658 121,107 121,518 81,497 617,019 637,679 587,491 478,527 19,897 99,372 13,513 18,297 89,884 13,644 18,570 83,807 12,731 20,519 99,194 12,646 copper Zinc Silver 561,939 545,082 558,998 569,492 429,899 (thousand ounces) 92,133 13,348 97,692 15,572 93,542 13,867 90,869 12,731 95,072 12,646 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 (thousand) 211,202 114,828 6,100 169,808 173,927 177,398 179,313 110,691 120,108 120,379 131,518 4,662 4,468 5,363 4,828 (thousand) 182,812 173,277 154,091 140,108 126,144 178,337 168,582 158,793 140,140 164,968 4,001 3,133 2,861 2,787 5,259 25,675 28,400 32,194 35,322 37,938 1,022,536 1,072,826 996,592 1,094,224 997,933 - 1,670 32,843 - - 303,939 322,637 265,213 337,812 312,478 257,926 271,035 215,666 260,998 255,505 09 2014 2013 2012 2011 2010 Mexicana de Cobre - Caridad Mined Material (thousand) 91,454 88,595 Copper in concentrates Molybdenum in concentrates 101,062 96,863 10,800 11,742 86,632 97,847 10,968 84,266 84,163 89,778 94,871 10,420 10,432 Buenavista Mined material (thousand) 271,026 206,710 150,871 98,306 6,439 copper in concentrates 132,853 115,813 133,966 110,147 - Smelter/Refineries in Mexico SX/EW Smelt concentrates Anode produced cathode produced Rod produced Underground Mines contents in concentrates (tons) 118,633 90,258 88,913 86,196 43,559 926,427 722,597 904,311 832,307 416,730 258,000 220,775 260,941 231,680 116,534 204,302 188,005 213,734 186,853 84,626 129,078 126,800 120,791 107,925 57,264 Zinc Lead copper in concentrates Silver Gold 66,614 99,372 22,286 23,918 5,211 6,412 (thousand ounces) 4,945 6,170 (thousand ounces) 4,857 5,493 89,884 19,978 5,858 5,974 5,210 83,807 99,194 18,817 20,240 5,529 5,866 6,286 5,673 6,549 5,023 ANNUAL REPORT 2014 10 LETTER TO SHAREHOLDERSCHAPTER ONE 11 US$3.11 LME copper price MINERAL RESERVES Our management focuses on creation value through copper production, controlling costs, improving production and maintenance capital structure to remain profitable.We achieve these goals through capital expenditures, exploration and reduction cost programs. ANNUAL REPORT 201412 Southern Copper Corporation is one of the largest integrated copper producers in the world and we believe we currently have the largest copper reserves in the industry. cOppER RESERVES We believe we hold the world’s largest copper reserve position. At December 31, 2014, our copper ore reserves totaled 69.9 million tons of contained copper, calculated at a copper price of $2.90 per pound (as of December 31, 2014, the LME and cOMEX copper price was $3.11 and $3.12, respectively), our internal ore reserve estimation value is as follows: CATHODES Cu MinERAL RESERVES 13 Copper Contained in ore reServeS thouSand tonS Mexico Buenavista La caridad iMMSA Peru Toquepala cuajone Development projects El Arco Tia Maria Angangueo Total 25,232 9,034 213 14,993 8,726 9,030 2,626 92 69,946 For more information on ore reserves refer to “Mineral Reserves” (p. 44-46) of our Form 10-K 2014. ANNUAL REPORT 201414 Southern Copper Corporation operates mining units and metallurgical facilities in Mexico, Peru and conduct exploration activities in Argentina, Chile, Ecuador, Mexico and Peru. SOUThERN COPPER CORPORATION AND SUbSIDIARIES 15 Five-year SeleCted FinanCial and StatiStiCal data For the yearS ended deCember 31 (in millions, except per share amounts, employee data and stock and financial ratios) Consolidated Statement of earnings net sales Operating costs and expenses Operating income non-controlling interest of investments shares on 2014 2013 2012 2011 2010 $ 5,788 $ 5,953 $ 6,669 $ 6,819 $ 5,149 $ 3,555 2,233 3,421 2,532 3,560 3,109 3,193 3,625 2,545 2,604 Peruvian Branch income 5 6 7 8 9 Net earnings attributable to SCC $ 1,333 $ 1,619 $ 1,935 $ 2,336 $ 1,554 Per share amount Net earnings attributable to SCC – basic and diluted Dividends paid consolidated balance sheet cash and cash equivalent Total assets Total debt Total equity Consolidated statement of cash flows Cash provided from operating activities Dividend paid capital expenditures Depreciation & depletion Capital stock (1) Common shares outstanding (in thousands) nYSE price – high NYSE price – low Book value per share P/E ratio Financial ratios current assets to current liabilities net debt as % of capitalization (2) Employees (at year end) $ 1.61 0.46 $ 1.92 $ 0.68 $ 2.28 $ 4.06 $ 2.73 $ 2.43 $ 1.83 $ 1.68 364 11,552 4,206 $ 5,837 $ 1,673 10,996 4,205 $ 5,562 $ 2,460 10,384 4,214 $ 4,789 848 $ 8,063 2,746 $ 4,036 $ 2,193 8,128 2,760 $ 3,910 $ 1,356 381 1,530 445 $ 1,857 574 1,703 396 $ 2,004 3,140 1,052 326 $ 2,080 2,080 613 288 $ 1,921 1,428 409 282 813 $ 33.54 $ 26.08 $ 7.14 17.52 835 $ 41.96 $ 24.78 $ 6.62 14.95 846 $ 38.94 $ 28.16 $ 5.64 16.60 850 $ 49.59 $ 23.99 $ 4.77 11.04 859 $ 48.84 $ 26.19 $ 4.58 26.94 2.16 4.36 5.00 3.12 3.25 39.7% 31.3% 26.8% 32.0% 12.7% 12,735 12,665 12,085 12,145 11,510 (1) The number of shares and values per share has been adjusted to reflect the 2008 stock splits. (2) Represents net debt divided by net debt plus equity. net debt is total debt minus cash and cash equivalents balances. AnALiSiS Y DiScuSiOn ANNUAL REPORT 2014 16 LETTER TO SHAREHOLDERSCHAPTER TWO US$3,400 were invested in Buenavista 17 CAPITAL EXPENDITURES AND EXPLORATION The construction of the new Buenavista SX-EW III plant, with a capacity of 120,000 tons, was completed and start commercial production in June 2014. ANNUAL REPORT 2014Aereal view of the new ore thick warehouse. It works as an environmental measure, preventing the spread of dust. cApITAL EXpENDITuRES We made capital expenditures of $1,534.8 million, $1,703.3 million and AND EXpLORATION $1,051.9 million in 2014, 2013 and 2012, respectively. in general, the capital expenditures and investment projects are intended to increase production, decrease costs or address social and environmental commitments. in 2015, we plan to invest $2.7 billion in capital projects. As we previously disclosed, our investment program aims to increase copper production capacity by approximately 89% from our 2013 production level of 617,000 tons to 1,165,000 tons by 2018. in addition to our ongoing capital maintenance and replacement spending, our principle capital programs include the following: cAPiTAL EXPEnDiTuRES & EXPLORATiOn PROJECTS IN MEXICO: Buenavista Projects: We continue developing our The crushing, conveying and spreading system for $3.4 billion investment program at this unit which is leachable ore project (Quebalix iV) will increase expected to increase its copper production capacity production by improving SX-EW copper recovery, by approximately 175%, as well as molybdenum reducing processing time, mining and hauling costs. production by 42%. it has a crushing and conveying capacity of 80 million tons per year and is expected to be completed in The new copper molybdenum concentrator has the fourth quarter of 2015. The project has a 49.4% an annual production capacity of 188,000 tons of progress with an investment of $117.7 million out of copper and 2,600 tons of molybdenum. The project the approved capital budget of $340 million. will additionally produce 2.3 million ounces of silver and 21,000 ounces of gold per year. The total capital The remaining projects to complete the $3.4 budget of the project is $1,383.6 million and through billion budgeted program include investments in December 31, 2014, the project has a 92.2% progress infrastructure, including power lines and substations, with an investment of $978.5 million. The project is water supply, tailings dam, mine equipment shops, expected to be completed in the third quarter of 2015. internal roads and others. All major equipment is on site and has been installed. Angangueo: With an estimated investment of $174.7 Regarding the mine equipment acquisition for the million, Angangueo includes a concentrator plant which Buenavista expansion, through December 31, 2014 will have an estimated average annual metal content we have invested $510.9 million and have received production of 10,400 tons of copper and 7,000 tons of sixty-one 400-ton capacity trucks, seven shovels and zinc in the first seven years. Over the life of the mine, eight drills required for the mine expansion. All of this average annual concentrate production is expected to equipment is currently in operation. contain 2.4 million ounces of silver and 1,500 ounces of gold. Through December 31, 2014 we have spent Performance testing for the SX-EW iii plant was $27.3 million on the project. We are preparing the new successfully completed and technical full capacity has environmental studies for this project. We will wait the been achieved in accordance with the design flow rate authorization from SEMARnAT to resume the purchase of the plant. Estimated annual production for the plant of main equipment and work on the project. is 120,000 tons of copper cathodes. capital budget of $444.0 million has been invested through December 31, 2014. We remain the world leader in production costs. In 2014, according to Wood Mackenzie, industry analyst firm, Southern Copper Corporation (SCC) is leader in low-cost production, followed by Americas Mining Corporation (AMC). 7% AMOUNT 2014 YEAR 847,387 TONS COPPER Cu + IN 2014, COPPER PRODUCTION INCREASED 7 % COMPARED WITH 2013 847,387 TONS, A NEW RECORD. inVESTMEnTS & EXPLORATiOn PROJECTS IN PERu 21 Toquepala Projects: Through December 31, 2014, we The project to improve slope stability at the south area have invested a total of $346.0 million in Toquepala of the cuajone mine, will remove approximately 148 projects. These projects include the construction of million tons of waste material, in order to improve a new crusher and conveyor belt system to replace mine design without reducing current production current mine rail haulage, which we expect will reduce level. The mine equipment acquired includes one annual operating cost. shovel, five 400-ton capacity trucks, one drill and auxiliary equipment which will be reallocated to our Toquepala expansion project: On December 17, 2014 mine operations once the project is finished. Besides we received governmental approval of the EiA for the preparing the mine for the future, this investment Toquepala concentrator expansion, which will allow will avoid a reduction in average ore grade. As of us to continue developing this important project. December 31, 2014, 14 million tons of waste material The Toquepala concentrator expansion will increase have been removed and activities will continue for 4 annual production capacity by 100,000 tons of copper additional years. At December 31, 2014, we have and 3,100 tons of molybdenum at a total capital cost invested $67.7 million in this project. of approximately $1.2 billion. Tia Maria project: On August 1, 2014 we received cuajone Projects: Through December 31, 2014, we the final approval of our EiA. We expect to be granted have invested $40.6 million of a budget of $45 million the authorization in the first quarter of 2015 to move on the HPGR project, which will produce a more finely forward with the construction phase and begin crushed material. The engineering and the purchase construction immediately thereafter. of equipment have been completed and the project has reached 99% completion. The project is expected This project will be completed in the first half of 2017 to generate cost savings, improve copper recovery and with an investment of approximately $1.4 billion, to reduce power consumption in the crushing process. produce 120,000 tons of copper cathodes per year Through December 2014, the implementation of using state of the art technology with the highest the HPGR project and the variable cut-off ore grade international environmental standards. The project is project, implemented in 2013, have produced an currently expected to generate 3,500 jobs during the estimated incremental production of 23,500 tons of construction phase. When in operation, Tia Maria will copper. directly employ 600 workers and indirectly another ANNUAL REPORT 20142,000. Through its expected twenty-years of life, the project related services will create significant business opportunities in the Arequipa region. in addition, the company intends to implement social responsibility programs in the Arequipa region similar to those established in the communities near its other Peruvian operations. Tailings disposal at Quebrada Honda: This project increases the height of the existing Quebrada Honda dam to impound future tailings from the Toquepala and cuajone mills and will extend the expected life of this tailings facility by 25 years. The first stage and construction of the drainage system for the lateral dam is finished. We are preparing bidding documents for the second stage that includes engineering and procurement to improve and increase the dam’s embankment. The project has a total budgeted cost of $66.0 million, with $52.7 million invested through December 31, 2014. 22 CATHODES Cu DURING 2014, WE RECORDED SPCC´S ILO AND MEXICANA DE COBRE’S CER ELECTROLITIC CATHODES IN THE SHANGAI EXCHANGE, IN CHINA, AND METAL EXCHANGE IN CHINA, AND THE LME OF LONDON, RESPECTIvELY, SO WE TOOk AN IMPORTANT ADDED vALUE AND LIqUIDITY TO THESE PRODUCTS. inVESTMEnTS & EXPLORATiOn 23 As a result of significant investments in Buenavista , it will become the third mine in the world in terms of production. ANNUAL REPORT 201424 DIVISIÓN TRANSPORTECHAPTER THREE 25 COMMUNITY OUTREACh SOUTHERN COPPER CORPORATION Southern Copper Corporation is much more than copper. We are an organization with an unwavering will towards our stakeholders, considering value creation in our social environment is importance for our success and permanence. ANNUAL REPORT 201426 Based on honesty, responsibility and professional ethics, we generate greatest value to our stakeholders. In synergy with our employees, their families, and our neighbouring communities, we move forward looking for alternatives that contribute to their development and welfare. DIVISIÓN TRANSPORTEENVIRONmENTAL AND SOcIAL mEASuRES 27 At Southern copper corporation we are much more investment, but also for the results which, with great than just a copper producer. We are an organization satisfaction, we have achieved in communities and in with an unwavering will for our stakeholders, as we our environment. understand that creation of value is a key to our success and permanence. For that reason, we constantly strive These achievements have been possible thanks to the to achieve an increasingly efficient operation in social, actions, plans and programmes that the company has economic and environmental issues. implemented, proving our commitment to care of the environment, quality of life of our employees, a culture With honesty, responsibility and professional ethics as of ethics, and contribution to the development of the the basis of our foundation, we seek to generate the communities in which we operate. greatest value for our stakeholders. in synergy with our employees and their families, as well as our neighbouring OuR ENVIRONmENTAL cOmmITmENT communities, we move forward to find and implement (EcOLOGIcAL BALANcE) decisions that may contribute to the development and common good. We maintain an ongoing commitment to move forward in harmony with the challenges of expansion and For that purpose, we have a methodology platform that modernisation of the industry of which we are part. in is ingrained in our business model, and aligned to the this regard, not only do we seek regulatory compliance, needs of the communities and to the specific needs of but we also operate following the best environmental the regions where we operate. practices, committed to achieving optimum in Southern copper corporation, we want our projects to assessing and mitigating the impacts generated by our environmental performance at all times, by identifying, have a positive impact and strengthen the relationship activities on the environment. with the communities where we operate. in 2014, we developed projects that will leave lasting benefits, not We develop strategies to meet the specific environmental only for what they mean in terms of innovation and needs of each region and Division, and implement them ANNUAL REPORT 201428 through environmental management systems that we have developed under nine specific lines of action: Responsible use of water and natural resources Prevention, control and reduction of air emissions Efficiency use of energy Reduction of GHG emissions per ton produced Reduction in waste generation and integrated management Mine closure Biodiversity conservation Reforestation compliance, environmental regulation in 2014, three units of Southern copper corporation were granted the iSO 14001:2004 certification. 29 These certifications which, together with the 12 clean industry certifications and 6 Environmental Quality certifications, previously awarded our company, are the product of the efforts of all of our employees and a comprehensive application of the best environmental practices in each of the activities we engage in. environmental eXpenditureS (million dollar) SCC Air Ground Waste Biodiversity Gestion Water TOTAL $ $ $ $ $ $ 69.73 13.09 38.40 1.23 8.23 22.16 $ 152.84 We maintain our commitment to move forward with the challenges of expansion and modernization of industries in which we participate, seeking not only for regulatory compliance, but to operate under the best environmental practices. ANNUAL REPORT 201430 EnERGY AnD cLiMATE cHAnGE At Southern copper corporation we are aware of the effects of climate change and its impact on our operations, so by anticipating an increase in the probability of occurrence of extreme weather events such as hurricanes, droughts, floods and fires, we have identified potential risks resulting from global warming. in addition to the risks arising from the increase in the global temperature of the planet, we also face the impact of new environmental policies and regulations that are being adopted by the governments of all countries. Given these challenges, at Southern copper corporation we are taking measures which include: • using energy more efficiently. • Diversifying our energy mix and shifting it to cleaner energy sources. • Developing and using renewable energy sources. • increasing the level of electric power self-sufficiency. • Promoting efforts to capture greenhouse gases. • Encouraging positive change s in employee behaviour through awareness campaigns. Simultaneously with our environmental policy, we continue to implement actions to maximize the generation of electricity by using our own energy sources. in the case of Mexico, we make use of the smelter gases for the heat recovery boiler to generate energy. in Peru, we generate energy from renewable sources, in particular from two hydroelectric plants with a combined capacity of 130 terajoules. Additionally, in July 2014 our Mexican operations started using electric power supplied by a wind farm, owned by a subsidiary of Grupo Mexico; by doing so, we are diversifying our energy mix by allocating a higher proportion to renewable sources, and further reducing emissions related to our energy consumption. in addition to generating and consuming energy from shift towards an environmentally friendly economic 31 renewable sources and cleaner fuels, we have also development. implemented best practices that have resulted in higher energy efficiency in our operations, including BiODiVERSiTY the improvement, redesign, conversion, and retrofitting Our operating units have tree nurseries that grow of equipment, the rational use of resources, and the species native to the region, and are used to reforest training of personnel to improve their performance and rehabilitate ecosystems, including those of areas during operations. not adjacent to our operations. We increased the production capacity of trees in our in 2014, $175 million were invested in modernisation nurseries and greenhouses to 4.4 million. Significantly, projects of the crushing, concentration and hauling the new greenhouses at our operations in the state systems, which will enable us to reduce not only operating of Sonora increased by 400,000 the number of trees costs, but also the amount of energy consumed per ton grown in 2014. produced. Major plans include the construction of a new crushing and conveyor system in Toquepala, Peru; the “Quebalix iV” crushing and conveyor system for leachable mineral, at the Buenavista mine in Sonora, and the use of high pressure grinding rolls at the cuajone concentrator in Peru, to increase by 5.7% the energy efficiency in the milling process. TREES ANNUAL PRODUCTION CAPACITY IN MILLION 4.4 4 2 2 0 1 4 2 0 1 3 2 0 1 2 These investments, which take place year after year, in a significant effort to preserve endangered species, in show the efficiency improvements in the energy used 2014 we improved our Mexican Gray Wolf conservation for production at each operating unit. They demonstrate Program, as a result of which we now have 8 specimens our commitment to reducing our carbon footprint and in a 1-3 hectare environmental management unit that enhance our position as a sustainable global company, has been conditioned to ensure that wolves will live thereby improving our competitiveness and contributing as closely as possible to their wildlife environment. To in some way with the actions taken domestically to emphasis this effort, we have adopted the Mexican wolf ANNUAL REPORT 201432 as the flagship species of Grupo Mexico. To ensure proper care, an international committee is recording the genealogy of all wolves held in captivity. Another ongoing project within this wildlife conservation program is the turkey Gould hatchery, aimed at preserving this species by breeding and releasing them in the area of cananea, in Mariquita, Sonora, as well as, some private farms. The first release took place in September 2014, in the vicinity of the national Forest Reserve and the Ajos-Bavispe Wildlife Sanctuary, an area characterized by a great diversity of ecosystems. At our Peruvian operations, we continue to make significant environmental investment and conservation measures. The remediation program has successfully removed pollutants from ite Bay –which is located in Tacna, Peru and has an area of 1,600 hectares; this has resulted in the largest and most diverse coastal waterfowl wetland in the country. WATER MAnAGEMEnT in Southern copper corporation we are aware of the huge responsibility entailed in the care of water, as it is one of the most important inputs in our mining and industrial processes. Accordingly, we promote the rational use of this resource. Our measures for the efficient use and saving of water include: • Pumping systems to of recover water. • instrumentation and maintenance of closed circuits to use the total volume of process water. • continuous water recovery from tailings and thickener processes for reuse in metallurgical processing. • implementation of the Zero Wastewater Discharge Program, which seeks a more efficient management of both consumption and reuse of water resources. 33 Southern Copper Corporation promotes the rational use of water as it is one of the most important inputs in our mining operation. ANNUAL REPORT 201434 In 2014, $175 million were invested in modernization projects of crushing, concentration and hauling systems, which will enable us to reduce operating costs and the amount of energy consumed per ton produced. The implementation of closed circuits in our mining operations allows 67% of the total water consumed in the company be reused water. The consumption of fresh water in mining operations becomes necessary only due to evaporation losses. At in some facilities, the company makes use of municipal wastewater treatment utilities, which after treatment, is used in industrial processes; as is the case at, our wastewater treatment plant in San Luis Potosi. While the plant only increases by 3% the flow of treated water by the utility, it is one of the few that increases the availability of fresh water in the city to meet the demands of its’ 32,000 inhabitants. in Peru, the ilo Smelter maximises the use of desalinated water 99% of total consumption, is supplied by this type of treated water. in terms of water management, it is important to mention that an incident took place on August 6, 2014, namely the spill of approximately 40,000 cubic meters of acidic solution with copper sulphate at a dam 10 kilometres away from the Buenavista del cobre mine in cananea, 35 Sonora. Today, the cleaning of both rivers, affected by the spill, have already been completed, and the people affected were promptly taken care of, and appropriate preventive measures are being taken to make sure that a similar incident will not recur. under the supervision of the authorities, a team of 1,100 employees accompanied by environmentalists, physicians, safety supervisors and biologists conducted cleanup activities, as a result of which most of the metals in the spill were removed. it should be remarked that, as part of the remediation process, water, soil, and sediment quality studies, were performed on 3,262 samples by laboratories accredited by the Mexican Accreditation Authority, which had been approved by PROFEPA. From the very beginning of the incident, Grupo Mexico has maintained a presence in the region to help the people of the 7 affected municipalities and to listen to their concerns. The company launched a water supply and water infrastructure program for the general population, the schools and health centres, and has provided more than 167 million litters of drinking water on a 24/7 basis during 2014. On September 15, a $150 million trust fund was established in order to provide support to the populations affected by the spill, as well as to support the implementation of the measures set out in the remediation program. The company has also extended its community Development Program to affected communities along the river banks, promoting socially emblematic projects related to the challenges of the region, just as any other citizen, whose duty is promoting the common good. For more information, please refer to the following website: http://www.riosonora.com.mx/ ANNUAL REPORT 201436 Through Community Committees, we build social and human capital, by grounding our actions on respect for human rights and shared responsibility. These committees are intended to promote people’s voluntary, pluralistic and transparent participation, which encourages a real link between the community and Southern Copper Corporation and promotes exchange of views, respect for values and strengthen social bonds. 336 WORKSHOPS Health education 7,534 assistants. cOMMuniTY OuTREAcH OuR cOmmuNITIES 37 We build together the social and human capital that reflects the company’s business model and that is triggers the common welfare of future generations. That intended to meet the particular needs and condition of is our premise for meaningful development. the communities where we operate in Mexico and Peru. in line with the company’s operating lines of action, in this context, it is essential to identify our stakeholders the company and our methodology, which is based on and keep in touch with them permanently in order to the respect of human rights, social responsibility and meet their expectations and address their concerns. sustainability, our work aims at meaningful development that will integrate the company’s both internal and For that purpose, we have in place a methodology that external stakeholders. program Community development Social integration community development programmes Sponsorships and donations infrastructure and equipment in neighbouring communities Employees and communities investment in education Sport and cultural programs investment in townsite infrastructure GMÉXicO TOTAL mEXIcO cASA GRAnDE SCC $ $ $ $ $ $ $ 12,963,711 3,891,106 1,066,805 30,202,768 4,532,656 1,060,775 19,439,686 $ 73,157,507 Together, we build social and human capital, by grounding values, and to strengthen the social fabric. our actions on the respect for Human Rights and shared The casa Grande model has been so successful because responsibility through community committees, agencies it has enabled us to listen to people and groups that that seek people’s voluntary, pluralistic and transparent make up the communities; and to understand what is participation, which encourages a real link between required to achieve the common good of these and future the community and Southern copper corporation to generations. We identify their needs and concerns, and promote the exchange of views, to further respect for give priority to dialogue and consensus. ANNUAL REPORT 2014 38 Our booklets on Health Education and Life have been edited with the support of experts in educational issues. These nine booklets, for elementary and high school, are intended to be useful material for our teachers, parents and students throughout the country. cOMMuniTY OuTREAcH With the calls for action made in Mexico in 2014, Tamosura is equipped with water treatment plants, which 39 our community Development centres and projects are used in the maintenance of vegetation, pastures and implemented in every region carried out 6,000 trees native to the region, representing balance between activities in 21 towns. in the same period, we made nature and urban infrastructure. This development was important progress in training programs focused on an investment of $30.36 million. the development of productive projects which benefited more than 6,150 people. This centre has had a positive impact on the local casa Grande is socially innovative and works constantly economy: it has brought welfare, urban, economic and in the development and implementation of programs to industrial growth to the community and turned it into benefit senior citizens, women, people with disabilities, a regional common ground that promotes the social and the youth and children. Thanks to our centres, integration based on peaceful coexistence. knowledge, experience and life skills are developed. Our annual call for action in each community is outstanding: Tamosura represents inclusion, diversity and pride of a it is funded by Southern copper corporation, in addition new cananea, which inspires a better future to all. to the new mining tax in Mexico, and is invested to support hundreds of projects previously evaluated by REGiOnAL HOSPiTAL OF SPEciALTiES the community committees, which empower them to The cananea Regional Hospital of Specialties is a unique be the agents of their own development. project that was accomplished through a strategic alliance and a trilateral investment by the Federal TAMOSuRA uRBAn PARK Government, the Government of the State of Sonora and As part of Grupo Mexico’s commitment, we completed Grupo Mexico. Built on an area of 4,000 square meters, the construction of the Tamosura urban Park with 56 it provides medical care, emergency, surgery room, hectares of public infrastructure, including health, delivery room, X-ray, imaging, blood bank, telemedicine sports, amusement facilities, and recreation facilities. and 45 beds for hospitalization. it has specialties in The following facilities are located within this park: orthopaedics, paediatrics, orthopaedics, gynaecology, the cananea Regional Hospital of Specialties, a internal medicine, anaesthesia and surgery. One of supermarket, a fitness centre with indoor pool, movie the most important objectives is the implementation of theatres, hotel, bowling, sports facilities, shops, offices, haemodialysis service, in order to prevent the transfer of branches and medical practices, as well as a residential patients to other locations. The investment made so far area that includes a park, a nursery and areas with by the company amounts to $ 7.2 million. natural reserves. ANNUAL REPORT 201440 This hospital project benefits 35 thousand residents, research have increased local production capacities and and allows communities in the region to have access optimised marketing processes in the communities. to high quality health care, which is a sign of Southern copper corporation’s interest in furthering the health in 2014, our projects focused on the spheres of and wellbeing of the communities in which it operates. action that are part of Southern copper corporation’s pERu commitment, including: • Education and capacity Building • Health and nourishment As in every region where Southern copper corporation • infrastructure and support for the farming industry operates, in Peru our team is committed to promoting development; to achieve these objectives, it is essential EDucATiOn AnD cAPAciTY BuiLDinG to have a deep understanding of the needs of the The implementation of the “Women Entrepreneurs communities, and work hand in hand with them: we of Torata” aims at developing woman-focused recognize that the creation of value is only possible in a entrepreneurial projects in the region of Torata Alta, spirit of co-operation. these women were provided with training in food and textile processing. We were also involved in the close cooperation with municipalities and with all “Scholarship Grant 600” which benefited 600 teachers, kinds of institutions and organisations representing the who as a result are currently pursuing a Master’s degree region, has given tangible results that improve the living in Education, thus strengthening the capacity of teachers conditions of local residents; moreover, studies and in the Moquegua region. One of the main educational goals is the improvement of basic education, with an investment of $17 million to incorporate information technology and improve communication in educational institutions; as a result, Moquegua is now the leading region in terms of educational achievement; as more than 33,000 students and 2,900 teachers have been benefited. Equally outstanding are the efforts to give maintenance to schools in Toquepala, cuajone and ilo. HEALTH AnD nuTRiTiOn Preventive health campaigns were held in different districts of the Jorge Basadre and candarave, provinces; it has improved the quality of life of many in these communities and, working closely with the Peruvian government, a number of initiatives have been launched, such as the telemedicine project, which will expand the coverage and scope of health services. The urban Wastewater Treatment Plant in the district of camilaca started operations, which will increase access to drinking water; this project has improved distribution, regulation and supply operations. Similarly, it will prevent sewage from polluting the environment and will provide treated water for agricultural and forestry use. 41 2014 74% OF WATER RECOVERED WATER + Close cooperation with municipalities and different institutions and organizations, representing the region, has given tangible results that improve the living conditions of local residents, allowing an increase of local production capacities and better marketing processes in the communities through studies and research. ANNUAL REPORT 201442 The fifth publication of the Xocoyo Collection was “Corn”. With the income, we supported La Casa del Sol A.C., located in Puebla. This civil association houses 60 children in situation of abandonment, abuse, orphanage, loss and health problems. DIVISIÓN TRANSPORTESouthern copper corporation has also taken part in ilabaya, the “Oregano Growers of ilabaya” programme 43 the “candarave nourishment Programme” which, has enhanced production, as a result of the modern after working five years with the population, has irrigation project implemented in Poquera, chulibaya, reduced chronic malnutrition and anaemia rates by and Ticapampa. 11% and 33%, respectively, thus benefiting more than 600 children, from newborns to 5 year olds and 190 With such actions as those mentioned above, Southern expecting mothers in the provinces of cairani, camilaca, copper corporation is working to strengthen social candarave, curibaya, Huanurara and Quilahuani. development; the funds provided to strengthen the productive and commercial capacities in a number of inFRASTRucTuRE AnD PROMOTiOn OF THE FARMinG regions in this Andean country, have consolidated our SEcTOR Meaningful Development vision and shown the positive With the implementation of 14 projects to improve results achieved with consensus and dialogue with the irrigation channels and techniques to upgrade water communities that are host to our operations. infrastructure, and the installation of water treatment plants, we have managed to increase crop productivity With this vision of dialogue, and after holding informative in candarave. in 2014, tangible results have been workshops and public hearings to address the concerns achieved both in the marketing of quinoa (an Andean of stakeholders from different sectors and the civil grain) and oregano, and in animal health and permanent society, in 2014 both the Toquepala expansion project veterinary care. in addition, emergency response and the new Tía María mining project were approved. programs have been implemented to face cold waves, a weather condition that affects crop and farm yields; community development is not a matter of one single accordingly, the company supports the region with the area of the company; it is what our company is all about, provision of fodder and concentrated feed for livestock, and is reflected in the lifestyles of all its employees and as well as fertilizer for crops. contractors. We are grateful for their willingness, as it allows our staff to express themselves and participate Working together with two associations of local as active emissaries, able to positively transform the producers in the province of Jorge Basadre, a number lives of the community where they work, and collectively of livestock production projects have been developed creating social value to drive sustainability. in the district of ite, which have been successful thanks to the advice provided on dairy production and in Southern copper corporation, we will always animal health campaigns. Moreover, in the province of firmly keep our commitment to continually improving ANNUAL REPORT 201444 Community development is a way of being of our Company, which is expressed in the lifestyles of all its employees and contractors. We are grateful for their willingness which allows our members to express and participate as active spokespersons, able to positively transform societies where they work, creating together social value to drive sustainability. the quality of life of the communities where we operate, by encouraging community integration structures and its collective involvement, which will result in the common good and make people the key agents of development. cOMMuniTY OuTREAcH 45 In 2014, 242,203 people were benefited by 24 premieres which represents 3.673 percent increase over the previous year. ANNUAL REPORT 201446 CHAPTER FOuR 47 US$5,787.7 net sales in 2014 (in million) RESULTS OF OPERATIONS In 2014, EBITDA registered a new record, totaling uS$208 million, 90% above the previous year. ANNUAL REPORT 201448 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. RESuLTS OF OpERATIONS The years ended December 31, 2014, 2013 and 2012. Our net income attributable to Scc in 2014 was $ 1,333.0 or diluted earnings per share of $1.61, compared with net income attributable to Scc of $1,618.5 million or diluted earnings per share of $1.92 in 2013, and net income attributable to Scc of $1,934.6 million or diluted earnings per share of $ 2.28 in 2012. Operating cash cost: The company presents its operating costs both including and excluding the revenues of its byproducts (molybdenum, silver, sulfuric acid, etc.). Excluded from its calculation of operating cash cost are RESuLTS OF OPERATiOnS the cost of purchases of third parties metal, depreciation, amortization and depletion, exploration, workers participation provisions and other items of non-recurring nature, and the royalty charges. The company’s operating cash cost, as previously defined, for the three years ended December 31, is as follows: 49 Operating cash cost without by-product revenues Operating cash cost with by-product revenues 2014 2013 2012 (dollar per pound) 1.90 1.00 1.73 0.71 1.89 1.05 As seen on the previous chart, operating cash cost per pound of copper without by-product credits was $0.01 less than in 2013, a decrease of 0.5%, mainly due to the unitary cost dilution, higher production in all of our operations, but principally in Buenavista. This increase in production volume, more than offsets cost inflation, which increased costs for fuel, energy and other operation materials of our production process. net Sales: net sales in 2014 were $5,787.7 million, compared to $5,952.9 million in 2013, a decrease of $165.2 million or 2.8%. The decrease was principally the result of lower copper prices and sales volume as well as lower prices for our major by-products partially offset by higher sales volume of molybdenum, zinc and silver. copper made up 78.0% of net sales in 2014, compared to 78.2% in 2013. Sales of by-products in 2014 totaled $1,269.7 million, compared to $1,298.1 million in 2013, a decrease of 2.2%. ANNUAL REPORT 2014 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 2014 2013 2012 Average metal prices copper (per pound - LME) $ 3.11 $ 3.32 $ 3.61 copper (per pound - cOMEX) $ 3.12 $ 3.34 $ 3.61 Molybdenum (per pound) $ 11.30 $ 10.26 $ 12.62 Zinc (per pound - LME) $ 0.98 $ 0.87 $ 0.88 Silver (per ounce - cOMEX) $ 19.04 $ 23.82 $ 31.19 SALES VOLUME (IN ThOUSANDS) 2014 2013 2012 copper (pounds) 1,448.0 1,382.4 1,414.6 Molybdenum (pounds) (1) 51.0 43.9 40.2 Zinc (pounds) Silver (ounces) 201.5 218.5 205.9 14.6 16.6 16.2 (1) The company´s molybdenum production is sold in the form of concentrates. Volume represents pounds of molybdenum contained in concentrates. 50 23 2014 23% INCREASE IN PRODUCTION EXPANSION SINCE SCC ANNOUNCED ITS EXPANSION PLAN, DURING THE THIRD qUARTER OF 2010, OUR PRODUCTION HAS INCREASED 23%. RESuLTS OF OPERATiOnS In 2014, our Mining Division achieved a annual record of 847,387 tons of copper, which exceeded our 2014 production budget of 837,000 tons. 51 ANNUAL REPORT 201452 In 2014, our budget for social investment programs was increased 57%, compared with 2013, mainly due to investment in the new General Hospital of Cananea. LETTER TO SHAREHOLDERSCHAPTER FIVE 53 $24.4 MEXICAN OPERATIONS SOCIAL RESPONSAbILITY ANNUAL REPORT 201454 uS $ 18.9 million was the investment in the New General Hospital in Cananea. It was inaugurated by Guillermo Padres, State Governor; Mercedes Juan Lopez, Federal Secretary of Health; and our CEO Oscar Gonzalez Rocha. 2014 40,000 PEOPLE WERE BENEFITED HOSPITAL + DURING 2014, THE NEW GENERAL HOSPITAL OF CANANEA WAS INAUGURATED, AN ESTIMATED OF 40,000 INHABITANTS OF THE REGION HAvE BEEN BENIFITED. SOciAL RESPOnSABiLiTY ENVIRONmENTAL mATTERS 55 The company has instituted extensive environmental surface of the tailings dams and the implementation conservation programs at its mining facilities in Peru of scrubbing technology in the mines to reduce dust and Mexico. The company’s environmental programs emissions. include, among others, water recovery systems to conserve water and minimize impact on nearby Environmental capital expenditures in years 2014, streams, reforestation programs to stabilize the 2013 and 2012, were as follows (in millions): Mexican operations Peruvian operations Total 2014 $ 24.4 127.0 $ 151.4 2013 2012 $ 39.8 $ 27 76.9 20.7 $ 116.7 $ 47.7 Mexican operations: The company’s operations companies that violate environmental laws, which in are subject to applicable Mexican federal, state and the most extreme cases may result in the temporary municipal environmental laws, to Mexican official or permanent closing of non-complying facilities, the standards, and to regulations for the protection of the revocation of operating licenses and/or other sanctions environment, including regulations relating to water or fines. Also, according to the federal criminal code, supply, water quality, air quality, noise levels and PROFEPA must inform corresponding authorities hazardous and solid waste. regarding environmental non-compliance. The principal legislation applicable to the company’s in January 2011, Article 180 of the General Law Mexican operations is the Federal General Law of was amended. This amendment, gives an individual Ecological Balance and Environmental Protection (the or entity the ability to contest administrative acts, “General Law”), which is enforced by the Federal including environmental authorizations, permits or Bureau of Environmental Protection (“PROFEPA”). concessions granted, without the need to demonstrate PROFEPA monitors compliance with environmental the actual existence of harm to the environment, legislation and enforces Mexican environmental natural resources, flora, fauna or human health, laws, regulations and official standards. PROFEPA because it will be sufficient to argue that the harm may initiate administrative proceedings against may be caused. in addition, in 2011, amendments ANNUAL REPORT 2014 56 to the civil Federal Procedures code (“cFPc”) were On August 19, 2014, PROFEPA, as part of the published in the Official Gazette and are now in administrative proceeding initiated after the spill, force. These amendments establish three categories announced the filing of a criminal complaint against of collective actions by means of which 30 or more BVc and those determined to be responsible for the people claiming injury derived from environmental, environmental damages. The criminal complaint filed by consumer protection, financial services and economic PROFEPA against BVc is in the procedural stages. The competition issues will be considered to be sufficient company is vigorously defending against it. According in order to have a legitimate interest to seek through a to the Mexican Environmental Responsibilities Federal civil procedure restitution or economic compensation Law, administrative fines and sanctions could go or suspension of the activities from which the alleged upward to 40 million Mexican pesos (approximately $3 injury derived. The amendments to the cFPc may result million). Additional sanctions or fines may be imposed, in more litigation, with plaintiffs seeking remedies, including the cost of cleanup and remediation of the including suspension of the activities alleged to cause polluted sites, as well as economic compensation to harm. individuals who may have suffered damages as a result of the spill, provided that direct damages are proven. in June 2013, the Environmental Liability Federal Law was published in the Official Gazette and became effective one month thereafter. The law establishes On September 15, 2014, BVc, in agreement with general guidelines in order to determine which the Mexican Federal Government, established a environmental actions will be considered to cause trust of up to two billion pesos (approximately $150 environmental harm that will give rise to administrative million) to support the remedial efforts that BVc had responsibilities (remediation or compensations), already undertaken, to comply with the environmental criminal responsibilities as well as monetary fines. remediation plan and to pay, as the case may be, material damages to the riverside residents of the The accident was caused by a rock collapse that seven counties affected by the spill. in 2014, BVc affected the system’s pumping station and by a estimated the contingent liability at $91.4 million, of construction defect in the seal of a pipe in the leaching which $16.4 million had been paid previous to the system containment dam, a part of the new SX-EW establishment of the trust, and approximately one billion iii plant. This solution reached the Bacanuchi River, a pesos (approximately $74.9 million) was deposited in branch of the Sonora River. All the immediate actions the trust. These funds have been available and have were properly taken in order to contain the spill, and to been used to compensate claims as they have arisen. comply with all the legal requirements. This deposit was classified as restricted cash and SOciAL RESPOnSABiLiTY 57 2014 6,500 HOUSES W ITH ENERGY + On August 6, 2014, an accidental spill of approximately 40,000 cubic meters of copper sulfate solution occurred at a leaching pond that was under construction ten kilometers away from the mine of Buenavista del Cobre, S.A. de C.V. (“BVC”) a subsidiary of the Company. was recorded as an operating expense in the 2014 results. A technical committee was created to manage the funds, comprised of representatives from the federal government, the company and specialists assisted by a team of environmental experts. The trust established by the company and the administrative agreement executed with the corresponding Federal authorities, serves as an alternative mechanism for dispute resolution to mitigate public and private litigation risks. A TECHNICAL COMMITTEE WAS CREATED TO MANAGE THE FUNDS, COMPRISED OF REPRESENTATIvES FROM THE FEDERAL GOvERNMENT, THE COMPANY AND SPECIALISTS ASSISTED BY A TEAM OF ENvIRONMENTAL EXPERTS. ANNUAL REPORT 201458 Our environmental programs include water, water recovery systems to reduce consumption and minimize the impact on nearby streams, reforestation programs for stabilize surface of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions. 2014 120% INCREASED PRODUCTION TREES TREES + SCC INCREASED 120% ITS PRODUCTION CAPACITY OF TREES FROM 2012 TO 2014 SOciAL RESPOnSABiLiTY On november 27, 2014, a remediation program was metallurgical operations. Through these environmental 59 presented before SEMARnAT, the federal agency audits, matters related to environmental obligation, of environment and natural resources, which was compliance with legal requirements, atmospheric approved on January 6, 2015. emissions, effluent monitoring and waste management On December 31, 2014, PROFEPA initiated an compliance with applicable Peruvian environmental are reviewed. The company believes that it is in material administrative proceeding directly derived from the laws and regulations. spill, which is still in its initial stages. The national commission for Water (“cOnAGuA”), and the Federal Peruvian law requires that companies in the mining commission for the Protection against Sanitary Risks industry provide assurances for future closure and (“cOFEPRiS”), have initiated certain proceedings, reclamation. in accordance with the requirements of not directly linked to the spill, to monitor company’s this law, the company’s closure plans were approved compliance with the applicable environmental laws. by MinEM. As part of the closure plans, the company in addition, the company has been served with three is providing guarantees to ensure that sufficient funds collective action lawsuits seeking damages for injuries will be available for the asset retirement obligation. related to the spill, which are in an early procedural See note 9 “Asset retirement obligation,” for further stages. For a description of collective actions in Mexico discussion of this matter. refer to the 2011 amendments to the cFPc described in 2008, the Peruvian government enacted above. The company asserts that these lawsuits are environmental regulations establishing more stringent without merit and is vigorously defending against them. air quality standards (“AQS”) for daily sulfur dioxide (“SO2”) emissions for the Peruvian territory. These The company reasonably considers that none of the regulations, as amended in 2013, recognize distinct legal proceedings resulting from the spill, individually zones/areas, as atmospheric basins. As part of these or in the aggregate, would have a material effect on its regulations, MinAM was required to carry-out a 12 financial position or results of operations. month ambient air monitoring period, prior to January 1, 2014, to establish SO2 levels. Those areas with a Peruvian operations: The company’s operations are mean 24-hour SO2 concentration equal or less than 20 subject to applicable Peruvian environmental laws micrograms per cubic meter (“ug/m3”) are required to and regulations. The Peruvian government, through develop programs to maintain this level of compliance. the Ministry of Environment (“MinAM”) conducts Those areas or cities exceeding the mean 24-hour SO2 annual audits of the company’s Peruvian mining and concentration of 20 ug/m3 will be required to establish ANNUAL REPORT 2014an action plan to address this problem and are required to achieve the 20 ug/m3 AQS in the future. Meanwhile they are required to achieve mean 24-hour AQS equal to 80 ug/m3 of SO2. MinAM has established three atmospheric basins that require further attention to comply with 80ug/ m3 of SO2. The ilo basin is one of these three areas and the company’s smelter and refinery are part of the area. A supreme decree issued on April 8, 2014, indicates that the company should review its compliance with these regulations and develop a modification plan to reach compliance. The company is working with an environmental technical study group, established by a MinAM resolution to identify air quality issues and develop plans to comply with the pertinent regulations. in 2013, the Peruvian government enacted new soil environmental quality standards (“SQS”) applicable to any existing facility or project that generates or could generate risk of soil contamination in its area of operation or influence. in March 2014, MinAM issued a supreme decree which establishes additional provisions for the gradual implementation of SQS. under this rule the company has twelve months to identify contaminated sites in and around its facilities and present a report of identified 60 2014 74% OF WATER RECOVERED WATER + IN 2014, 74% OF TOTAL WATER CONSuMPTION IN OuR MINING OPERATIONS WAS RECOVERED WATER, MINIMIZING CONSuMPTION AND DEMAND OF FRESH WATER LETTER TO SHAREHOLDERScontaminated sites. if such sites exist, the company The company believes that all of its facilities in Mexico 61 must submit a decontamination plan for approval within and Peru are in material compliance with applicable 24 months from the date it is notified by the authority. environmental, mining and other laws and regulations. This decontamination plan shall include remediation actions, a schedule and compliance deadlines. Also, The company also believes that continued compliance under this rule, if deemed necessary, the company with environmental laws of Mexico and Peru will not may request a one year extension, given sound have a material adverse effect on the company’s justification. Soil confirmation tests must be carried business, properties, result of operations, financial out after completion of decontamination actions (within condition or prospects and will not result in material the approved schedule) and results must be presented capital expenditures. to the authorities within 30 days after receiving such results. non-compliance with this obligation or with decontamination goals will carry penalties, although no specific sanctions have been established yet. During compliance schedule, companies cannot be penalized for non-compliance with the SQS. in the fourth quarter of 2014, the company selected the consultant to carry out soil samplings, studies and other requirements of the rules. ANNUAL REPORT 201462 LETTER TO SHAREHOLDERSCHAPTER SIX 63 84.6% In 2014, AMC increased its interest in SCC GENERAL INFORMATION Minera Mexico engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead. Minera Mexico operates through subsidiaries that are grouped into three separate units. Mexicana de Cobre S.A. de C.V. (together with its subsidiaries, the “La Caridad unit”) operates La Caridad, an open-pit copper mine, a copper ore concentrator, a SX-EW plant, a smelter, refinery and a rod plant. ANNUAL REPORT 201464 The new ore thick warehouse with a capacity of 300,000 tons, 120 meters in diameter and 50 meters high, works as an environmental measure avoiding dust dispersion. GENERAL INFORmATION information related to its constitution and their inscription in the Public Registry: See: “Brief historical review from the constitution of the company” on page 67. 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 in chile, Ecuador y Argentina. 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. GEnERAL inFORMATiOn 65 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 860 kilometers southeast of the city of Lima, Peru. We also operate a smelter and refinery west of the Toquepala and cuajone mines in the coastal city of ilo, Peru. Our Mexican operations are conducted through our subsidiary, Minera Mexico S.A. de c.V. (“Minera Mexico”), which we acquired 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. Operadora de Minas e instalaciones Mineras S.A de c.V. ( the “Buenavista unit”)operates Buenavista, formerly named 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 SXEW plants. The Buenavista mine was operated until December 11, 2010 by Mexicana de cananea S.A. de c.V. and by Buenavista del cobre S.A. de c.V. from that date until July 2011. industrial Minera Mexico, S.A. de c.V. (together with its subsidiaries, the “iMMSA unit”) operates five underground mines that produce zinc, lead, copper, silver and gold, a coal mine and a zinc refinery. Effective February 1, 2012, Minerales Metalicos del norte S.A was merged with industrial Minera Mexico S.A. de c.V. (iMMSA). iMMSA absorbed Minerales Metalicos del norte S.A. 7.5% 2014 7.5% INCREASE IN SALES SALES + OUR OPERATIONS HAvE A HIGH LEvEL OF vERTICAL INTEGRATION THAT ALLOWS US TO MANAGE THE ENTIRE PRODUCTION PROCESS. ANNUAL REPORT 201466 We utilize modern/state of the art mining and processing the entire production process, from the mining of the ore methods, including global positioning systems and to the production of refined copper and other products computerized mining operations. Our operations have a and most related transport and logistics functions, using high level of vertical integration that allows us to manage our own facilities, employees and equipment. EcONOmIc GROup Scc, indirectly, makes part of “Grupo Mexico S.A.B. de c.V.” who owns 100% of Americas Mining corporation (“AMc”). Name of the company SEVERAL ACTIVITIES Domicilio Inscripcion en el RPMV % 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Grupo Mexico, S.A.B. de c. V. Grupo Mexico Servicios, S.A. de c.V. AcTiViDADES DE TRAnSPORTE FERROViARiO Mexico Mexico infraestructura y Transportes Mexico, S.A. de c. V. Mexico AcTiViDADES MinERAS 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. Buenavista del cobre, S.A. de c. V. Mexicana de cobre, S.A. de c. V. Southern Peru Limited EE.uu. EE.uu. EE.uu. Mexico Mexico Mexico Mexico EE.uu. Southern Peru copper corporation, Agencia en chile chile 100 100 100 84.6 100 99.95 99.99 99.99 98.14 100 100 Southern Peru copper corporation, Sucursal del Peru compañia Minera Los Tolmos, S.A. Peru Peru  99.291 97.3 1 include 82.69% of common shares and 16.60% of investment shares. GEnERAL inFORMATiOn LA CARIDAD SMELTER It started its production with a capacity of 493 t / d of anodes in July 1986 and expanded its capacity to 822 t / d of anodes in March 1997. 67 ANNUAL REPORT 201468 The new copper molybdenum concentrator has an annual production capacity of 188,000 tons of copper and 2,600 tons of molybdenum. The project will additionally produce 2.3 million ounces of silver and 21,000 ounces of gold per year. The total capital budget of the project is $1,383.6 million and through December 31, 2014, the project has an 92.2% progress with an investment of $978.5 million. GEnERAL inFORMATiOn Corporate Capital and Common Stock The authorized number of shares issues an Paid capital: common Shares nominal Value of common Shares Capital Structure Americas Mining corporation common Shares Total Shares 69 2,000,000,000 884,596,086 $ 0.01 Shares 687,275,997 125,342,125 Interest 84.6% 15.4% 812,618,122 100.0% OpERATIONS IN mEXIcO La Caridad Mine La Caridad Metallurgic Complex “La caridad concentrator” started operations in 1979, La caridad Smelter started operations in July, 1986, with a milling capacity of 90,000 tons per day. with a production capacity of 493 tons of anode per day and was expanded to 822 tons in March, 1997. “Molybdenum Plant” started operations in 1982, with a production capacity of 2,000 tons of copper- “La caridad Refinery” started operations in July, 1997, molybdenum concentrate per day. with a production capacity of 493 tons of copper cathode per day and was expanded to 822 tons in January, 1998. -“La caridad SX-EW” started operation in 1995 and has a daily production capacity of 66 tons of copper “La caridad Precious Metals Plant” started operations cathodes. Approximately 663.3 million tons of leach in May, 1999, with a production capacity of 43,836 ore with an average grade of approximately 0.247% ounces of silver per day, 247 ounces of gold per day copper have been extracted from the La caridad open- and 342 kilograms of selenium per day. pit mine and deposited in leaching dumps from May 1995 to December 31, 2012. “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. ANNUAL REPORT 2014 70 Buenavista Mine Underground mines “Buenavista concentrator” started operating in 1.- The Santa Barbara unit with a milling capacity of September, 1986, with a capacity of 62,500 tons per day; 5,800 tons of ore per day. the capacity was expanded to 70,000 tons in 1988 and to 2.- The Santa Eulalia unit with a milling capacity of 76,700 tons in 1998. 1,450 tons of ore per day. 3.- The San Martin unit with a milling capacity of 4,400 “Buenavista SX/EW i Plant” started operating in 1980, tons of ore per day. with a capacity of 30 tons per day. 4.- The charcas unit with a milling capacity of 4,100 tons of ore per day. “Buenavista SX/EW ii Plant” started operating in 1989, 5.- The Taxco unit with a milling capacity of 2,000 tons with a capacity of 66 tons per day and was expanded to per day. 120 tons per day in 2001. 6.- coquizadora coal Plant, in coahuila unit, with a capacity of 105,000 tons of coke per year. “Buenavista SX/EW iii Plant” started operating during the 7.- The Zinc Refinery with a capacity of 288 tons per fourth quarter of 2014, we completed the construction of a day. new SX-EW plant that is expected to significantly increase production of leachable material by approximately 120,000 tons per year. (See 10K, on page 64). GEnERAL inFORMATiOn pERuVIAN OpERATIONS TOquEPALA 71 1. Toquepala concentrator. Directorial Resolution 2. oquepala Leaching Plant (SX/EW). Directorial no.455-91-EM/DGM/DcM dated July 5, 1991 Resolution no. 166-96-EM/DGM dated May 7, approved the operation of the Toquepala concentrator. 1996, approved the operation of the Toquepala SX/ The resolution granted 240 hectares of surface land EW plant. The resolution granted 60 hectares of and authorized a throughput of 39,000 tons/day. surface land and authorized a throughput of 11,850 Based on Report no. 413-97-EM/DGM/DPDM tons/day. dated July 7, 1997 the “Director General de Based on Report no. 663-98-EM-DGM/DPDM Mineria” authorized the expansion of the Toquepala dated november 10, 1998 the “Director General concentrator to a 43,000 tons/day throughput. de Mineria” authorized construction and expansion of Toquepala SX/EW plant to 18,737 tons/day Based on Report n° 547-2002-EM/DGM/DPDM, throughput. Directoral Resolution dated May 19, dated november 6, 2002, the “Director General de 2003, based on Report no. 291-2003-EM-DGM/ Mineria” authorized the expansion of the Toquepala DPDM, authorized operation of the SX/EW plant to concentrator to a capacity of 60,000 MT per day. a throughput of 18,737 tons/day. Our Peruvian copper operations involve mining, milling and flotation of copper ore to produce copper and molybdenum concentrates, the smelting of copper concentrates to produce anode copper, and the refining of anode copper to produce copper cathodes. ANNUAL REPORT 2014 72 CuAJONE 1. Botiflaca concentrator in cuajone: Directorial of the installed capacity from 87,000 to 90,000 Resolution no. 150-81-EM/DcM dated August MT per day. 14, 1981 approved the operation of Botiflaca concentrator. The resolution granted 56 hectares 2. cuajone Leaching Plant (LX/EW). Directorial of surface land. Resolution no.155-96-EM/DGM dated May 6, 1996 approved the operation of the cuajone Based on Report no. 266-99-EM/DGM/DPDM Leaching plant. The resolution granted 400 dated July 20, 1999 the “Director General de hectares of surface land and authorized a Mineria” authorized the expansion of Botiflaca throughput of 2,100 MT per day. Based on Report concentrator to 87,000 MT per day throughput. no. 988-2009-MEM-DGM/V, dated December 16, 2009, cuajone SX plant operation was approved Resolution n° 379-2010-MEM-DGM/V dated and authorized the of the, with a capacity of 3100 October 7, 2010, based on Report n°312-2010- MT per day. MEM-DGM-DTM/PB, authorized construction and expansion of Botiflaca concentrator to 90,000 MT ILO per day throughput. 1. ilo Smelter: Authorized (definitely) by Directorial Resolution no. 078-69-EM/DGM dated August 21, For operating reasons as part of the crusher 1969 approved the operation of the ilo Smelter. process optimization, on november 8, 2012, we The resolution authorized a production of 400 requested to the Peruvian authorities through Short tons/day of blister copper. resources n° 214491 to add three additional facilities (HPGR mill and others). Based on Report no.204-2000-EM-DGM-DPDM dated June 20, 2000 the “Director General de With Directoral Resolution n° 153-2012-MEM- Mineria” authorized the expansion of the ilo DGM-V based on report 165-2012-MEM-DGM- Smelter to a 3,100 MT per day throughput of DTM-PB. MEM approved and authorized the project copper concentrates. to include three additional facilities aforementioned on the procedure of the amendment and increase GEnERAL inFORMATiOn 73 On February 4, 2010, the company began the 3. Sulfuric Acid Plant: Authorized by Directorial process to obtain authorization from the MinEM to Resolution no. 024-96-EM/DGM dated January operate a capacity of 3,770 MT per day, which is 19, 1996, approved the operation of the sulfuric included as an ancillary facility to Acid Plant no. 2, acid plant, installed at the smelter, at a production with a capacity of 2,880 MT per day or 1,051,200 rate of 150,000 tons per year. MT per year. 2. ilo Refinery: Authorized by Report no. 056-94-EM/ dated May 21, 1998 the “Director General de DGM/DRDM dated May 27, 1994 the “Director Mineria”, authorized the expansion of the ilo General de Mineria” authorized the operation Sulfuric Acid Plant to a capacity of 300,000 tons Based on Report no. 313-98-EM/DGM/DPDM of the ilo copper Refinery at 533 MT per day per year production. throughput of blister copper. Based on Report no. 506-97-EM/DGM/DPDM 4. “coquina Wash Plant and Sea shell concentrates” dated September 2, 1998 the “Director General authorized to operate by Directorial Resolution nº de Mineria” authorized the expansion of ilo 110-93-EM/DGM of August 3, 1993. The plant copper Refinery to a capacity of 658 MT per day processes 95 Tc/h of raw material (coquina) throughput. recovered from nearby mines. Seashell is produced separating sand and other materials from the Based on Report n° 080-2002-EM-DGM/DPDM, coquina using sea water washing screens. dated March 14, 2002, the “Director General de Mineria” authorized the expansion of the ilo Resolution n°038-2011-MEM-DGM-DTM/PB dated copper Refinery to a capacity of 800 MT per day. February 2, 2012, based on Report n°035-2011- MEM-DGM-DTM/PB, authorized modification in the Resolution n°520-2010-MEM-DGM/V dated concession of “coquina Wash Plant and Sea shell December 30, 2010, based on Report n° n°414- concentrates” to a classified dry sea shell plant without 2010-MEM-DGM-DTM/PB, authorized changes in expanded its capacity throughput, which represents ilo copper refinery without expanded its capacity 2,068 tons/day. throughput. ANNUAL REPORT 2014 74 Description of Operations and Development regarding the issuing entity Purpose 17% 2014 23,290 TONS MOLYBDENUM Mo + PRODUCTION OF MOLYBDENUM IN 2014 INCREASED 17 % COMPARED WITH 2013, REACHING 23,290 TONS, A NEW RECORD The average price of molybdenum in 2014 was uS $ 11.39 / lb , an increase of 10 % over 2013. GEnERAL inFORMATiOn The purpose of Southern copper corporation (Scc) Actions following company incorporation: 75 is to engage in activities allowed by the laws of the capital increase: State of Delaware. its main activity is to extract, By Public Deed dated May 31, 1995, signed before mill, concentrate, smelt, treat, prepare for market, notary public of Lima, Dr. carlos A. Sotomayor Bernos, manufacture, sell, exchange and, in general, to produce the Branch capital increase was formalized. it was and negotiate for sales of copper, molybdenum, gold, made through money contribution by the company in silver, lead, zinc, iron and any other class of minerals favor of its Peru Branch and by the owners of labor and materials or other materials, effects and goods of shares, pursuant to Legislative Decree no. 677. any nature or description; as well as to explore, exploit, The capital contribution made by the company was sample, examine, investigate, recognize, locate, aimed at increasing the capital allotted to the Branch appraise, buy, sell, exchange, etc., mining concessions by the headquarters and registered in Peru. The and mining deposits. Scc belongs to the ciiu 1320 capital contribution made by the Labor Shares (today group. investment Shares) owners was assigned to the Labor Shares account of the Branch for issuing new Labor The term of duration of the company is indefinite. Shares. Brief historical review from the constitution of the Part of the money contribution made by the company company: in favor of its Branch and by the Labor Shares owners The company was organized on December 12, 1952, was applied as a capital premium to the Resident according to the Laws of the State of Delaware of account as Additional capital. the united States of America, under the original denomination of Southern Peru copper corporation Exchange of investment Shares (Labor Shares) for (“SPcc”), which was renamed on October 11, 2005, common Shares: to Southern copper corporation (Scc). Dated September 7, 1995, “Southern Peru copper Holding company” was also incorporated pursuant to in 1954, Scc established a Branch in Peru to carry the Laws of the State of Delaware, aiming at acting as out mining activities in this country. The Branch was a holding company that owns all Southern Peru copper established under public instrument certified by Public corporation shares, and at performing an exchange of notary from Lima, Dr. Ricardo Fernandini Arana, on the shares that were then called “Labor Shares” (today november 6, 1954. investment Shares) issued by the branch in Peru, delivering the owners of labor shares a certain number The Branch is registered in the Electronic Record of common shares issued by SPcc in the united nº 03025091 of the Juridical People of the Registry States. As a consequence of this share exchange, Office of Lima and callao. former owners of Labor Shares acquired 17.31% of ANNUAL REPORT 201476 The new primary crushing building, in Buenavista open pit, has a capacity to process up to 400,000 tons per day. This will be the first installation of its kind to hold 4 breakers. By December 2014, its construction reached 90%. SPcc’s capital, and this company acquired ownership one and assumed all its assets and liabilities, including of 80.77% of Labor Shares (today investment Shares). the Branch in Peru. This merger did not imply any change to the share percentage in the corporate On December 31, 1995, Southern Peru copper capital or in the net Worth Share Account (investment corporation changed its corporate name to “Southern shares), which were kept the unchanged. Peru Limited”, and “Southern Peru copper Holding company” changed its corporate name to Southern As a consequence of the merger, the mining activities Peru copper corporation. of the corporation in Peru were again carried out under As a consequence of this corporate name change, the Branch, or the abbreviated name of “Southern Peru” the name of Southern Peru copper corporation, Peru mining activities of the company in Peru started being and/or the acronym SPcc. performed under the name of Southern Peru Limited, Peru Branch (SPL). change of Economic Group: in november 1999, Grupo Mexico S.A.B. de c. V., On December 31, 1998, the merger between Southern a firm incorporated pursuant to the Laws of the Peru copper corporation and Southern Peru Limited Republic of Mexico, acquired in the united Stated was agreed. The first company absorbed the second 100% of ASARcO incorporated, the main shareholder GEnERAL inFORMATiOn of Southern Peru copper corporation at that time. in which represent $1,842.3 million. These shares are 77 this way, SPcc became a subsidiary of Grupo Mexico, available for general corporate purposes. The company who keeps its shareholding through Americas Mining may purchase additional shares of its common stock company (AMc). from time to time, based on market conditions and Acquisition of Minera Mexico, and other corporate expiration date and may be modified or discontinued other factors. This repurchase program has no changes: at any time. Scc shareholders, in a shareholder extraordinary meeting dated March 28, 2005, approved issuance At December 31, 2014, Grupo Mexico indirect of common Shares and required actions related to ownership is 84.6%. the acquisition of Minera Mexico, a firm incorporated pursuant to the Laws of the Republic of Mexico. This change in the certificate of incorporation: transaction was approved by more than 90% of the On March 28, 2005, following Board of Directors stocks and circulating capital of Scc. To acquire recommendations, Scc shareholders approved in an Minera Mexico, Scc issued 67,207,640 shares in extraordinary meeting the amendments to the Articles exchange for MM shares. Once the shares related to of incorporation Deed, changing the composition and the acquisition were issued, AMc increased its share obligations of some Board committees. in Scc from 54.2% to approximately 75.1%. Special independent Director: AMc increased its Participation in Scc: The changes to the Articles of incorporation Deed in 2008 and 2009 Grupo Mexico, through its wholly require the Board to include a certain number of special owned subsidiary AMc, purchased 11.8 million and independent directors. A special independent director 4.9 million shares of the company’s common Stock, is a person who (i) complies with the independence respectively. standards of the new York Stock Exchange (or any other stock exchange or association in which common Scc $500 Million Share Repurchase Program : Shares are listed) and (ii) is appointed by the Special in 2008, the company’s Board of Directors (“BOD”) Appointment committee of the Board. A special authorized a $500 million share repurchase program independent director may only be removed from the that has since been increased by the BOD and is Board upon a justified cause. currently authorized to $3 billion. Pursuant to this program, the company purchased common stock as The minimum number of special independent directors from 2008 to December 31th, 2014, the company in that Directory at any time shall equal (a) the total purchased 79.9 million shares of its common stock number of directors in the Board multiplied by (b) the ANNUAL REPORT 201478 percentage of common Shares all the shareholders independent directors or initial Members. Only special (that are not Grupo Mexico and its affiliates) have, independent directors can fill vacancies on the Special rounding up to the following integer number. nominating committee. Any member of the Special notwithstanding the abovementioned, the total number nominating committee may be removed at any time of people appointed as special independent directors by the Board of Directors for cause. The unanimous (not belonging to Grupo Mexico) cannot be less than vote of all members of the nominating committee will two or more than six. be necessary for the adoption of any resolution or the Special nominating committee: taking of any action. The Special nominating committee functions as a Our Amended and Restated certificate of incorporation, special committee to nominate special independent as amended, provides that the minimum number of directors to the Board. Pursuant to our Amended and special independent directors on the Board of Directors Restated certificate of incorporation, as amended, a at any given time shall be equal to (a) the total number special independent director is any director who (i) of directors on the Board of Directors multiplied by satisfies the independence requirements of the new (b) the percentage of common Stock owned by all York Stock Exchange or nYSE (or any other exchange or of the stockholders (other than Grupo Mexico and association on which the common Stock is listed) and its affiliates), rounded up to the next whole number. (ii) is nominated by the Special nominating committee. notwithstanding the foregoing, the total number of The Special nominating committee has the right to persons nominated as special independent directors nominate a number of special independent directors cannot be less than two or greater than six. based on the percentage of our common Stock owned by all holders of our common Stock, other than Grupo notwithstanding the foregoing, the power of the Mexico and its affiliates. Special nominating committee to nominate special independent directors is subject to the rights of the The Special nominating committee consists of two stockholders to make nominations in accordance with directors (2) of whom are Luis Miguel Palomino and our by-laws. carlos Ruiz Sacristan (each an “initial Member” and, together with their successors, “Special Designees”) The provisions of the Amended and Restated certificate and such other director, currently Xavier Garcia de of incorporation, as amended, relating to special Quevedo Topete, as may be appointed by the Board independent directors may only be amended by the of Directors or the “Board Designee”. The Board affirmative vote of a majority of the holders of shares of Designee will be selected annually by the Board of common Stock (calculated without giving effect to any Directors. The Special Designees will be selected super majority voting rights) other than Grupo Mexico annually by the members of the Board who are special and its affiliates. GEnERAL inFORMATiOn 79 The Company believes that all of its facilities in Mexico and Peru are in material compliance with applicable environmental, mining and other laws and regulations. The Company also believes that continued compliance with environmental laws of Mexico and Peru will not have a material adverse effect on the Company’s business, properties, result of operations, financial condition or prospects and will not result in material capital expenditures. ANNUAL REPORT 201480 As a result of the investments in Buenavista, this will become the third mine in the world, in terms of production. Transactions with affiliates: Amendments to the Deed also prohibit the company to commit in 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 $10.0 million. 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 operational 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, and its exploration activities in the Republics of Argentina and Ecuador. 81 Additionally, on the same date, the majority shareholder from sales, its financial and economic revenues and approved an amendment of our Articles of incorporation its solvency, the Board of Directors agreed to maintain Deed to remove others’ provisions in our Deed related the original corporate name to the Peru Branch, that with our class A common Shares that were formerly in is, Southern Peru copper corporation, Peru Branch, circulation, which were converted to common Shares or the abbreviated name “Southern Peru” and/or the on May 19, 2005, and to change the number of acronym SPcc. corporate directors from fifteen to a number that will be regularly established following agreement of most changes in the certificate of Articles of incorporation of Board members stipulating the number of directors and Bylaws: will not be less than six or more than fifteen. Dated January 26, 2006, the Board approved amendment to Southern copper corporation’s bylaws The Deed amendment was submitted to the Secretary (i) aiming at removing the provisions related to class of State of the State of Delaware, and came into effect A common Shares among other changes.(ii) adding on October 11, 2005. a new provision for advance notice to shareholders seeking to nominate directors or to propose other Peru Branch name: business at annual or special meetings of the Generally, the change of headquarters corporate common Stockholders (as applicable) (iii) substitute name should comprise the corresponding name of the Grupo Mexico for ASARcO incorporated in the ancillary organizations linked to it, as is the case of the “change in control” definition in the corporation’s Peru Branch through which the corporation develops by-laws (iv) and eliminate the 80% supermajority its mining activities in Peru. vote requirement for certain corporate actions. The modification of the Modified certificate of incorporation After consulting with Peruvian lawyers, the Board of increased the capital stock from 167,207,640 shares Directors, taking into consideration the net worth and to 320,000,000 shares. These modifications were assets importance of the Branch, the need to continue submitted for approval of the shareholders at the acknowledging the position of the Peruvian Branch with shareholders annual meeting held on April 27, 2006 its local and international copper clients, the need to which was adjourned and reconvened for May 4, preserve its proceeds and its position in good name in 2006, and later on adjourned and reconvened for May the copper market, and the need to prevent any possible 11, 2006. client loss, as well as to guarantee the revenue flow ANNUAL REPORT 201482 At the annual meeting, on April 27, 2006, the proposal the required votes. Because the required vote for the to amend the by-laws to eliminate certain extraneous approval of this proposal was 80% and because there provisions relating to the retired series of class A were still votes that needed to be tabulated, the annual common Stock had an affirmative vote of 79.85% of meeting for this proposal was adjourned first until the required votes. Because the required vote for the May 4, 2006, and subsequently until May 11, 2006. approval of this proposal was 80% and because there On May 11, 2006, at the adjourned and reconvened were still votes that needed to be tabulated, the annual meeting stockholders did not approve the proposal meeting for this proposal was adjourned until May 4, having received an affirmative vote of 79.61% of the 2006. On May 4, 2006, at the adjourned and reconvened required votes. meeting the stockholders approved the proposal with an affirmative vote of 80.61% of the required votes. Scc is indirectly, part of Grupo Mexico S.A.B. de c.V. which owns 100% of Americas Mining corporation On April 27, 2006, stockholders approved (i) the (AMc) shareholding, owner of 84.6% of Scc shares. amendment to the by-laws to introduce a new provision for advance notice to shareholders seeking information about plans and investment policies: to nominate directors or to propose other business See capital Expenditures and Exploration on page 16. at annual or special meetings of the common Stockholders (as applicable); (ii) the amendment to Relationship between the issuer and the Government: the by-laws to substitute Grupo Mexico for ASARcO On november 20, 1996, Scc and the Peruvian incorporated in the “change in control” definition in Government (Ministry of Energy and Mines) signed a the corporation’s bylaws; (iii) the amendments to the contract that remained effective until the year 2010 Amended and Restated certificate of incorporation and guaranteed the tax stability and the availability to increase the number of shares of common Stock, of exchange to foreign currency of the Branch’s which the corporation is authorized to issue from earnings related to the operation of the SX/EW plant 167,207,640 shares to 320,000,000 shares; and (iv) at Toquepala and the Solvent Extraction (SX) operation the selection of the independent accountants. in cuajone. Also, on April 18th, 1995, Scc and the Peruvian Government (cOniTE) signed a contract that On April 27, 2006, the proposal to amend the by-laws remained effective during ten years and guaranteed to eliminate the 80% supermajority vote requirement the availability of foreign currencies, free remittance for certain corporate actions had received preliminary of dividends to the exterior, among other guarantees votes, representing an affirmative vote of 78.35% of related to the acid plant of the ilo Smelter. GEnERAL inFORMATiOn 83 Scc obtains refunds 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 these refunds, Scc is entitled to credit the amount of the iGV against its Peruvian tax obligations or to receive a refund. Special Mining tax: in September 2011, the Peruvian government enacted a new tax for the mining industry. This tax is based on operating income and its rate ranges from 2% to 8.4%. it begins at 2% for the first 10% of operating income margin and for each additional 5% of operating income margin is increased by an additional rate of 0.4% until 85% of operating income margin is reached. Mining Royalty: in September 2011, the Peruvian congress approved an amendment to the mining royalty charge. The new mining royalty charge is based on operating income margins with graduated rates ranging from 1% to 12%, with a minimum royalty charge assessed at 1% of net sales. if the operating income margin is 10% or less, the royalty charge is 1% and for each 5% increment in the operating income margin, the royalty charge rate increases by 0.75%, up to a maximum of 12%. 2014 US$689 EBITDA RECORD EBITDA ANNUAL REPORT 201484 LETTER TO SHAREHOLDERSCHAPTER SEVEN 30% disabling accidents were reduced 85 MINING SAFETY IN SOUTHERN COPPER CORPORATION We have in place an Integrated Occupational Health and Safety Management System, which allows us to control the risks that exist in our operations and to develop plans of continuous improvement in order to protect our employees. ANNUAL REPORT 201486 ZERO ACCIDENTS OBJETIVES SCC WORkS UNDER THE HIGHEST SAFETY STANDARDS. The occupational accident rates at our mining operations in Mexico are 78% below the national average. MininG SAFETY Occupational Health and Safety 87 In Southern Copper Corporation, caring for the life, SX/EW plant of Mexicana de cobre, and to the health and integrity of our employees and their families Santa Eulalia mining unit, for achieving the lowest is the number one priority in all our operations. No task recorded accident rates in the industry. is more important. • Our mining and metallurgical operations in Accordingly, our commitment is to create optimal work the Smelting, Refining and SX/EW plant in environments for their welfare, which we achieve by Peru achieved the triple recertification as per working under the highest safety standards. Our goal: OHSAS:18001, iSO:14001 and iSO:9001, ZERO accidents. endorsing its commitment to integrated sustainability management, including the best We have in place an integrated Occupational Health practices in occupational health and safety. and Safety Management System, which allows us to control the risks that exist in our operations and to • The communities surrounding the Santa develop plans of continuous improvement in order to Barbara unit in Mexico were certified as Healthy protect our employees. Environment by the Ministry of Health, which recognises the efforts of the company to make We maintain 12 business units in Mexico and Peru joint efforts to improve the health of its residents, whose Occupational Health and Safety Management and joins the Santa Eulalia unit as holders of this System have been certified according to OHSAS certification. 18001:2007. Additionally, in Mexico we have 13 units certified with the Secretariat of Labour and Social • The occupational accident rates at our mining Welfare for the Self-Managed Occupational Health and operations in Mexico are 78% below the national Safety (PASST). average. The accomplishments achieved in 2014 on • The accident rates in our mining operations in occupational health and safety include: Peru are 14% below the national average. • The Mining chamber of Mexico (cAMiMEX) • in the last two years, Scc has reduced its awarded the “Jorge Rangel Zamorano” Silver occupational accident rates by 18% and the rate Helmet Trophy to the nueva Rosita plant, to the of severe accidents by 45%. ANNUAL REPORT 201488 The accident rate (IR) in the Mining Division decreased significantly from 1.09 in 2012 to 0.89 in 2014. As a result of the work and commitment of our people to safety and health, at the end of 2014, the accident rate (iR) decreased significantly from 1.09 in 2012 to 0.89 in 2014, showing clearly that our activities to identify and address risks have reduced the frequency of accidents at our mining operations. 2014 -18% SEVERITY RATE in this regard, we recognise that the commitment and effort of our people, strengthened by training, coaching, responsibility and the implementation of preventive observation is key to achieving our goals. SAFETY SEvERITY RATE ACCIDENTS IN OUR MINING DIvISION HAS DECREASED 18 % SINCE 2012. MininG SAFETY These results reflect the efforts in our activities leading to a culture of safety, in the implementation of inspection plans, and especially in the work and commitment of our employees. Accident Rate (IR) SCC, 2012-12014 0.85 0.94 1.06 2 0 1 4 2 0 1 3 2 0 1 2 IR = no. of disabling accidents no. of total men - hours worked x 200,000 89 During 2014 we reduced our rate of occupational diseases by 27% as a result of the various programmes on education, prevention and control of risks, as well and on the treatment of diseases. OccupATIONAL HEALTH in order to promote a culture of self-healthcare, we continue to strengthen our prevention programmes in the workplace, family and community environments. During 2014 we reduced our rate of occupational diseases by 27% as a result of the various programmes on education, prevention and control of risks, as well and on the treatment of diseases. These programmes were provided to our employees and, in some cases, to their families and community members. Severity Rate (GR) SCC, 2012-12014 0.50 0.61 0.19 2 0 1 4 2 0 1 3 2 0 1 2 GR = no. of days lost no. of total men - hours worked x 1,000 ANNUAL REPORT 201490 ACTIVITIES: TTaarrggggeettiinngg wwoorrkkppllaaccee ppeersrsononnenell EXPO Safety INTERNAL SECURITY FORUM HEALTH FAIR HEALTH CAREER AWARDS TO EMPLOYEES OR DEPARTMENTS WITH ZERO ACCIDENTS SECURITY COURSES AND CONFERENCES Targeting employyees’ families and community GUIDED TOURS "KNOWING MY COMPANY" FAMILY PARTIES AND PARADES HEALTH FAIR HEALTH CAREER FAMILIAR CONTESTS TO PROMOTE VALUES FIREFIGHTING COURSES mining Safety inveStment in oCCupational SaFety SCC Management costs Training Personal protection equipment industrial hygiene studies Engineering works TOTAL $ $ $ $ $ 2,973,229.84 2,058,653.05 6,767,986.51 193,113.24 76,456,413.48 $ 88,449,396.12 inveStment in oCCupational health SCC Development, Promotion and Protection of Health Detection and prevention Treatment Rehabilitation TOTAL $ $ $ $ 541,096.95 2,043,849.64 3,903,006.53 36,325.00 $ 6,524,278.12 ACTIVITIES: TTaarrggggeettiinngg wwoorrkkppllaaccee ppeersrsononnenell EXPO Safety INTERNAL SECURITY FORUM HEALTH FAIR HEALTH CAREER AWARDS TO EMPLOYEES OR DEPARTMENTS WITH ZERO ACCIDENTS SECURITY COURSES AND CONFERENCES GUIDED TOURS "KNOWING MY COMPANY" FAMILY PARTIES AND PARADES HEALTH FAIR HEALTH CAREER FAMILIAR CONTESTS TO PROMOTE VALUES FIREFIGHTING COURSES Targeting employyees’ families and community FOR FuRTHER INFORmATION ABOuT cOmpANy´S mAIN ASSETS, SEE 10-K FORm FROm pAGE 91 EmpLOyEES FOR THE yEAR ENDED DEcEmBER 31TH 2014 2013 2012 2011 2010 Mexican operations Employees Workers Total Peruvian operations Employees Workers Total Ecuador office Employees Workers Total Argentina office Employees Workers Total Chile office Employees Workers Total Corporate office Total Total employees in scc Total Mexico Total Peru Total Ecuador Total Argentina Total Chile Total corporate Office Total 2,153 5,952 8,105 2,308 2,216 4,524 14 38 52 10 16 26 12 14 26 2 8,105 4,524 52 26 26 2 2,152 6,030 8,182 2,272 2,158 4,430 2,033 5,441 7,474 2,101 2,465 4,566 1,979 5,996 7,975 2,031 2,128 4,159 1,919 5,257 7,176 1,999 2,003 4,002 17 18 16 14 18 2 8,182 4,430 17 16 18 2 12 1 7,474 4,566 18 14 12 1 - -- 10 1 - - 10 1 7,975 4,159 7,176 4,002 - - 10 1 - - 11 7 12,735 12,665 12,085 12,145 11,189 ANNUAL REPORT 201492 INVESTmENT IN OccupATIONAL SAFETy AND HEALTH During 2014 we invested uS $ 94.97 million in occupational safety and health, a 7% increase from the previous year, focusing efforts on engineering works, purchase of personal protective equipment, training, coaching, and industrial hygiene studies. in terms of occupational health, we have invested in the development, promotion and protection of health, as well as in primary prevention, treatment and rehabilitation. pRINcIpLES OF cORpORATE GOVERNANcE Resolution from the Superintendencia de Mercado de Valores –SMV- by its acronym in Spanish) nº 00012-2014-SMV/01. The information referred to that resolution will be submitted to the SMV of the Republic of Peru, together with the Annual Report. Economic relations with other companies due to loans that commit more % than 10% of the stockholder’s equity of the issuing entity. 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 13 “commitments and contingencies” to our consolidated financial statements. changes of those responsible for the preparation and revision of the financial information At December 31, 2014, no changes have been done. Mr. Raul Jacob Ruisanchez acts as Director of comptroller and Finance. Mr. Marco A. Garcia acts as Finance Manager. 2014 US$90 MILLION IN HEALTH AND SAFETY INVESTMENT + IN 2014, WE INvEST MORE THAN US $ 90 MILLION IN OCCUPATIONAL SAFETY AND HEALTH, AN INCREASE OF 11% OvER THE PREvIOUS YEAR. MininG SAFETY INFORMATION RELATED TO THE STOCk ENTERED IN THE STOCk 93 3% 2014 36,592 OUNCES GOLD Au + GOLD PRODUCTION INCREASED 3 %, TO 36,592 OUNCES, COMPARED WITH 35,545 OUNCES IN 2013 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 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. Along with the exchange of labor shares the holders of common shares of the company exchanged their shares for class A common shares, with the right to five votes per share. in connection with the Minera Mexico acquisition (April 1, 2005), 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. ANNUAL REPORT 201494 On June 19, 2008 the Executive committee of the The indentures relating to the notes contain certain Board of Directors declared a three-for-one split of the restrictive covenants, including limitations on liens, company’s outstanding common stock. On July 10, limitations on sale and leaseback transactions, rights 2008 common shareholders of record at the close of of the holders of the notes upon the occurrence business on June 30, 2008, received two additional of a change of control triggering event, limitations shares of common stock for every share owned. The on subsidiary indebtedness and limitations on split increased the number of shares outstanding to consolidations, mergers, sales or conveyances. certain 883,410,150 from 294,470,050. of these covenants cease to be applicable before the notes mature if the company obtains an investment All share and per share amounts were retroactively grade rating. The company obtained investment grade adjusted to reflect the stock splits. rating in 2005. Since 2008 and 2014, the company and AMc had in addition, the company´s Mexican operations hold bought shares periodically. $51.1 million in bonds referred above as “Yankee bonds”, contain a covenant requiring Minera Mexico At December 31, 2014, there were of record to maintain a ratio of EBiTDA to interest expense of not 812,618,122 shares of common stock of the company, less than 2.5 to 1.0 as such terms are defined in the par value $0.01 per share, outstanding. debt instrument. cORpORATE BONDS At December 31, 2014, Minera Mexico was in Between July 2005 and november 2012 the company compliance with this covenant. issued senior unsecured notes six times totaling $4.2 billion as listed above. interest on the notes is paid Please see note 10 “Financing” for a discussion about semi-annually in arrears. The notes rank pari passu the covenants requirements related to our long-term with each other and rank pari passu in right of payment debt, on page 106-107, Form 10-K 2014. with all of the company’s other existing and future unsecured and unsubordinated indebtedness. MininG SAFETY 95 At the Cuajone mine, in Peru, we implemented the HPGR project and the variable cut-off ore grade project, which produced an additional estimated production of 23,500 tons of copper. ANNUAL REPORT 201496 Members of the Board of Directors at December 31, 2014 GERMAN LARREA MOTA-VELASCO President and chief Executive Officer since October DiREcTOR. 21, 2004. He has been a director of the company German Larrea Mota-Velasco, Director. Mr. Larrea has since november 1999. Mr. González Rocha has been been chairman of the Board of Directors since December the President and chief Executive Officer of Americas 1999, chief Executive Officer from December 1999 to Mining corporation (“AMc”) since november 1, 2014 October 2004, and a director of the company since and the chief Executive Officer and a director of Asarco november 1999. He has been chairman of the board of LLc (integrated uS copper producer), an affiliate of the directors, President and chief Executive Officer of Grupo company, since August 2010. Previously, he was the México, S.A.B. de c.V. (“Grupo Mexico”) (holding) since company’s President and General Director and chief 1994. Mr. Larrea has been chairman of the board of Operating Officer from December 1999 to October directors and chief Executive Officer of Grupo Ferroviario 20, 2004. Mr. González Rocha has been a director of Mexicano, S.A. de c.V. (railroad company) since 1997. Grupo Mexico since 2002. He was General Director of Mr. Larrea was previously Executive Vice chairman of Mexicana de cobre, S.A. de c.V. from 1986 to 1999 Grupo Mexico and has been member of the board of and of Buenavista del cobre, S.A. de c.V. (formerly directors since 1981. He is also chairman of the board Mexicana de cananea, S.A. de c.V.) from 1990 to of directors and chief Executive Officer of Empresarios 1999. He was an alternate director of Grupo Mexico industriales de México, S.A. de c.V. (“EiM”) (holding) and from 1998 to April 2002. Mr. Gonzalez Rocha is a civil Fondo inmobiliario (real estate company), since 1992. engineer with a degree from the Autonomous national He founded Grupo impresa, a printing and publishing university of Mexico (“unAM”) in Mexico city, Mexico. company in 1978, remaining as the chairman and chief Executive Officer until 1989 when the company was EMILIO CARRILLO GAMBOA sold. He is also a director of Banco nacional de México, DiREcTOR. S.A. (citigroup), which forms part of Grupo Financiero Emilio carrillo Gamboa, Director. Mr. carrillo Gamboa Banamex, S.A. de c.V. since 1992, consejo Mexicano de has been a director of the company since May 30, Hombres de negocios since 1999, and was a director of 2003 and is our fourth independent director nominee. Grupo Televisa, S.A.B. from 1999 to 2014. Mr. carrillo Gamboa is a prominent lawyer in Mexico and has been the Senior Partner of the Bufete carrillo OSCAR GONZALEZ ROCHA Gamboa, S.c., a law firm specializing in corporate, DiREcTOR. financial, commercial, and public utility issues, for Oscar Gonzalez Rocha, Director. Mr. Gonzalez Rocha the last five years. Mr. carrillo Gamboa has extensive has been our President since December 1999 and our business experience and currently serves on the MEMBERS OF THE BOARD 97 boards of many prestigious international and Mexican ALFREDO CASAR PEREZ corporations, as well as charitable organizations. Since DiREcTOR. March 9, 2005, he has been chairman of the board of Alfredo casar Pérez, Director. Mr. casar Pérez has been The Mexico Fund, inc. (nYSE—mxf), a nondiversified a director of the company since October 26, 2006. He closed-end management investment company. Mr. has been a member of the board of directors of Grupo carrillo Gamboa held various offices with Teléfonos Mexico since 1997. He is also a member of the board de México, S.A. de c.V. (“TELMEX”) from 1960 to of directors of Ferrocarril Mexicano, S.A. de c.V., an 1987, the most recent being that of President and chief affiliated company of Grupo Mexico, since 1998 and Executive Officer from June 1975 to June 1987. He its chief Executive Officer since 1999. From 1992 later served as Mexico’s Ambassador to canada from to 1999, Mr. casar Pérez served as General Director July 1987 to February 1989. Mr. carrillo Gamboa and member of the board of directors of compañía served from 2002 through March 2010 on the board Perforadora México, S.A. de c.V. and México compañía and on the audit committee of Empresas icA, S.A.B. constructora, S.A. de c.V., two affiliated companies de c.V. (nYSE—ica), an engineering, procurement and of Grupo Mexico. Mr. casar Pérez served as Project construction company. He has been a member of the Director of iSEFi, a subsidiary of Banco internacional, in valuation, contract review, nominating and corporate 1991 and Executive Vice President of Grupo costamex governance, and audit committees of The Mexico Fund, in 1985. Mr. casar Pérez also worked for the Real inc. since 2002. Mr. carrillo Gamboa has served on Estate Firm, Agricultural Ministry, and the college of the board and audit committee of Grupo Mexico since Mexico. Mr. casar Pérez holds a degree in Economics 2004 and on the boards of Grupo nacional Provincial from the Autonomous Technological institute of Mexico, S.A.B. (Mexican insurance company) since 2007, iTAM, and one in industrial Engineering from Anáhuac Grupo Posadas, S.A.B. de c.V. (Mexican hotel operation university in Mexico city, Mexico. He also holds a company) since 2006, Grupo Master’s degree in Economics from the university of Profuturo, S.A.B. de c.V. (Mexican insurance and chicago in chicago, illinois. pension holding company) since 2009, and Kimberly- clark de Mexico, S.A.B. de c.V. (consumer products) LuIS CASTELAZO MORALES since 2002. Mr. carrillo Gamboa has a law degree from DiREcTOR. the unAM in Mexico city, Mexico. He also Luis castelazo Morales, Director. Mr. castelazo attended a continuous legal education program at Morales has been a director of the company since Georgetown university Law center in Washington D.c., September 20, 2010. Mr. Luis castelazo Morales and practiced at the World Bank. has been the General Director of EiM since 2008. ANNUAL REPORT 201498 Mr. castelazo Morales was previously chief Executive Banorte, S.A.B. de c.V. (“GFnorte”). From October Officer of Desarrollo de ingeniería, S.A. de c.V. (DiSA), 2000 to March 2011, Mr. castillo Sánchez Mejorada a Mexican construction company, for more than ten was the chairman of the board of directors and chief years. Mr. castelazo Morales has also participated in Executive Officer of ixe Grupo Financiero, S.A.B. de different projects in Mexico through joint ventures with c.V., a Mexican financial holding company that merged Raytheon Engineers and constructors and also with the into GFnorte as of April 2011. in addition, from March Mccarthy construction Group. Later he, along with two 2007 to March 2009, Mr. castillo Sánchez Mejorada colleagues, founded AGBc S.c., a firm dedicated to was the President of the Mexican Banking Association financial consulting and advising for investments in the (Asociación de Bancos de México). currently, Mr. Mexican stock market, where he worked for more than castillo Sánchez Mejorada serves as an independent 15 years. Mr. castelazo Morales holds the recognition director on the boards of directors of (i) Grupo Herdez, of the AMiB (Asociación Mexicana de intermediarios S.A.B. de c.V., a Mexican holding company for the Bursátiles) as a certified “Advisor in investment manufacture, sale and distribution of food products; Strategies” for the Mexican stock market. Mr. castelazo (ii) Alfa, S.A.B. de c.V., a Mexico-based holding Morales holds a degree in civil Engineering from the company that, through its subsidiaries, is engaged in universidad iberoamericana in Mexico city, Mexico and the petrochemical, food processing, automotive and a Master’s degree in Business Administration from the telecommunication sectors; (iii) Organización cultiba, university of Texas at Austin in Austin,Texas. S.A.B. de c.V. (formerly Grupo Embotelladoras unidas, S.A.B. de c.V.), a Mexico-based holding company ENRIquE CASTILLO SANCHEZ MEJORADA primarily engaged in the beverage industry; and (iv) DiREcTOR. Médica Sur, S.A.B. de c.V., a Mexico-based company Enrique castillo Sánchez Mejorada, Director. Mr. castillo engaged in the hospital business. From April 2012 until Sánchez Mejorada has been a director of the company April 2014, Mr. castillo Sánchez Mejorada served as since July 26, 2010 and is our fifth independent director an independent director on the board and as a member nominee. From May 2013 to date, Mr. castillo Sánchez of the audit committee of Grupo Aeroportuario del Mejorada has been Senior Partner of Ventura capital Pacifico, S.A.B. de c.V., a Mexico-based and nYSE- Privado, S.A. de c.V. (Mexican financial company) and listed company that operates, maintains and develops since October 2013 to date, he has been chairman of 12 airports in the Pacific and central regions of Mexico. the board of directors of Maxcom Telecomunicaciones, Mr. castillo Sánchez Mejorada was a member of the S.A.B. de c.V. (Mexican telecommunications company). board of directors of Grupo casa Saba, S.A.B. de c.V., From April 2011 to May 2013, Mr. castillo Sánchez a Mexican wholesale distributor of pharmaceutical, Mejorada was a senior advisor at Grupo Financiero health, beauty and other consumer products and MEMBERS OF THE BOARD operator of a retail pharmacy chain, from April 2010 director of Grupo Mexico since April 2002. He was 99 until 2013. Mr. castillo Sánchez Mejorada has been also Vice President of Grupo condumex, S.A. de c.V. a member of the audit committee of Alfa, S.A.B. de (telecommunications, electronic and automotive parts c.V. since 2010.Mr. castillo Sánchez Mejorada holds a producer) for eight years. Mr. García de Quevedo was Bachelor’s degree in Business Administration from the the chairman of the Mining chamber of Mexico from Anáhuac university, in Mexico city, Mexico. november 2006 to August 2009. He is a chemical engineer with a degree from the unAM in Mexico XAVIER GARCIA DE quEVEDO TOPETE city, Mexico. He also attended a continuous business DiREcTOR. administration and finance program at the Technical Xavier García de Quevedo Topete, Director. Mr. García institute of Monterrey in Monterrey, Mexico. de Quevedo has been a director of the company since november 1999 and our chief Operating Officer since DANIEL MuñIZ quINTANILLA April 12, 2005. Since november 1, 2014 Mr. Garcia DiREcTOR. de Quevedo Topete has served as the President of the Daniel Muñiz Quintanilla, Director. Mr. Muñiz has been infrastructure division of Grupo Mexico, composed of a director of the company since May 28, 2008. Mr. the energy, gas, oil and construction subsidiaries of Muñiz has been the chief Financial Officer of Grupo Grupo Mexico. He was the President of Minera Mexico, Mexico since April 2007. Prior to joining Grupo Mexico, S.A. de c.V. from September 2001 to October 31, Mr. Muñiz was a practicing corporate-finance lawyer 2014 and the President and chief Executive Officer of from 1996 to 2006. During this time he worked at Southern copper Minera Mexico from April 12, 2005 cortés, Muñiz y núñez Sarrapy; Mijares, Angoitia, until november 1, 2014. He was the President and chief cortés y Fuentes; and Baker & McKenzie (London and Executive Officer of AMc from September 7, 2007 to Mexico city offices). He holds a Master’s degree in October 31, 2014. From December 2009 to June Financial Law from Georgetown university Law center 2010, he was chairman and chief Executive Officer of in Washington D.c., and a Master’s degree in Business Asarco LLc. He was previously President of Asarco LLc Administration from instituto de Empresa in Madrid, from november 1999 to September 2001. Mr. García Spain. de Quevedo began his professional career in 1969 with Grupo Mexico. He was President of Grupo Ferroviario LuIS MIGuEL PALOMINO BONILLA Mexicano, S.A. de c.V. and of Ferrocarril Mexicano, DiREcTOR. S.A. de c.V. from December 1997 to December 1999, Luis Miguel Palomino Bonilla, Director. Dr. Palomino has and General Director of Exploration and Development been a director of the company since March 19, 2004 of Grupo Mexico from 1994 to 1997. He has been a and is a special independent director nominee. Dr. ANNUAL REPORT 2014100 Palomino has been chairman of the board of directors since June 2002 and is a special independent director of Aventura Plaza, S.A. (commercial real estate nominee. Mr. Perezalonso was chairman of the board developer and operator) since January 2008, Manager of directors of Volaris compañía de Aviación, S.A.P.i. of the Peruvian Economic institute (economic think de c.V. (airline) from March 2, 2011 to november tank) since April 2009, Partner of Profit consultoria 2014. He was chief Executive Officer of corporación e inversiones (a financial consulting firm) since July Geo, S.A. de c.V. (housing construction) from February 2007, director of the Master in Finance Program at the 2006 to February 2007. Mr. Perezalonso was the university of the Pacific in Lima, Peru since July 2009, chief Executive Officer of Aeroméxico (Aerovías de and a director and chairman of the audit committee of México, S.A. de c.V.) (airline company) from 2004 until the Bolsa de Valores de Lima (Lima Stock Exchange) December 2005. From 1998 until April 2001, he was since March 2013. He was a member of the board of Executive Vice President of Administration and Finance directors of Access SEAF SAFi from December 2007 of Grupo Televisa, S.A.B. (media company). From 1980 to April 2010. Dr. Palomino was previously Principal until February 1998, Mr. Perezalonso held various and Senior consultant of Proconsulta international positions with Grupo cifra, S.A. de c.V. (department (financial consulting) from September 2003 to June stores), the most recent position being that of General 2007. Previously he was First Vice President and chief Director of Administration and Finance. now he is a Economist, Latin America, for Merrill Lynch, Pierce, member of the advisory council of Banco nacional de Fenner & Smith, new York (investment banking) México, S.A. de c.V. (banking), the board of directors from 2000 to 2002. He was chief Executive Officer, and the investment committee of Afore Banamex Senior country and Equity Analyst of Merrill Lynch, (banking), the board and the investment committee of Peru (investment banking) from 1995 to 2000. Dr. Siefore Banamex no. 1 (banking), and is a member Palomino has held various positions with banks and of the boards of directors of Gigante, S.A. de c.V. financial institutions as an economist, financial advisor (retail), Masnegocio co. S. de R.L. de c.V. (information and analyst. He has a PhD in finance from the Wharton technology), intellego (technology), Telefónica Móviles School of the university of Pennsylvania in Philadelphia, México, S.A. de c.V. (wireless communication), cruz Pennsylvania and graduated from the Economics Roja Mexicana (emergency and medical services), Program of the university of the Pacific in Lima, Peru. construction company Marhnos (housing construction), and Fomento de investigación y cultura Superior, A.c. GILBERTO PEREZALONSO CIFuENTES (Foundation of the iberoamerican university) . Mr. DiREcTOR. Perezalonso was a director of cablevision, S.A. de Gilberto Perezalonso cifuentes, Director. Mr. c.V., Grupo Televisa, S.A.B. and a member of the audit Perezalonso has been a director of the company committee of Grupo Televisa, S.A.B. from March 1998 MEMBERS OF THE BOARD to September 2009. Mr. Perezalonso has a law degree and is a special independent director nominee. Since 101 from the iberoamerican university in Mexico city, Mexico november 2001, he has been the owner and Managing and a Master’s degree in Business Administration Partner of Proyectos Estrategicos integrales, a Mexican from the Business Administration Graduate School for investment banking firm specialized in agricultural, central America (incAE) in nicaragua. Mr. Perezalonso transport, tourism, and housing projects. Mr. Ruiz has also attended a corporate Finance program at Sacristán has held various distinguished positions in Harvard university in cambridge, Massachusetts. the Mexican government, the most recent being that of Secretary of communications and Transportation of JuAN REBOLLEDO GOuT Mexico from 1995 to 2000. While holding that position, DiREcTOR. he was also chairman of the board of directors of the Juan Rebolledo Gout, Director. Mr. Rebolledo has been Mexican-owned companies in the sector, and member a director of the company since May 30, 2003. Mr. of the board of directors of development banks. Rebolledo has been international Vice President of He was also the chairman of the board of directors Grupo Mexico since 2001. He was Deputy Secretary of Asarco LLc. Mr. Ruiz Sacristán was a member of of Foreign Affairs of Mexico from 1994 to 2000 and the board of directors from 2007 to 2012 and of the Deputy chief of Staff to the President of Mexico audit, and environmental and technology committees from 1993 to 1994. Previously, he was Assistant to of Sempra Energy (energy services). in 2012, Mr. Ruiz the President of Mexico (1989-1993), director of the Sacristán was appointed chairman and chief Executive “national institute for the Historical Studies of the Officer of iEnova, the Mexican operating subsidiary Mexican Revolution” of the Secretariat of Government of Sempra Energy. He is a member of the boards of (1985-1988), Dean of Graduate Studies at the unAM, directors of constructora y Perforadora Latina, S.A. Political Science Department (1984-1985), and de c.V. (Mexican geothermal exploration and drilling professor of said university (1981-1983). Mr. Rebolledo company), of Banco Ve Por Mas, S.A. (Mexican bank), holds a law degree from unAM in Mexico city, Mexico, of OHL concesiones Mexico (a construction and civil an MA in philosophy from Tulane university in new engineering company), and of AMAiT (an international Orleans, Louisiana, and an LLM from Harvard Law airport in Mexico). Mr. Ruiz Sacristán holds a Bachelor’s School in cambridge, Massachusetts. degree in Business Administration from the Anáhuac university in Mexico city, Mexico, and a Master’s CARLOS RuIZ SACRISTAN degree in Business Administration from northwestern DiREcTOR. university in chicago, illinois. carlos Ruiz Sacristán, Director. Mr. Ruiz Sacristán has been a director of the company since February 12, 2004 ANNUAL REPORT 2014102 EXEcuTIVE OFFIcERS GERMAN LARREA MOTA-VELASCO cHAiRMAn OF THE BOARD OF DiREcTORS OSCAR GONZALEZ ROCHA PRESiDEnT AnD cHiEF EXEcuTiVE OFFicER XAVIER GARCIA DE quEVEDO TOPETE cHiEF OPERATinG OFFicER RAuL JACOB RuISANCHEZ VicE-PRESiDEnT, FinAncE AnD cHiEF FinAnciAL OFFicER AGuSTIN AVILA MARTINEZ cOMPTROLLER JuAN MANuEL RODRIGuEZ ARRIAGA VicE-PRESiDEnT cOMMERciAL VIDAL MuHECH DIP VicE-PRESiDEnT, PROJEcTS EDGARD CORRALES VicE-PRESiDEnT, EXPLORATiOnS JAVIER GOMEZ AGuILAR VicE-PRESiDEnT, LEGAL AnD LEGAL ADViSOR HANS A. FLuRY SEcRETARY EXEcuTiVE OFFicERS NEXT OF KIN To the best of the Company’s knowledge, no relationship of 103 A company of which more than 50% of the voting power affinity and/or consanguinity exists among the members of is held by a single entity, a “controlled company”, need not the Board, and between them and the Executive Officers of comply with the requirements of the New York Stock Exchange Southern Copper Corporation. (“NYSE”) corporate governance rules requiring a majority of independent directors and independent compensation and SpEcIAL cOmmITTEES OF THE BOARD nomination/corporate governance committees. SCC’s Board of Directors has organized the following Special Committees: SCC is a controlled company as defined by the rules of the 1. Executive committee. it is comprised of five members NYSE. Grupo Mexico owns indirectly 84.6 % of the stock of who substitute for the Board when sessions or the Company, as of December 31, 2014. The Company decisions are required concerning urgent matters, or has taken advantage of the exceptions to comply with the matters for which the Board would have expressly corporate governance rules of the NYSE. The Board of delegated its mandate. Directors of the Company determined that Messrs. Luis Miguel Palomino Bonilla, Gilberto Perezalonso Cifuentes, and 2. Audit committee. it is comprised of three independent Emilio Carrillo Gamboa, the three members of the Company’s Board members who are knowledgeable in accounting Audit Committee, are independent of management and and financial matters. its main purpose is to: (a) assist financially literate in accordance with the requirements of the the Board in monitoring (i) the quality and integrity of the NYSE and the Securities and Exchange Commission (“SEC”), company’s financial statements; (ii) the qualifications as such requirements are interpreted by the Company’s and independence of the independent auditors; (iii) Board of Directors in its business judgment. In 2012, we had the performance of the internal audit function and three special independent directors nominated by the Special of the independent auditors; and (iv) the company’s Nominating Committee, Messrs. Luis Miguel Palomino Bonilla, compliance with legal and regulatory requirements; Gilberto Perezalonso Cifuentes, and Carlos Ruiz Sacristan. and (b) prepare the report required by SEc rules. Additionally in 2012, Messrs. Emilio Carrillo Gamboa and Enrique Castillo Sánchez Mejorada were our fourth and 3. compensation committee. it is comprised of four fifth independent directors. At its meeting on January 29, Board members and its principal objective is to 2015, the Board of Directors determined that Messrs. Luis evaluate and establish the remunerations of principal Miguel Palomino Bonilla, Gilberto Perezalonso Cifuentes, officers and key employees of the company and its Carlos Ruiz Sacristán, Emilio Carrillo Gamboa, and Enrique subsidiaries. Castillo Sánchez Mejorada are independent of management in accordance with the requirements of the NYSE as such 4. Special nominating committee. it is comprised requirements are interpreted by our Board of Directors in its of two independents Board members and one business judgment. nominated by the Board and it has the exclusive ANNUAL REPORT 2014104 authority to propose and evaluate individuals who are proposed as special independents directors. 5. corporate Governance committee. it is comprised of four Board members and has as its primary functions to consider and make recommendations to the Board concerning the appropriate function and needs of the Board, to develop and recommend to the Board corporate governance principles, to oversee evaluation of the Board and management, and to oversee and review compliance with the disclosure and reporting standards of the company that require full, fair, accurate, timely, and understandable disclosure of material information regarding the company in reports and documents that it files with the SEc, the nYSE and equivalent authorities in the countries in which the company operates, as well as in other public communications that it regularly makes. 6. Administrative committee. it is designated by the named Fiduciary appointed by the Board for the benefit plans as required by the Employee Retirement income Security Act – ERiSA of the united States. ERiSA is the law that covers employee retirement and other benefit plans. . Mr. Daniel Muñiz Quintanilla is the Board-appointed named Fiduciary for the company’s benefits plans subject to uS regulations, including ERiSA. This Officer appoints an Administrative committee, which is comprised of three management members and its purpose is to administer and manage said plans and to oversee the performance of the trust agents and other fiduciaries charged with investing the plans’ funds. ADMINISTRATION AND BOARD INCOME Total remunerations of Board and Administration members, in relation to the company´s gross income is 0.07%. ANNuAL MEETING The annual stockholders meeting of Southern copper corporation will be held at Edificio Parque Reforma, campos Eliseos no. 400, 9th Floor, col. Lomas de chapultepec, Mexico city, c.P. 11000, Mexico, on Thursday, April 30, 2015 at 9:00 A.M., Mexico city time. SPEciAL cOMMiTTEES 105 CORPORATE OFFICES: united StateS meXiCo peru 1440 E. Missouri Avenue, Edificio Parque Reforma, Av. caminos del inca no. 171 Suite 160, campos Eliseos no. 400 chacarilla del Estanque Phoenix, AZ 85014, u.S.A. col. Lomas de chapultepec, Mexico D.F Santiago de Surco Lima 33, Peru Phone: +(602) 264-1375 Phone. +(52-55) 1103-5000, Phone. +(511) 512-0440, Anexo 3181 Transfer Agent, Registrar and Stockholder Others Services computershare 480 Washington Boulevard Jersey city, nJ 07310-1900 Phone: +1(866)230-0172 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 SPccPi1 and SPccPi2. Transfer Agent, registrar and stockholders services Dividend Reinvestment Program are provided by Banco de credito of Peru at Avenue Scc stockholders can have their dividends centenario 156, La Molina, Lima 12, Peru. automatically reinvested in Scc common shares. Scc pays all administrative and brokerage fees. Phone +(511) 313-2478, Fax +(511) 313-2556. This plan is administered by The Bank of new York Mellon corporation. For more information, contact 1 PROXY STATEMENT, extension 3325 The Bank of new York Mellon corporation at phone +1(866) 230-0172. Stock Exchange Listing The principal markets for Scc’s common Stock are the new York Stock Exchange and the Lima Stock Exchange. Effective February 17, 2010, Scc’s common Stock changed its symbol from Pcu to SccO on both the nYSE and the Lima Stock Exchange. ANNUAL REPORT 2014Other Corporate Information For other information on the corporation or to obtain additional copies of the annual report, Form 10-K 2013 contact to investor Relations Department at our corporate offices: Southern Copper Corporation USA: 1440 East Missouri Avenue, Suite 160 Phoenix, Az. 85014, uSA Phone: (602)264-1375, Fax (602) 264-1397 En Mexico: Campos Eliseos No. 400, 11 floor, Col. Lomas de Chapultepec Mexico D.F. Phone +(52-55) 1103-5000, Extension 5855. En Peru: Avenue Caminos del Inca 171 (B-2), Chacarilla del Estanque, Santiago de Surco – Lima 33 - Peru. Phone. +(511) 512-0440, Ext. 3442. Web Page: www.southerncoppercorp.com Email address: southerncopper@southernperu.com.pe Formulario 10-k1 Attached Form 10-K 2013 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. 1Form 10-K 2013, Phone. +(511) 512-0440, extension 3442 for Spanish 106 cORPORATE inFORMATiOn Members of the Board of Directors 107 German Larrea Mota-Velasco Oscar Gonzalez Rocha Emilio Carrillo Gamboa Alfredo Casar Perez Xavier Garcia de Quevedo Topete Daniel Muñiz Quintanilla Luis Miguel Palomino Bonilla Gilberto Perezalonso Cifuentes Juan Rebolledo Gout Carlos Ruiz Sacristan Luis Castelazo Morales Enrique Castillo Sanchez Mejorada AuDIT COMMITTEE Emilio Carrillo Gamboa, Chairman Luis Miguel Palomino Bonilla, and Gilberto Perezalonso Cifuentes Enrique Castillo Sanchez Mejorada ANNUAL REPORT 2014108 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 2014. SCC takes responsibility for its contents according to applicable requirements”. HANS A. FLURY ROYLE Assistant Secretary RAUL JACOB RUISANCHEZ Vice-President Finance and Chief Financial Officer CONVERSION INFORMATION: All tonnages in this annual report are metric tons unless otherwise noted. To convert to short tons, multiply by 1.102. All distances are in kilometers, to convert to miles, multiply by 0.62137. All ounces are troy ounces. U.S. dollar amounts represent either historical dollar amounts, where appropriate, or U.S. dollar equivalents translated in accordance with generally accepted accounting principles in the United States. “SCCO”, “SCC”, “Southern Copper” or the “Company” includes Southern Copper Corporation and its consolidated subsidiaries. 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, 9 floor Col. Lomas de Chapultepec, Mexico D.F. Phone: + (52-55) 1103-5320, Extension 5855 Fax: + (52-55) 1103-5583 PERU Avenue Caminos del Inca 171 (B-2) Chacarilla del Estanque, Santiago de Surco Lima 33 - Peru Phone: +(511) 512-0440, Extension 3354 Symbol: SCCO E-mail southerncopper@southernperu.com.pe www.southerncoppercorp.com 2014 IN DETAIL ANNUAL REPORT E L L A T E D A 4 1 0 2 T R O P E R L A U N N A

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