Southern Copper
Annual Report 2015

Plain-text annual report

FULFILLING GOALS Annual Report 2015 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 2015. 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 PRODUCTION STATISTICS COPPER RESERVES SELECTED AND FINANCIAL DATA CAPITAL INVESTMENT PROGRAM AND EXPLORATION (EXPANSION & MODERNIZATION) DEVELOPMENT - COMMUNITY OUTREACH RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 COMMITMENT - ENVIRONMENTAL AFFAIRS GENERAL INFORMATION DESCRIPTION OF OPERATIONS AND DEVELOPMENT REGARDING THE ISSUING ENTITY 03 06 08 13 14 22 42 48 60 MEMBERS OF THE BOARD OF DIRECTORS 101 In 2015, $1.25 billion were invested in capital expenditures. We will increase our copper production capacity by 90%. 2 | 2 | DIVISIÓN2 | 2 | 3 LETTER TO SHAREHOLDERS During 2015, we have made significant progress, capital investments were $1,250 million, which were used primarily for the expansion program of the Buenavista mine, as well as for the acquisition of El Pilar project, both in Mexico; while in Peru we have started construction of the new concentrator at Toquepala. With these projects we continue our investment program to increase copper production capacity by 90% over of our 2013 production levels of 617,000 tons in 2013 to 1.2 million tons in 2013. We would like to note that our $3.5 billion program, at the Buenavista mine, is being completed under budget and meeting our forecasted productions and operating cost goals. Last September, we started commercial operations at this unit and as of December, we have spent almost 90% of the Buenavista expansion capital budget. With the new facilities, we hope to produce 460,000 tons of copper at Buenavista in 2016. The new production of the Buenavista mine will be processed in the new copper-molybdenum concentrator, which has an annual production capacity of 188,000 tons of copper and 2,600 tons of molybdenum. This project will also produce 2.3 million ounces of silver and 21,000 ounces of gold per year. The new concentrator is in its ramping-up phase with 5 of the 6 mills already in operation and the other in the commissioning process. In September 2015, we obtained the first copper concentrate lot and the plant is now running at 90% capacity. Due to promising initial results, it is expected to gradually increase production until the plant reaches full capacity in the second quarter of 2016. This project has a 99% progress with an investment of $1.162 million out of the approved capital budget of $1.384 million. In Peru, we have invested $392.0 million in Toquepala projects. On April 14, 2015 the construction permit for the Toquepala expansion project was approved, this, together with the approval of the Environmental Impact Assessment previously received, confirms that our project complies with the highest environmental standards of the Peruvian authorities and corroborates our position as a sustainable Company. Once in operation, the Toquepala expansion will increase annual production capacity by 100,000 tons of copper to 235,000 tons in 2018, and will also increase molybdenum production by 3,100 tons. Regarding the Tia Maria project, we have received the approval of the Environmental Impact Assessment; however, the issuance of the project’s construction permit has been delayed by the Peruvian authorities due to certain pressures ANNUAL REPORT 20154 | 4 | from anti-mining groups. To explain the merits of the cost competitiveness, with great benefit for all our project, the Company established a multi-faceted stakeholders. encounter plan, which began with a national media campaign, followed by a door-to-door campaign in the Our annual copper production in 2015 was 742,993 neighboring district of Cocachacra. The purpose of the tons, a new record. In 2016, we expect to reach copper campaign was to explain the relevant environmental production of 903,300 tons, an increase of 21.6% and aspects of the project and answer questions. Tia Maria again a new record production. The additional copper will use desalinated seawater and SX/EW technology units have a very low cost per pound, improving our with the highest international environmental standards, overall cash cost and competitiveness. which are considered the most environmentally friendly in the industry, as no emissions are released into the Simultaneously with our investment program, Southern atmosphere. The project represents an investment of Copper has maintained a sound capital structure and a approximately $1.4 billion to produce 120,000 tons of strong balance sheet, despite this investment program copper cathode per year. We trust that we will soon and the significant drop in prices of our main products. receive the necessary construction licenses and permits required in order to begin construction of Tia Maria. In 2015, Southern Copper managed to mitigate the We are confident that the positive results of our of copper (+ 12.3%), zinc (+ 10.3%) and reducing investment programs in Mexico and Peru, as well as unitary costs. The operating cash cost per pound of our prudent financial policy, will further improve our copper before by-product credits was $1.66 in 2015, downward trend in prices by increasing the sales volume DIVISIÓN4 | 4 | 5 The new copper-molybdenum concentrator at the Buenavista mine, reaches full capacity in the second quarter of 2016. Our $3.5 billion expansion program is being completed at the Buenavista mine under budget. The Toquepala expansion will increase annual production capacity by 100,000 tons of copper to 235,000 tons in 2018. a reduction of 11.8% when compared to the $1.89 per On behalf of Southern Copper Corporation’s Board, pound in 2014. This was mainly due to an increase we express our thanks to all our personnel for their in production and a decrease in costs such as labor, effort, hard work and dedication, to our clients for their energy, fuel and administrative expenses. Operating continued trust and loyalty, and to you, our shareholders, cash cost per pound, net of by-product credits, was for your permanent support. $1.12 in 2015, an increase of 4.6% compared to $1.07 in 2014 mainly due to lower sales prices of all our by- products. In regard to our reserves, we believe we currently have GERMAN LARREA MOTA VELASCO the largest copper reserves in the industry. Our copper Chairman of the Board reserves at December 31, 2015, totaled 70.1 million tons of copper content, calculated at a price of $2.90 per pound. Our social benefit programs continue in each of the President and Chief Executive Officer OSCAR GONZALEZ ROCHA countries where we conduct exploration, mining and processing activities. Thereby, improving living conditions for neighboring towns. ANNUAL REPORT 20156 | DIVISION PRODUCTION STATISTICS Southern Copper Corporation and Subsidiaries Five-year Production Statistics Copper production Mines (tons) 2015 2014 2013 2012 2011 Mined Material (thousand) 764,532 758,965 641,456 568,428 502,909 Copper in concentrates 569,072 532,291 498,361 516,572 465,973 Copper SX/EW Total Copper Molybdenum in concentrates Zinc in concentrates Silver in concentrates (thousand ounces) Smelter/refineries production 173,921 144,308 118,658 121,107 121,518 742,993 676,599 617,019 637,679 587,491 23,347 61,905 13,288 23,120 19,897 18,297 18,570 66,614 99,372 89,884 83,807 12,992 13,513 13,644 12,731 Copper Zinc Silver Toquepala Mined Material 597,945 561,939 545,082 558,998 569,492 100,576 92,133 97,692 93,542 90,869 (thousand ounces) 13,638 13,348 15,572 13,867 12,590 (thousand) 193,013 211,202 169,808 173,927 177,398 Copper in concentrates 119,427 114,828 110,691 120,108 120,379 Molybdenum in concentrates 7,924 6,100 4,662 4,468 5,363 Cuajone Mined Material 191,651 182,812 173,277 154,091 140,108 Copper in concentrates 178,187 178,337 168,582 158,793 140,140 Molybdenum in concentrates 4,444 4,001 3,133 2,861 2,787 Smelter/refineries in Peru SX/EW Smelt concentrates Blister produced Anode produced Cathode produced 24,167 25,675 28,400 32,194 35,322 1,143,682 1,022,536 1,072,826 996,592 1,094,224 2,800 - 1,670 32,843 - 338,893 303,939 322,637 265,213 337,812 280,591 257,926 271,035 215,666 260,998 ANNUAL REPORT 2015 6 | 7 2015 2014 2013 2012 2011 Mexicana de Cobre – Caridad Mined Material (thousand) 94,283 91,454 88,595 86,632 Copper in concentrates 103,861 101,062 96,863 97,847 Molybdenum in concentrates 10,040 10,800 11,742 10,968 84,266 89,778 10,420 Buenavista Mined material (thousand) 282,954 271,026 206,710 150,871 98,306 Copper in concentrates 142,025 132,853 115,813 133,966 110,147 Smelter/Refineries in Mexico SX/EW Smelt concentrates Anode produced Cathode produced Rod produced Underground Mines Contents in concentrates (tons) 149,754 118,633 90,258 88,913 86,196 933,403 926,427 722,597 904,311 832,307 256,252 258,000 220,775 260,941 231,680 213,360 204,302 188,005 213,734 186,853 138,180 129,078 126,800 120,791 107,925 Zinc Lead Copper in concentrates Silver Gold 61,905 20,693 5,593 4,995 4,697 66,614 99,372 89,884 22,286 23,918 19,978 5,211 6,412 4,945 6,170 4,857 5,493 5,858 5,974 5,210 83,807 18,817 5,529 5,866 6,286 (thousand ounces) (thousand ounces) MINERAL RESERVES SCC 70.1 million tons of copper ore reserves. Buenavista 24.53 million tons of copper ore reserves. Toquepala 15.47 million tons of copper ore reserves. 10 | 10 | We believe we hold the world’s largest copper reserve position. DIVISIÓN10 | 10 | 11 More than 70 million tons of copper contained in ore reserves. COPPER RESERVES We believe we hold the world’s largest copper reserve position. At De- cember 31, 2015, our copper ore reserves, calculated at a copper price of $2.90 per pound, totaled 70.1 million tons of contained copper (as of December 31, 2015, the LME and COMEX copper price was $2.50 and $2.51, respectively), our internal ore reserve estimation value is as follows: as follows: COPPER CONTAINED IN ORE RESERVES Thousand tons Mexican open-pit: Buenavista La Caridad IMMSA Peru: Toquepala Cuajone Development projects: El Arco Tia Maria Angangueo Total 24,526 8,749 218 15,474 9,293 9,125 2,626 92 70,103 For more information on ore reserves refer to “Mineral Reserves” (pages 50-55) in our 2015 Form 10-K. ANNUAL REPORT 2015MINERAL RESERVES 12 | 12 | $12.59 billion, total assets. $5.05 billion, sales. $5.29 billion, total equity. SOUTHERN COPPER CORPORATION AND SUBSIDIARIES FIVE-YEAR SELECTED FINANCIAL AND STATISTICAL DATA For the years ended December 31 12 | 12 | 13 (in millions, except per share amounts, employee data and stock and financial ratios) Consolidated Statement of earnings Net earnings attributable to SCC Net sales Operating costs and expenses Operating income Non-controlling interest of investments shares 2015 2014 2013 2012 2011 736 $ 1,333 $ 1,619 $ 1,935 $ 2,336 5,045.9 3,631.5 1,414.4 $ 5,788 $ 6 , 6 6 9 $ 6,669 $ 6,819 $ 3,555 2,233 3,560 3,109 3,560 3,109 3,193 3,625 on Peruvian Branch Income 3 5 6 7 8 Per share amount Net earnings attributable to SCC – basic and diluted Dividends paid Consolidated balance sheet Cash and cash equivalent 0.93 0.34 275 $ 1.61 0.46 $ $ 1.92 0.68 $ $ 2.28 4.06 $ $ 2.73 2.43 364 $ 1,673 $ 2,460 $ 848 12,593.2 11,393 10,996 10,384 4,181 4,205 4,214 8,063 2,746 Total assets Total debt Total equity Consolidated statement of cash flows Cash provided from operating activities Dividend paid Capital expenditures Depreciation & depletion Capital stock 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 (1) Employees (at year end) 5,952 5,299 880 217 1150 511 776 33.14 24.40 6.78 28.19 $ 5,837 $ 5,562 $ 4,789 $ 4 , 0 3 6 $ 1,356 $ 1,859 $ 2,004 $ 2,080 381 1,530 445 574 1,703 396 3,140 1,052 326 2,080 613 288 813 835 846 850 $ 24.40 $ 33.54 $ 26.08 $ 41.96 $ 26.08 $ 24.78 $ 28.16 $ 23.99 $ 7.14 $ 6.62 $ 5.64 $ 4.77 17.52 14.95 16.60 11.04 2.70 48.9% 13,024 2.07 37.3% 4.36 29.2% 5.00 3.12 25.0% 25.2% 12,735 12,665 12,085 12,145 (1) Represents net debt divided by net debt plus equity. Net debt is total debt minus cash and cash equivalents balances. ANNUAL REPORT 2015 CAPITAL EXPENDITURES AND EXPLORATION EXPANSION & MODERNIZATION $1.25 billion, capital investments. For 2016, the Board of Directors approved a capital investment program of $1.58 billion. By 2018, our copper production capacity will be 1.2 million tons. CAPITAL EXPENDITURES AND EXPLORATION Our copper production capacity will increase more than 90% by 2018. CAPITAL EXPENDITURES AND EXPLORATION We made capital investments of $1,250.0 million in 2015, including the El Pilar acquisition, $1,534.8 million and $1,703.3 million in 2014 and 2013, respectively. In general, the capital investments and projects described below are intended to increase production, decrease costs or address social and environmental commitments. This is 18.3% lower than in 2014, and represented 169.7% of net income. Our growth program to develop the full production potential of our Company is underway. In addition, the Buenavista expansion program is largely completed. For 2016, the Board of Directors approved a capital investment program of $1,577.8 million to make the final payments for the Buenavista projects, to initiate the construction of a new concentrator in Toquepala, with an annual production capacity of 100,000 tons of copper and 3,100 tons of molybdenum, and for the Tia Maria project. With these projects we are continuing our investment program to increase copper production capacity by more than 90% from our 2013 production level of 617,000 tons to 1.2 million tons by 2018. In addition to our ongoing capital maintenance and replacement spending, our principal capital programs include the following: PROJECTS IN MEXICO: Buenavista Project: We are completing the development of our $3.5 billion investment program at this unit, where we have already invested $3.0 billion. Excluding the Quebalix project and some infrastructure facilities, all the other facilities of this program are currently operating and we are expecting to produce 460,000 tons of copper in 2016 and 500,000 tons in 2017. 17 $392.0 million were invested in the Toquepala concentrator expansion projects. Tia Maria will represent an investment of approximately $1.4 billion to produce 120,000 tons of copper cathodes per year. The new copper-molybdenum concentrator has an annual Regarding the SX-EW III plant, in July 2015, the Mexican production capacity of 188,000 tons of copper and 2,600 authorities approved the initiation of activities for the tons of molybdenum. The project will additionally produce Tinajas 1 leaching pad. This will allow us to achieve the 2.3 million ounces of silver and 21,000 ounces of gold per estimated low cost annual production of 120,000 tons year. The total capital budget of the project is $1,383.6 of copper cathodes by the first quarter of 2016. As of million and as of December 31, 2015, the project had a December 31, 2015, we have invested $526.4 million. 99% progress with an investment of $1,162.0 million. The crushing, conveying and spreading system for All major equipment is in place and has been installed. leachable ore project (Quebalix IV) will increase production by improving SX-EW copper recovery, reducing processing Regarding the mine equipment acquisition for the time and mining and hauling costs. The project has a Buenavista expansion, through December 31, 2015 we crushing and conveying capacity of 80 million tons of ore have invested $510.9 million and have received sixty-one per year and is expected to be completed by the second 400-ton capacity trucks, seven shovels and eight drills quarter of 2016. As of December 31, 2015, the project required for the mine expansion. All of this equipment is has an 87% progress with an investment of $209 million currently in operation. out of the approved capital budget of $340 million. ANNUAL REPORT 2015CAPITAL EXPENDITURES AND EXPLORATION 18 | The remaining projects to complete the $3.5 billion reducing operating and maintenance costs as well as the budgeted program include investments in infrastructure, environmental impact of the Cuajone mine. The crusher including power lines and substations, water supply, will have a processing capacity of 43.8 million tons per tailings dam, mine equipment shops, internal roads and year. We are completing the detailed engineering. The main others. PROJECTS IN PERU components including the crusher and the overland belt have been acquired and we have started the preparation of the land and civil works. As of December 31, 2015, Toquepala Projects: Through December 31, 2015, we we have invested $80.1 million in this project out of the have invested $392.0 million in the Toquepala concentrator approved capital budget of $165.5 million. The project is expansion projects. On April 14, 2015 the construction expected to be completed by the first quarter of 2017. permit for the project was approved, allowing us to continue its development. We had previously received the The project to replace tailing thickeners at the concentrator approval of the Environmental Impact Assessment (“EIA”) will replace two of the three existing thickeners with a confirming that our project complies with the highest new hi-rate thickener. The purpose is to streamline the environmental standards of the Peruvian authorities, which concentrator flotation process and improve water recovery corroborates our position as a sustainable company. efficiency, increasing the tailings solids content from 54% to 61%, thereby reducing fresh water consumption Once in operation, the Toquepala expansion will increase by replacing it with recovered water. As of December annual production capacity by 100,000 tons of copper 31, 2015, we finalized the commercial negotiations to 235,000 tons in 2018, and will also increase annual and started the engineering and procurement process. molybdenum production by 3,100 tons at an estimated We have invested $1.3 million in this project out of the capital cost of $1.2 billion. It is estimated that the project approved capital budget of $30 million, and we expect it will generate 2,200 jobs during the construction phase to be completed by the first quarter of 2017. and 300 additional jobs once finished, which will add to current 1,500 permanent employees at Toquepala. The Tia Maria Project: While we have received approval of project is expected to be completed by the first quarter Tia Maria´s EIA, the issuance of the project´s construction of 2018. permit has been delayed by the Peruvian authorities due to certain pressures from anti-mining groups. Cuajone Projects: The In-Pit Crushing and Conveyor (IPCC) Project consists of installing a primary crusher at Tia Maria, when completed, will represent an investment the mine pit with a conveyor system for moving the ore to of approximately $1.4 billion to produce 120,000 tons of the concentrator. The purpose of this project is to optimize copper cathodes per year. This project will use state of the hauling process by replacing rail haulage, thereby the art SX-EW technology with the highest international 18 | 19 Tia Maria facilities will be a SX-EW, the most environmentally friendly in the mining industry. The In-Pit Crushing and Conveyor (IPCC) Project consists of installing a primary crusher at the Cuajone mine pit with a conveyor system for moving the ore to the concentrator. ANNUAL REPORT 201520 | The Tia Maria project will only use seawater. We guarantee that the Tambo river water resources and the water resources from the wells of the areas will be used solely for farming and human consumption. Tia Maria has complied with all existing requirements and regulations. DIVISIÓNSCC complies with all existing requirements and regulations where operates. 20 | 21 environmental standards. SX-EW facilities are the most environmentally friendly in the industry due to their technical process and consequently, no emissions into the atmosphere are released. The project will only use seawater, transporting this more than 25 kilometers and at 1,000 meters above sea level, constructing a desalinization plant representing an investment of $95 million. In this manner, we guarantee that the Tambo river water resources and the water resources from the wells of the areas will be used solely for farming and human consumption, as it has been done until today. Tia Maria has complied with all existing requirements and regulations and therefore the Company trusts that it will soon receive from government authorities the construction licenses and permits required in order to begin construction of this project. 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 developing the engineering and procurement to improve and increase the dam’s embankment with a new cyclone battery station that will allow us to place more slurry at the dams. The project has a total budgeted cost of $66.0 million with $53.4 million invested through December 31, 2015. SCC holds the world’s largest copper reserve position. ANNUAL REPORT 201522 | COMMUNITY OUTREACH DIVISIÓN 22 | 23 SCC creates share values in the areas where its operates. According to SCC goals. ANNUAL REPORT 201524 | Our business goal is the Meaningful Development. Strengthening the environment from the human and environmental point of view. ENVIRONMENTAL AND SOCIAL MEASURES Southern Copper Corporation is committed to generate the greatest value for our stakeholders, aligned with our business objectives. In this regard, we seek to achieve an increasingly responsible operation in the social, economic and environmental fields, considering the expectations of our stakeholders and aiming at the sustainability of the organization over time, to continue contributing directly and indirectly with the development of the country. Our business goal is the Meaningful Development, with which we align our investments and the distribution of economic value, from the strengthening of the environment, from the human and environmental point of view among our employees, communities and other stakeholders. We do our best every day to consolidate the confidence they have in us, making them participants in management, communicating our performance and listening to their expectations, in order to create share value together. To consolidate the confidence they have in us in order to create share value together. DIVISIÓN24 | 25 OUR ENVIRONMENTAL COMMITMENT These lines of action are carried out in compliance with We maintain an ongoing commitment to advance in harmony international and local certifications that rule our operating with the challenges of expansion and modernization of the units in countries where we are present. industry in which we participate. In this sense, we not only seek regulatory compliance, we also operate under the In 2015, four of our units were granted the ISO 14001: best environmental practices, in order to always achieve 2004. These certifications, together with the 12 Clean optimum environmental performance, to identify, evaluate Industry certifications and 6 Environmental Quality and mitigate the impacts generated by our activities on certifications, are the result of the efforts of all our the environment. employees and a comprehensive application of our environmental practices. To do this, we have strategies that meet the specific environmental needs of each region in which we operate, and use an environmental management system that we have developed, with the following 9 lines of action: IN HARMONY WITH THE ENVIRONMENT IN DETAIL 9 Compliance with environmental regulations 1 Responsible use of water and natural resources 8 Reforestation 2 Prevention, control and reduction of air emissions 7 Biodiversity conservation 3 Efficient use of energy 6 Mine closure 5 Reduction of GHG emissions per ton produced 4 Reduction in waste generation and integrated management ANNUAL REPORT 2015SCC is efficiently in energy consumption. Developing and using renewable energy sources. We promote efforts to capture greenhouse gases. 26 | DIVISIÓN26 | 27 ENVIROMENTAL EXPENDITURES (million dollar) • Diversifying our energy matrix. • Developing and using renewable energy sources. SCC • Increasing the level of electric power self-sufficiency. Energy Air Ground Waste Biodiversity Management Water Total $ $ $ $ $ $ $ $ 0.47 83.80 15.66 64.30 15.53 10.30 14.47 204.52 ENERGY AND CLIMATE CHANGE At SCC we are aware of the effects of climate change and • Promoting efforts to capture greenhouse gases. At SCC we have set a target to produce more with less, implementing energy efficiency initiatives in accordance with best practices. Therefore, we work on the redesign, conversion and adaptation of equipment, process improvement and reorganization, and training our employees to optimize energy use, making strong investments in this regard. In this sense, we are diversifying our sources of generation of clean, renewable energy for our supply. Our operations in Mexico have mitigated their indirect greenhouse gas emissions by consuming clean energy supplied by SCC subsidiaries that generate electric power through its high efficient combined cycle and a wind farm. By replacing its impact on our operations, so, by anticipating an increase traditional sources of energy by more efficient and in the probability of occurrence of extreme weather events renewable sources, in 2015 we achieved a mitigation of such as hurricanes, droughts, floods and fires, we have 151.680 tons of CO2eq. identified potential risks from global warming. In addition to the risks arising from the increase in global temperature of Simultaneously with our environmental policy, we continue the planet, we also face the impact of new environmental to implement actions to maximize the generation of policies and regulations being adopted by governments of electricity by using our own energy sources. In the case all countries. of Mexico, we make use of the smelter gases for the heat recovery boiler to generate energy. In Peru, we generate Given these challenges, we are taking measures, which energy from renewable sources, in particular from two include: hydroelectric plants with a combined capacity of 130 • Using energy more efficiently. terajoules. ANNUAL REPORT 201528 | 28 | In addition to generating and consuming energy from renewable sources and cleaner fuels, we have also implemented the best practices that have resulted in higher energy efficiency in our operations, including the improvement, redesign, conversion and retrofitting of equipment, the rational use of resources, and the training of personnel to improve their performance during operations. In the last two years, we have invested more than $105 million in our Peruvian mining complexes at Cuajone and Toquepala. One of our projects of technological improvement in material transport systems will not only allow us to reduce operating costs, but also the amount of energy consumed and the intensity of emissions per ton produced of product. Similarly, in our mining unit, Buenavista del Cobre (Sonora, Mexico) we are moving forward in the construction of the “Quebalix IV” crushing and conveying system. This infrastructure project lets us crush the material and transport it by conveyor, one of which with 1.7 km length is the longest in the Mexican mining industry, and will allow us to improve our efficiency in the management of energy resources and reduce our emissions of greenhouse gases associated with our activities of hauling and crushing. The measures to adapt to the effects of climate change are increasingly relevant. In the case of Peru, global warming has been reflected in meteorological phenomena of great intensity, such as El Niño, which among its consequences, it has caused droughts in the interior and south of the country, as opposed to heavy rains in the north and central coast. For this reason, we are regionally supporting the Ministry of Agriculture and the Water User Boards that manage water resources in areas where we operate. We also continue working with communities in the forage delivery programs for cattle, in cold seasons, given the scarcity of vegetation for DIVISIÓN28 | 28 | 29 Our reforestation projects provide a double value to the environment. SCC contributes to biological biodiversity and enrichment of flora and fauna We contribute by trapping CO2 from the atmosphere. ANNUAL REPORT 201530 | animals, an initiative that has been strengthened this year to minimize the effects of drought. on the other, they act as carbon sinks, trapping CO2 from the atmosphere. The Company has begun studies to measure the contribution made by planting trees, With these actions, and others, SCC confirms the including differences between the species used, in order commitment to reduce its carbon footprint, meet their to maximize its associated impact. implications and enhance our position as a sustainable As part of our conservation efforts, we have a 1.3 global company, thereby improving our competitiveness hectare Environmental Management Unit (EMU) that has and contributing to shift towards an environmentally been developed to replicate the wildlife environment of friendly economic development. threatened and endangered species, including the Mexican BIODIVERSITY In our operating units we have forest nurseries and Gray Wolf and the Turkey Gould, along with other species that are part of our program whose strategy focuses on breeding and release, as well as in the regeneration of greenhouses whose production of species native to the their habitat. region are used to reforest and rehabilitate ecosystems, The EMU is a clear sign of how we involve the community including those areas not adjacent to our operations. in the common challenge of protecting our environment, Our reforestation projects provide a double value to particularly biodiversity of Sonora. This is extensible to the the environment. On the one hand, they contribute to Ecological Path, where the EMU, along 1.8 kilometers, biological biodiversity and enrichment of flora and fauna; offers educational and recreational activities, being visited DIVISIÓNANNUAL REPORT 2015 30 | 31 We replicate the wildlife environment of threatened and endangered species. We protect the Mexican Gray Wolf and the Turkey Gould. In Peru, we make significant environmental measures within the remediation program at the Ite Bay. by about 5,000 people and an average of 52 schools per year. The Path also constitutes a very important facility in our reforestation efforts, with an annual production of 500,000 plants. In the Peruvian region of Tacna, we continue to make significant environmental investments and conservation measures within the remediation program at the Ite Bay. With an area of 1,600 hectares, this successful program of contaminant removal has resulted in the largest ANNUAL CAPACITY OF PRODUCTION TREES (in million) 2015 2014 2013 2012 4.4 4.4 4 2 COMMUNITY OUTREACH Our mining operations promote progress. $204.52 million invested in environmental remedial. and most diverse coastal waterfowl wetland in the country, and it has become also a tourist attraction that favors economic development. WATER MANAGEMENT For our mining operations, water is the most important input, and in order to ensure the sustainability of the resource in areas where we operate, we develop projects to get the greater efficiency in their use, promote reuse and use water discharged by third parties. The efficient use of water and conservation programs include the following: • Pumping systems to recover water. • Continuous water recovery process from tailings and thickener processes for reuse in metallurgical processing. • Implementation and maintenance of closed circuits to use the total volume of process water. • Implementation of the Zero Wastewater Discharge Program, looking for a more efficient management of both consumption and reuse of water resource within our mining operations. These programs have enabled us to obtain a large proportion of our total water consumption from reclaimed water. In 2015, 71% of total water consumption at our mining operations was reclaimed water, minimizing consumption and demand for fresh water. In some of our units, we make use of municipal wastewater treatment utilities, as is the case of our operations in San Luis Potosi (Mexico), so that the availability of fresh water is largely for the local population. At SCC we have done all that is within our reach to care for and protect our communities, their rivers and land. Consistent with our commitment to sustainability, we have concluded with all cleaning and remediation works required as a result of the spill of copper sulfate solution which occurred on August 6, 2014 at a dam 10 kilometers away from the Buenavista del Cobre mine. 33 Peru, Ite Bay, peaceful haven for local and migratory birds. At SCC, we have done all that is within our reach to care for and protect our communities, their rivers and land. ANNUAL REPORT 2015COMMUNITY OUTREACH 34 | On August 7, 2014 we launched an emergency plan to whose actions were very effective. By initial cleaning and contain and collect the materials released, as well as to subsequent remediation, it was possible to collect a larger minimize dispersion. For it, a contingency border was built amount of metals than the one contained in the spill, which with lime and milk of lime to neutralize the solution and is explained by the geology of the area characterized by soils and sediments of rivers were collected, concluding highly mineralized geological formations. with the cleanup actions in October 2014. When Sonora and our communities were at risk, we With the implementation of immediate measures in support immediately and unconditionally to ensure all the response to the contingency, pollutant load significantly needs of the population. We compensate those susceptible decreased in the water, so on August 27, 2014 the to the potential consequences of precautionary measures Delegate of the Secretariat of Agriculture, Livestock, and the closure of the water, through the establishment Rural Development, Fisheries and Food stated that the of a trust, whose technical committee was created with strip of 500 meters on the banks of the rivers Sonora and representatives of the Federal Government, the Company Bacanuchi had not been affected by pollutants. and specialists, assisted by a team of environmental Besides the significant work done to prevent damage to experts, all in order to ensure proper use of funds that the river, in 2015 we implemented a remediation program, were provided. Through this mechanism, we have When Sonora and our communities were at risk, we support immediately and unconditionally. 34 | 35 invested more than $ 70 million for the supply of drinking water, installation of water infrastructure, as well as compensation to farmers, ranchers and the general population, among other efforts. SCC continues fulfilling its commitment to make environmental and health monitoring across the Sonora and Bacanuchi rivers, and keep working to reforest those areas of the river affected by Odile Hurricane. This in order to verify that no negative affectations to the environment or the people arise, and join efforts in our search for meaningful development. SCC continues fulfilling its commitment to make environmental and health monitoring across the Sonora and Bacanuchi rivers in Mexico. Investing more than $ 70 million for the supply of drinking water. ANNUAL REPORT 2015COMMUNITY OUTREACH 36 | SCC promotes local communities. Casa Grande, social investment fund, calls for projects and corporate volunteer. Our goals, create share value and promote the development of the communities were we operate. We are immersed in a rich and diverse environment, with communities in which we seek to create opportunities and contribute to generate internal processes of transformation. OUR COMMUNITIES As a company, we are immersed in a rich and diverse environment, with communities in which we seek to create opportunities and contribute to generate internal processes of transformation, prioritizing installation capabilities that allow efforts to transcend and become a vehicle for change. Our model of community development parts from this approach, and it is implemented through different tools: Community Committees, Casa Grande, social investment fund, calls for projects and corporate volunteer. Aligned with our goal of creating value and promoting development of the communities of which we are part, we implemented strong programs of social bonding suited to the needs and situations of the locations where we operate, Mexico and Peru. We understand social welfare as the synergy of different factors that we aim to strengthen through a multi- strategy, in close dialogue with communities. Therefore we strengthen health, education, culture and sports, among others. INVESTING IN COMMUNITY DEVELOPMENT (DOLLARS) PROGRAM Community development Social linking Community development programs Sponsorships and donations 36 | 37 SCC $ 641,396 $ 8,003,291 $ 10,568,565 Infrastructure and equipment in neighboring communit6ies $ 50,066,980 Employees and communities Investment in Education Sport and cultural programs Investment in town site infrastructure Total $ $ $ 586,592 898,001 15,034,969 $ 85,799,794 ANNUAL REPORT 2015 38 | $85.79 million were invested in community development. Our community centers are meeting points, coexistence and building of shared value. From community diagnosis, where local people are involved, we identify the needs and expectations to prioritize working opportunities, which are channeled through the Casa Grande model. This model consists of own company initiatives materialized through our team of experts, volunteers from the Company, the community, and community centers created as a meeting point, coexistence and building of shared value. In 2015, it included the participation of 6,946 community volunteers who were the key to increase the social capital of the areas in which we operate. In addition, calls in order to encourage community organizations to submit their own initiatives are made. In 2015, education and environment were established as key themes of work, as well as health and safety and productive development as complementary subjects. Also, for us, children and youth are a priority, because we know that giving them special attention, we go beyond the generations that will set the standard in the future. The projects presented in these calls are evaluated by community committees, mixed composed groups in which both, SCC as well as the community, participate, promoting dialogue and citizen participation. For us, children and youth are a priority. DIVISIÓN38 | 39 PERU At year-end 2015, 13 SCC operations and exploration units in Mexico, distributed in 8 states, have implemented In Peru, our commitment to the community focused in the Casa Grande model. Five calls for projects were three areas: education and capacity building, health launched and 66 initiatives were funded. Thus, we and nourishment, and infrastructure and support for the continue promoting our Meaningful Development vision, farming industry. with long-term vision and strategic building of alliances to strengthen communities we are part of. Our operations are located in the south of Peru, in an agricultural and livestock environment where water is a SCC also seeks to create value through social investments key resource. We seek to expand capacity development so that communities have at their disposal facilities and and self-management of communities and, with this spaces that contribute to the quality of life. In early 2015, approach, we are contributing to the development of the Cananea Regional Hospital of Specialist was opened. water supply infrastructure, as well as projects of irrigation Built with a trilateral investment by the Federal Government, modernization, strengthening fruit production and livestock the Sonora State Government and the Company, we in the provinces of Candarave and Jorge Basadre. contributed with more than $ 7 million. It is the first center with open access in Mexico, serving beneficiaries of any Four water storage structures for irrigation were completed medical services as well as people without it, potentially and the construction of 9 channels for Candarave began benefiting a population of 35,000 residents. with construction of 4,888 linear meters as well as the ANNUAL REPORT 201540 | In emergency, SCC takes care for people health. Cananea Regional Hospital was built with a trilateral investment by the Federal Government, the Sonora State Government and the Company. building of pressurized irrigation modules for 231 plots the end of the year, program participants had already and 466 hectares in Ite district. established two companies in which they applied the We have also launched the Candarave Development Fund knowledge acquired. for the implementation of priority projects identified by the Our support for future professionals it is expressed authorities and communities participating in a roundtable in undertaking programs like “Young Enterprises to dialogue, which also supports the economic development Success”, by which 508 participants were trained in of the area by hiring local companies for construction of business management, marketing, finance and personal the projects. development, among other topics. Notably, 15 of the participants were awarded initial seed capital to start their Supporting women’s entrepreneurial programs is also one businesses. of our program goals, thereby creating opportunities for professional development and contributing to strengthen In health and nutrition, in 2015 we continued our the economy of families. In the Peruvian province of commitment to support community health workers, a key Mariscal Nieto we developed the “Women Entrepreneurs part in the sustainability and development of educational of Torata”, training 40 women in bakery and dairy and activities to strengthen mothers, fathers and authorities nectar processing. We are pleased to report that, before of the various communities of the Province of Candarave DIVISIÓN40 | 41 through programs,such as demonstration sessions using local products, training and tracking and monitoring newborns through early childhood. By developing prevention campaigns and health care, residents of the provinces of Jorge Basadre and Candarave have benefited, managing to improve the quality of life of low income and vulnerable people. Similarly, we are working on the implementation of public infrastructure for the community, and was the first contributor to the Consortium of Companies with Major Investment Commitment, effort awarded in 2015 by the private investment promotion agency, Proinversion. In addition, in collaboration with the various governmental entities in Peru, we seek to develop projects that deliver high social performance and contribute prominently to the development of the regions where we operate. At Southern Copper Corporation we will keep our commitment to continually improve the quality of life of the communities where we operate, by encouraging community integration structures and collective involvement, which will result in the common good and make people the key agents of development. Southern Copper Corporation keeps its commitment to continually improve the quality of life of the communities where it operates. ANNUAL REPORT 201542 | RESULTS OF OPERATIONS DIVISIÓN 42 | 43 $741.1 million net income in 2015. Operating cash cost per pound, net of by- product credits, was $1.12. ANNUAL REPORT 201544 | Our 2015 operating cash cost per pound of copper without by- product revenues was $0.23 per pound lower than in 2014. We diluted our operating cash costs per pound through higher production in all our units. SCC is a world class copper producer. DIVISIÓN44 | 45 RESULTS OF OPERATIONS THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013. Our net income attributable to SCC in 2015 was $ 741.1 million or diluted earnings per share of $0.93, compared with net income attributable to SCC of $1,337.9 million or diluted earnings per share of $1.61 in 2014, and net income attributable to SCC of $1,618.5 million or diluted earnings per share of $ 1.92 in 2013. 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 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: Operating Cash Cost without by-product revenues Operating Cash Cost with by-product revenues As seen on the chart above, our 2015 operating cash cost per pound of copper without by-product revenues was $0.23 per pound lower than in 2014, a decrease of 11.8%. This was due to lower costs per pound from production costs, as a result of higher production. 2015 2014 2013 (dollar per pound) 1.66 1.12 1.89 1.07 1.90 1.00 ANNUAL REPORT 201546 | Net sales in 2015 were $5,05 billion. In 2015, average copper prices per pound were $2.50 (LME) and $2.51 (COMEX). In 2015, copper sales volume of copper reached 1,625.8 million pounds. DIVISIÓN46 | 47 Net Sales: 2015-2014: Net sales in 2015 were molybdenum and zinc prices and higher copper and $5,045.9 million, compared to $5,787.7 million in 2014, molybdenum sales volume. Copper made up 78.0% of a decrease of $741.8 million or 12.8%. The decrease was net sales in 2014, compared to 78.2% in 2013. Sales of principally the result of lower metal prices, partially offset by-products in 2014 totaled $1,269.7 million, compared by an increase in copper and zinc sales volumes, which to $1,298.1 million in 2013, a decrease of 2.2%. increased 12.3% and 10.3%, respectively. Prices: Sales: prices for the Company’s metals are 2014-2013: Net sales in 2014 were $5,787.7 million, established, mainly by reference to the prices quoted compared to $5,952.9 million in 2013, a decrease of in the London Metal Exchange (LME) and The New York $165.2 million or 2.8%. The decrease was principally the Commodity Exchange (COMEX), or published in the result of lower copper and silver prices as well as lower Platt’s Metals Week, for dealer oxide mean prices for silver and zinc sales volume, partially offset by higher molybdenum. Price/Volume Data Average metal prices Copper (per pound - LME) Copper (per pound - COMEX) Molybdenum (per pound) Zinc (per pound - LME) Silver (per ounce - COMEX) 2015 2014 2013 $ $ $ $ $ 2.50 2.51 6.59 0.88 15.68 $ $ $ $ $ $ $ $ $ 3.11 $ 3.32 3.12 $ 3.34 11.30 $ 10.26 0.98 $ 0.87 19.04 $ 23.82 2014 2013 1,448.0 51.0 201.5 14.6 $ $ $ $ 1,382.4 43.9 218.5 16.6 SALES VOLUME (in thousands) 2015 Copper (pounds) Molybdenum (pounds) (1) Zinc (pounds) Silver (ounces) 1,625.8 51.2 222.2 14.5 (1) The Company´s molybdenum production is sold in the form of concentrates. Volume represents pounds of molybdenum contained in concentrates . ANNUAL REPORT 2015 48 | ENVIRONMENTAL MATTERS DIVISIÓN 48 | 49 Environmental capital expenditures in 2015 were $120.8 millions. We comply with all environmental regulations. Our operations are environmentally friendly in the mining industry. ANNUAL REPORT 2015ENVIRONMENTAL MATTERS ENVIRONMENTAL MATTERS The Company has instituted extensive environmental conservation programs at its mining facilities in Peru and Mexico. The Company’s environmental programs include, among others, water recovery systems to conserve water and minimize impact on nearby streams, reforestation programs to stabilize the surface of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions. Environmental capital expenditures in years 2015, 2014 and 2013, were as follows (in millions): 2015 2014 2013 Mexican operations Peruvian operations Total $ $ $ 98.8 $ 24.4 $ 39.8 22.0 127.0 76.9 120.8 $ 151.4 $ 116.7 MEXICAN OPERATIONS The Company’s operations are subject to applicable Mexican federal, state and municipal environmental laws, to Mexican official standards, and to regulations for the protection of the environment, including regulations relating to water supply, water quality, air quality, noise levels and hazardous and solid waste. The principal legislation applicable to the Company’s Mexican operations is the Federal General Law of Ecological Balance and Environmental Protection (the “General Law”), which is enforced by the Federal Bureau of Environmental Protection (“PROFEPA”). PROFEPA monitors compliance with environmental legislation and enforces Mexican environmental laws, regulations and official standards. PROFEPA may 51 We are a responsible social company. In Mexico, PROFEPA must inform corresponding authorities regarding environmental non-compliance. We comply with the Federal General Law of Ecological Balance and Environmental Protection. initiate administrative proceedings against companies actions by means of which 30 or more people claiming that violate environmental laws, which in the most injury derived from environmental, consumer protection, extreme cases may result in the temporary or permanent financial services and economic competition issues will closing of non-complying facilities, the revocation of be considered to be sufficient in order to have a legitimate operating licenses and/or other sanctions or fines. interest to seek through a civil procedure restitution or Also, according to the federal criminal code, PROFEPA economic compensation or suspension of the activities must inform corresponding authorities regarding from which the alleged injury derived. The amendments environmental non-compliance. to the CFPC may result in more litigation, with plaintiffs seeking remedies, including suspension of the activities In 2011, the General Law was amended, giving an alleged to cause harm. individual or entity the ability to contest administrative acts, including environmental authorizations, permits or In 2013, the Environmental Liability Federal Law was concessions granted, without the need to demonstrate enacted. The law establishes general guidelines in the actual existence of harm to the environment because order to determine which environmental actions will it will be sufficient to argue that the harm may be be considered to cause environmental harm that will caused. In addition, in 2011, amendments to the Civil give rise to administrative responsibilities (remediation Federal Procedures Code (“CFPC”) were enacted. These or compensations), criminal responsibilities as well as amendments establish three categories of collective monetary fines. ANNUAL REPORT 201552 | 52 | On August 6, 2014, an accidental spill of approximately announced the filing of a criminal complaint against 40,000 cubic meters of copper sulfate solution occurred BVC in order to determine the responsibility for the at a leaching pond that was under construction ten environmental damages. The Company is vigorously kilometers away from the mine of Buenavista del Cobre, defending itself against this complaint. As of December S.A. de C.V. (“BVC”) a subsidiary of the Company. The 31, 2015, the case remains in the procedural stages accident was caused by a rock collapse that affected and it is still pending resolution. On September 15, the system’s pumping station and by a construction 2014, BVC executed an administrative agreement with defect in the seal of a pipe in the leaching system PROFEPA, providing for the submission of a remediation containment dam, a part of the new SX-EW III plant. action plan to the Mexican Ministry of Environment This solution reached the Bacanuchi River and the and Natural Resources (Secretaria de Medio Ambiente Sonora River. Immediate actions were taken in order y Recursos Naturales “SEMARNAT”). The remediation to contain the spill, and to comply with all the legal program submitted to SEMARNAT was approved on requirements. January 6, 2015. This program will be developed in five zones along the rivers. As of December 31, 2015, the The National Water Commission, the Federal Company informed SEMARNAT of the conclusion of the Commission for the Protection against Sanitary and clean-up and soil remediation actions in phase one of PROFEPA initiated administrative proceedings regarding zone one. Remediation activities in phase two of zone the spill to determine possible environmental and health one are expected to be concluded in February 2016. damages. On August 19, 2014, PROFEPA, as part of The Company has already obtained approval of the the administrative proceeding initiated after the spill, monitoring programs for zones two to five. DIVISIÓN52 | 52 | 53 The Company also created a trust with Nacional Financiera S.N.C., a Mexican development bank, acting as a Trustee to serve as a vehicle to support environmental remedial actions in connection with the spill, to comply with the remedial action plan and to compensate for damages caused to persons adversely affected by the spill. The Company committed up to two billion Mexican pesos (approximately $150 million) of which approximately one billion Mexican pesos have already been contributed. A technical committee of the trust was created with representatives from the federal government, the Company and specialists assisted by a team of environmental experts to ensure the proper use of the funds. Along with the administrative agreement executed with PROFEPA, the trust serves as an alternative mechanism for dispute resolution to mitigate public and private litigation risks. Independently of the execution of the administrative agreement with PROFEPA and the creation of the above mentioned trust, the Company has taken actions to clean the sites since the day of the copper solution spill. On August 29, 2014, the Company hired contractors to clean the river utilizing more than 1,200 of their workers and environmental specialists. ANNUAL REPORT 201554 | In addition, the Company developed a service program for the residents of the Sonora River Region, including (i) water distribution provisions, and infrastructure development within the affected region, (ii) the expansion of the current Community Development program to communities further downstream that were affected and previously not within the scope of the Company´s program, (iii) attention to local farmers and producers in coordination with the Federal Agriculture, Livestock, Rural Development, Fisheries, and Alimentations Ministry in order to revamp and promote the activities of local farmers and producers, (iv) the implementation of sustainable productive projects at each affected site, as well as (v) the establishment of service desks to attend specific cases. On March 2, 2015 as a result of four administrative proceedings, PROFEPA imposed administrative fines on BVC for an aggregate amount of 23.5 million Mexican pesos (approximately $1.7 million). The Company reasonably considers that none of the legal proceedings resulting from the spill, individually or in the aggregate, would have a material effect on its financial position or results of operations. PERUVIAN OPERATIONS The Company’s operations are subject to applicable Peruvian environmental laws and regulations. The Peruvian government, through the Ministry of Environment (“MINAM”) conducts annual audits of the Company’s Peruvian mining and metallurgical operations. Through these environmental audits, matters related to environmental obligation, compliance with legal requirements, atmospheric emissions, effluent monitoring and waste management are reviewed. The Company believes that it is in material compliance with applicable Peruvian environmental laws and regulations. Peruvian law requires that companies in the mining industry provide assurances for future closure and remediation. In accordance with the requirements of this The Company developed a service program for the residents of the Sonora River Region, Mexico. DIVISIÓN54 | 55 Our mine operations are social responsible. 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. law, the Company’s closure plans were approved by MINEM. As part of the closure plans, the Company is providing guarantees to ensure that sufficient funds will be available for the asset retirement obligation. See Note 10 “Asset retirement obligation,” for further discussion of this matter. In accordance with the requirements of the law, in 2015 the Company submitted the closure plans for the Tia Maria project and for the Toquepala expansion. The process of review and approval of closure plans usually takes several months. In 2008, the Peruvian government enacted environmental regulations establishing more stringent air quality standards (“AQS”) for daily sulfur dioxide (“SO2”) in the air for the Peruvian territory. These regulations, as amended in 2013, recognize distinct zones/areas, as atmospheric basins. Those areas with a mean 24-hour SO2 concentration equal or less than 20 micrograms per cubic meter (“ug/m3”) are required to develop programs to maintain this level of compliance. Those areas or The Company is providing guarantees to ensure that sufficient funds will be available for the asset retirement obligation. ANNUAL REPORT 201556 | 56 | MINAM has established three atmospheric basins that require further attention to comply with 80ug/m3 of SO2. cities exceeding the mean 24-hour SO2 concentration of 20 ug/m3 will be required to establish an action plan to amount of such contingency. The Company and other industries affected by this supreme decree believe that address this problem and are required to achieve the 20 the lack of further regulations and direction from the ug/m3 AQS in the future. Meanwhile they are required to government has delayed the full review and analysis achieve mean 24-hour AQS equal to 80 ug/m3 of SO2. of the necessary actions to establish compliance. Pending further government action, the Company will MINAM has established three atmospheric basins that continue to work with its study group to analyze this require further attention to comply with 80ug/m3 of SO2. The Ilo basin is one of these three areas and the Company’s issue. Furthermore, the Company does not believe it can estimate a reasonable range of possible costs until smelter and refinery are part of the area. A supreme decree additional direction is received from the government. issued on April 8, 2014, indicates that mining companies Therefore, currently the Company is not able to disclose should review their compliance with these regulations a range of costs that is meaningful. and develop a modification plan to reach compliance. The Company continues working with an environmental In 2013, the Peruvian government enacted new soil technical study group, established by a MINAM resolution environmental quality standards (“SQS”) applicable to identify activities, goals, deadlines, timetables and to to any existing facility or project that generates or develop an action plan in order to achieve compliance. could generate risk of soil contamination in its area of operation or influence. In March 2014, MINAM issued a While the Company believes that a potential loss supreme decree which establishes additional provisions contingency may exist, it cannot currently estimate the for the gradual implementation of SQS. Under this rule DIVISIÓN56 | 56 | 57 the Company had twelve months to identify contaminated sites in and around its facilities and present a report of identified contaminated sites. This report was submitted to MINEM in April 2015. After a review, MINEM should evaluate and issue a report to the Company which will allow it to continue with the next phase. Currently, the Company is awaiting an official response from MINEM. Once MINEM notifies the Company, it must prepare a characterization study to determine the depth, extent and physio-chemical composition of the contaminated areas and to define an appropriate remediation plan and the time- frame in which it will take place. In addition, the Company must submit for approval a Soil Decontamination Plan (SDP) within 24 months after being notified by the authority. This SDP shall include remediation actions, a schedule and compliance deadlines. Also, under this rule, if deemed necessary, the Company may request a one year extension for the decontamination plan, given sound justification. Soil confirmation tests must be carried out after completion of decontamination actions (within the approved schedule) and results must be presented to authorities within 30 days after receiving such results. Non-compliance with this obligation or with decontamination ANNUAL REPORT 201558 | DIVISIÓN58 | 59 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. 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. While the Company believes that there is a reasonable possibility that a potential loss contingency may exist, it cannot currently estimate the amount of the contingency. The Company believes that a reasonable determination of the loss will be possible once the characterization study and the SDP are substantially completed. Then the Company will be in a position to estimate the remediation cost. Further, the Company does not believe that it can estimate a reasonable range of possible costs until the noted studies have progressed substantially and therefore is not be able to disclose a range of costs that is meaningful. 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 201560 | GENERAL INFORMATION DIVISIÓN 60 | 61 Our mines, smelters & refineries are located in Mexico and Peru. Southern Copper Corporation is one of the largest integrated copper producers in the world. We produce copper, molybdenum, zinc, lead, coal and silver. ANNUAL REPORT 201562 | 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 75. 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 and 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. DIVISIÓN62 | 63 Our Peruvian copper operations involve mining, milling SX/EW plants. The Buenavista mine was operated until and flotation of copper ore to produce copper concentrates December 11, 2010 by Mexicana de Cananea S.A. de and molybdenum concentrates, the smelting of copper C.V. and by Buenavista del Cobre S.A. de C.V. from that concentrates to produce anode copper, and the refining date until July 2012. Industrial Minera Mexico, S.A. de of anode copper to produce copper cathodes. As part C.V. (together with its subsidiaries, the “IMMSA unit”) of this production process, we also produce significant operates five underground mines that produce zinc, lead, amounts of molybdenum concentrate and refined silver. copper, silver and gold, a coal mine and a zinc refinery. We also produce refined copper using SX/EW technology. Effective February 1, 2012, Minerales Metalicos del We operate the Toquepala and Cuajone mines high in Norte S.A was merged with Industrial Minera Mexico S.A. the Andes Mountains, approximately 860 kilometers de C.V. (IMMSA). IMMSA absorbed Minerales Metalicos southeast of the city of Lima, Peru. We also operate a del Norte S.A. smelter and refinery west of the Toquepala and Cuajone mines in the coastal city of Ilo, Peru. We utilize modern/state of the art mining and processing methods, including global positioning systems and Our Mexican operations are conducted through our computerized mining operations. Our operations have a subsidiary, Minera Mexico S.A. de C.V. (“Minera high level of vertical integration that allows us to manage Mexico”), which we acquired in 2005. Minera Mexico the entire production process, from the mining of the ore engages principally in the mining and processing of to the production of refined copper and other products copper, molybdenum, zinc, silver, gold and lead. Minera and most related transport and logistics functions, using Mexico operates through subsidiaries that are grouped our own facilities, employees and equipment. 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 Minera Mexico engages principally in the mining and processing of copper, molybdenum, zinc, silver, gold and lead. ANNUAL REPORT 2015 GENERAL INFORMATION ECONOMIC GROUP SCC, indirectly, is part of “Grupo Mexico S.A.B. de C.V.” which owns 100% of Americas Mining Corporation (“AMC”). SEVERAL ACTIVITIES Grupo Mexico, S.A.B. de C. V. Grupo Mexico Servicios, S.A. de C.V. LOCATION INSCRIPTION IN THE RPMV % Mexico Mexico ACTIVIDADES DE TRANSPORTE FERROVIARIO Infraestructura y Transportes Mexico, S.A. de C. V. Mexico MINING ACTIVITIES 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. Mexicana del Arco, S.A. de C.V. Minera Mexico Internacional, Inc. EE.UU. EE.UU. EE.UU. Mexico Mexico Mexico Mexico Mexico EE.UU. Operadora de Minas e instalaciones Mineras, S.A. de C.V. Mexico Servicios de Apoyo Administrativo, S.A. de C.V. Southern Peru Limited Southern Peru Copper Corporation, Agencia en Chile Southern Peru Copper Corporation, Sucursal del Peru Compañia Minera Los Tolmos, S.A. Mexico EE.UU. Chile Peru Peru 100 100 100 88.57 100 99.96 100 100 98.2 100 100 100 100 100 100 ü 99.291 97.31 NAME OF THE COMPANY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1 Include 82.69% of common shares and 16.60% of investment shares. 65 ANNUAL REPORT 201566 | DIVISIÓN66 | 67 CORPORATE CAPITAL AND COMMON STOCK Shares The authorized number of shares Issues an Paid Capital: Common Shares 2,000,000,000 884,596,086 Nominal Value of Common Shares $ 0.01 TOTAL NUMBER AND PERCENT OF SHARES Shares Americas Mining Corporation Common Shares Total 687,275,997 88,666,273 775,942,270 Interest 88.6% 11.4% 100.0% OPERATIONS IN MEXICO LA CARIDAD MINE “La Caridad Concentrator” started operations in 1979. The concentrator has a current capacity of 94,500 tons of ore per day. “Molybdenum Plant” started operations in 1982, with a production capacity of 2,000 tons of copper-molybdenum concentrate per day. “La Caridad SX-EW” has an annual production capacity of 21,900 tons of copper cathodes. Approximately 663.3 million tons of leach ore with an average grade of approximately 0.247% copper have been extracted from the La Caridad open-pit mine and deposited in leaching dumps from May 1995 to December 31, 2012. LA CARIDAD METALLURGIC COMPLEX La Caridad Smelter started operations in July, 1986, with a production capacity of 493 tons of anode per day and was expanded to 822 tons in March, 1997. The actual installed capacity of the smelter is 1,000,000 tons per year. ANNUAL REPORT 2015 68 | “La Caridad Refinery” started operations in July, 1997, “Buenavista SX/EW I Plant” started operating in 1980, with a production capacity of 493 tons of copper cathode with a capacity of 30 tons per day. per day and was expanded to 822 tons in January, 1998. The installed capacity of the refinery is 300,000 tons per “Buenavista SX/EW II Plant” started operating in 1989, year. with a capacity of 66 tons per day and was expanded to 120 tons per day in 2001. “La Caridad Precious Metals Plant” started operations in May, 1999, with a production capacity of 43,836 ounces “Buenavista SX/EW III Plant” started operating during the of silver per day, 247 ounces of gold per day and 342 fourth quarter of 2014, we completed the construction kilograms of selenium per day. of a new SX-EW plant that will significantly increase production of leachable material by approximately “La Caridad Wire Rod Plant” started operating in April, 120,000 tons per year. (See 10K, on page 64). 1998, with a production capacity of 300 tons of wire rod per day and was expanded to 411 tons in March 1999. UNDERGROUND MINES 1.- The Santa Barbara Unit with a milling capacity of BUENAVISTA MINE 5,800 tons of ore per day. “Buenavista Concentrator” started operating in 2.- The Santa Eulalia Unit with a milling capacity of September, 1986, with a capacity of 62,500 tons per 1,450 tons of ore per day. day; the capacity was expanded to 70,000 tons in 1988 3.- The San Martin Unit with a milling capacity of 4,400 and to 76,700 tons in 1998. tons of ore per day. DIVISIÓN68 | 69 4.- The Charcas Unit with a milling capacity of 4,100 tons of ore per day. 5.- The Taxco Unit with a milling capacity of 2,000 tons per day. 6.- Coquizadora Coal Plant, in Coahuila Unit, with a capacity of 105,000 tons of coke per year. 7.- The Zinc Refinery with a capacity of 288 tons per day. PERUVIAN OPERATIONS TOQUEPALA 1. “Toquepala Concentrator”. Directorial Resolution No.455-91-EM/ DGM/DCM dated July 5, 1991 approved the operation of the Toquepala Concentrator. The resolution granted 240 hectares of surface land and authorized a throughput of 39,000 tons/day. Based on Report No. 413-97-EM/DGM/DPDM dated July 7, 1997 the “Director General de Mineria” authorized the expansion of the Toquepala Concentrator to a 43,000 tons/day throughput. ANNUAL REPORT 2015GENERAL INFORMATION 70 | Based on Report N° 547-2002-EM/DGM/DPDM, dated November 6, 2002, the “Director General de Mineria” authorized the expansion of the Toquepala Concentrator to a capacity of 60,000 MT per day. 2. “Toquepala Leaching Plant (SX/EW)”. Directorial Resolution No. 166-96-EM/DGM dated May 7, 1996, approved the operation of the Toquepala SX/EW plant. The resolution granted 60 hectares of surface land and authorized a throughput of 11,850 tons/day. Based on Report No. 663-98-EM-DGM/DPDM dated November 10, 1998 the “Director General de Mineria” authorized construction and expansion of Toquepala SX/EW plant to 18,737 tons/day throughput. Directoral Resolution dated May 19, 2003, based on Report No. 291-2003-EM-DGM/DPDM, authorized operation of the SX/EW plant to a throughput of 18,737 tons/day. CUAJONE 1. “Botiflaca Concentrator” in Cuajone. Directorial Resolution No. 150-81-EM/DCM dated August 14, 1981 approved the operation of Botiflaca Concentrator. The resolution granted 56 hectares of surface land. SCC, mining that generates progress. Based on Report No. 266-99-EM/DGM/DPDM dated July 20, 1999 the “Director General de Mineria” authorized the expansion of Botiflaca Concentrator to 87,000 MT per day throughput. Resolution N° 379-2010-MEM-DGM/V dated October 7, 2010, based on Report N°312-2010-MEM-DGM-DTM/PB, authorized construction and expansion of Botiflaca Concentrator to 90,000 MT per day throughput. For operating reasons as part of the crusher process optimization, on november 18, 2011, we requested to the Peruvian authorities through 70 | 71 Left: Sulfuric acid plants. Right: Ilo smelter, Peru. Sulfuric acid is also used in leaching operations in Toquepala and Cuajone. resources N° 214491 to add three additional facilities authorized the of the, with a capacity of 3100 MT per (HPGR mill and others). With Directoral Resolution N° 153-2012-MEM-DGM-V day. ILO based on report 165-2012-MEM-DGM-DTM-PB. MEM 1. Ilo Smelter: Authorized (definitely) by Directorial approved and authorized the project to include three Resolution. No. 078-69-EM/DGM dated August 21, additional facilities aforementioned on the procedure of 1969 approved the operation of the Ilo Smelter. The the amendment and increase of the installed capacity resolution authorized a production of 400 Short tons/day from 87,000 to 90,000 MT per day. of blister copper. 2. “Cuajone Leaching Plant (LX/EW)”. Directorial Based on Report No.204-2000-EM-DGM-DPDM dated Resolution No.155-96-EM/DGM dated May 6, 1996 June 20, 2000 the “Director General de Mineria” approved the operation of the Cuajone Leaching plant. authorized the expansion of the Ilo Smelter to a 3,100 The resolution granted 400 hectares of surface land and MT per day throughput of copper concentrates. authorized a throughput of 2,100 MT per day. Based on Report No. 988-2009-MEM-DGM/V, dated December On February 4, 2010, the Company began the process 16, 2009, Cuajone SX plant operation was approved and to obtain authorization from the MINEM to operate a ANNUAL REPORT 2015GENERAL INFORMATION 72 | capacity of 3,770 MT per day, which is included as an Based on Report N° 080-2002-EM-DGM/DPDM, dated ancillary facility to Acid Plant No. 2, with a capacity of March 14, 2002, the “Director General de Mineria” 2,880 MT per day or 1,051,200 MT per year. authorized the expansion of the Ilo Copper Refinery to a capacity of 800 MT per day. 2. “Ilo Refinery”: 1. Authorized by Report No. 056- 94-EM/DGM/DRDM dated May 27, 1994 the “Director Resolution N°520-2010-MEM-DGM/V dated December General de Mineria” authorized the operation of the Ilo 30, 2010, based on Report N° N°414-2010-MEM- Copper Refinery at 533 MT per day throughput of blister DGM-DTM/PB, authorized changes in Ilo copper refinery copper. without expanded its capacity throughput. Based on Report No. 506-97-EM/DGM/DPDM dated 3. “Sulfuric Acid Plant”. Authorized by Directorial September 2, 1998 the “Director General de Mineria” Resolution No. 024-96-EM/DGM dated January 19, authorized the expansion of Ilo Copper Refinery to a 1996, approved the operation of the sulfuric acid plant, capacity of 658 MT per day throughput. installed at the smelter, at a production rate of 150,000 tons per year. Ilo copper refinery, Peru. The Ilo copper refinery has a capacity of 800 MT per day. 72 | 73 Based on Report No. 313-98-EM/DGM/DPDM dated May 21, 1998 the “Director General de Mineria”, authorized the expansion of the Ilo Sulfuric Acid Plant to a capacity of 300,000 tons per year production. 4. “Coquina Wash Plant and Sea shell Concentrates” authorized to operate by Directorial Resolution Nº 110-93-EM/DGM of August 3, 1993. The plant processes 95 TC/h of raw material (coquina) recovered from nearby mines. Seashell is produced separating sand and other materials from the coquina using sea water washing screens. Resolution N°038-2011-MEM-DGM-DTM/PB dated February 2, 2012, based on Report N°035-2011-MEM-DGM-DTM/PB, authorized modification in the concession of “Coquina Wash Plant and Sea shell Concentrates” to a classified dry sea shell plant without expanded its capacity throughput, which represents 2,068 tons/day. ANNUAL REPORT 201574 | Buenavista del Cobre. DIVISIÓN74 | 75 DESCRIPTION OF OPERATIONS AND DEVELOPMENT REGARDING THE ISSUING ENTITY PURPOSE THE PURPOSE The purpose of Southern Copper Corporation (SCC) is to engage in activities allowed by the laws of the State of Delaware. Its main activity is to extract, mill, concentrate, smelt, treat, prepare for market, manufacture, sell, exchange and, in general, to produce and negotiate for sales of copper, molybdenum, gold, silver, lead, zinc, iron and any other class of minerals and materials or other materials, effects and goods of any nature or description; as well as to explore, exploit, sample, examine, investigate, recognize, locate, appraise, buy, sell, exchange, etc., mining concessions and mining deposits. SCC belongs to the CIIU 1320 group. The term of duration of the Company is indefinite. BRIEF HISTORICAL REVIEW FROM THE CONSTITUTION OF THE COMPANY: The Company was organized on December 12, 1952, according to the Laws of the State of Delaware of the United States of America, under the original denomination of Southern Peru Copper Corporation (“SPCC”), which was renamed on October 11, 2005, to Southern Copper Corporation (SCC). In 1954, SCC established a Branch in Peru to carry out mining activities in this country. The Branch was established under public instrument certified by Public Notary from Lima, Dr. Ricardo Fernandini Arana, on November 6, 1954. The Branch is registered in the Electronic Record Nº 03025091 of the Juridical People of the Registry Office of Lima and Callao. ANNUAL REPORT 2015 76 | ACTIONS FOLLOWING COMPANY INCORPORATION: Part of the money contribution made by the Company in Capital increase: favor of its Branch and by the Labor Shares owners was applied as a capital premium to the Resident account as By Public Deed dated May 31, 1995, signed before Additional Capital. notary public of Lima, Dr. Carlos A. Sotomayor Bernos, the Branch capital increase was formalized. It was made EXCHANGE OF INVESTMENT SHARES (LABOR SHARES) through money contribution by the Company in favor of its FOR COMMON SHARES: Peru Branch and by the owners of labor shares, pursuant Dated September 7, 1995, “Southern Peru Copper to Legislative Decree No. 677. The capital contribution Holding Company” was also incorporated pursuant to made by the Company was aimed at increasing the the Laws of the State of Delaware, aiming at acting as capital allotted to the Branch by the headquarters and a holding company that owns all Southern Peru Copper registered in Peru. The capital contribution made by the Corporation shares, and at performing an exchange Labor Shares (today Investment Shares) owners was of the shares that were then called “Labor Shares” assigned to the Labor Shares account of the Branch for (today Investment Shares) issued by the branch in issuing new Labor Shares. Peru, delivering the owners of labor shares a certain DIVISIÓN76 | 77 number of common shares issued by SPCC in the United States. As a consequence of this share exchange, former owners of Labor Shares acquired 17.31% of SPCC’s Capital, and this company acquired ownership of 80.77% of Labor Shares (today Investment Shares). On December 31, 1995, Southern Peru Copper Corporation changed its corporate name to “Southern Peru Limited”, and “Southern Peru Copper Holding Company” changed its corporate name to Southern Peru Copper Corporation. As a consequence of this corporate name change, the mining activities of the Company in Peru started being performed under the name of Southern Peru Limited, Peru Branch (SPL). On December 31, 1998, the merger between Southern Peru Copper Corporation and Southern Peru Limited was agreed. The first company absorbed the second one and assumed all its assets and liabilities, including the Branch in Peru. This merger did not imply any change to the share percentage in the corporate capital or in the Net Worth Share Account (investment shares), which were kept the unchanged. As a consequence of the merger, the mining activities of the corporation in Peru were again carried out under the name of Southern Peru Copper Corporation, Peru Branch, or the abbreviated name of “Southern Peru” and/or the acronym SPCC. CHANGE OF ECONOMIC GROUP: In November 1999, Grupo Mexico S.A.B. de C. V., a firm incorporated pursuant to the Laws of the Republic of Mexico, acquired in the United States 100% of ASARCO Incorporated, the main shareholder of Southern Peru Copper Corporation at that time. In this way, SPCC ANNUAL REPORT 201578 | became a subsidiary of Grupo Mexico, who keeps its shareholding through Americas Mining Company (AMC). ACQUISITION OF MINERA MEXICO (“MM”), AND OTHER CORPORATE CHANGES: SCC shareholders, in a shareholder extraordinary meeting dated March 28, 2005, approved issuance of Common Shares and required actions related to the acquisition of MM, a firm incorporated pursuant to the Laws of the Republic of Mexico. This transaction was approved by more than 90% of the stocks and circulating capital of SCC. To acquire Minera Mexico, SCC issued 67,207,640 shares in exchange for MM shares. Once the shares related to the acquisition were issued, AMC increased its share in SCC from 54.2% to approximately 75.1%. AMC Increased its Participation in SCC In 2008 and 2009 Grupo Mexico, through its wholly owned subsidiary AMC, purchased 11.8 million and 4.9 million shares of the Company’s common Stock, respectively. DIVISIÓN78 | 79 SCC $500 Million Share Repurchase Program stock exchange or association in which Common Shares In 2008, the Company’s Board of Directors (“BOD”) are listed) and (ii) is appointed by the Special Appointment authorized a $500 million share repurchase program Committee of the Board. A special independent director that has since been increased by the BOD and is may only be removed from the Board upon a justified currently authorized to $3 billion. Pursuant to this cause. program, the Company purchased common stock from 2008 to December 31, 2015. The Company purchased The minimum number of special independent directors 116.6 million shares of its common stock for $2,846.6 in that Directory at any time shall equal (a) the total million. These shares are available for general corporate number of directors in the Board multiplied by (b) the purposes. The Company may purchase additional percentage of Common Shares all the shareholders (that shares of its common stock from time to time, based are not Grupo Mexico and its affiliates) have, rounding on market conditions and other factors. This repurchase up to the following integer number. Notwithstanding the program has no expiration date and may be modified or abovementioned, the total number of people appointed discontinued at any time. as special independent directors (not belonging to Grupo Mexico) cannot be less than two or more than six. At December 31, 2015, Grupo Mexico indirect ownership is 88.6%. Special Nominating Committee The Special Nominating Committee functions as a CHANGE IN THE CERTIFICATE OF INCORPORATION: special committee to nominate special independent On March 28, 2005, following Board of Directors directors to the Board. Pursuant to our Amended and recommendations, SCC shareholders approved in an Restated Certificate of Incorporation, as amended, a extraordinary meeting the amendments to the Articles special independent director is any director who (i) of Incorporation Deed, changing the composition and satisfies the independence requirements of the New obligations of some Board committees. York Stock Exchange or NYSE (or any other exchange or association on which the Common Stock is listed) and (ii) SPECIAL INDEPENDENT DIRECTOR: is nominated by the Special Nominating Committee. The The changes to the Articles of Incorporation Deed Special Nominating Committee has the right to nominate require the Board to include a certain number of special a number of special independent directors based on the independent directors. A special independent director percentage of our Common Stock owned by all holders is a person who (i) complies with the independence of our Common Stock, other than Grupo Mexico and its standards of the New York Stock Exchange (or any other affiliates. ANNUAL REPORT 2015GENERAL INFORMATION 80 | The Special Nominating Committee consists of two directors (2) of whom are Luis Miguel Palomino and Carlos Ruiz Sacristan (each an “Initial Member” and, together with their successors, “Special Designees”) and such other director, currently Xavier Garcia de Quevedo Topete, as may be appointed by the Board of Directors or the “Board Designee”. The Board Designee will be selected annually by the Board of Directors. The Special Designees will be selected annually by the members of the Board who are special independent directors or Initial Members. Only special independent directors can fill vacancies on the Special Nominating Committee. Any member of the Special Nominating Committee may be removed at any time by the Board of Directors for cause. The unanimous vote of all members of the nominating committee will be necessary for the adoption of any resolution or the taking of any action. Our Amended and Restated Certificate of Incorporation, as amended, provides that the minimum number of special independent directors on the Board of Directors at any given time shall be equal to (a) the total number of directors on the Board of Directors multiplied by (b) the percentage of Common Stock owned by all of the stockholders (other than Grupo Mexico and its affiliates), rounded up to the next whole number. Notwithstanding the foregoing, the total number of persons nominated as special independent directors cannot be less than two or greater than six. Notwithstanding the foregoing, the power of the Special Nominating Committee to nominate special independent directors is subject to the rights of the stockholders to make nominations in accordance with our by-laws. The provisions of the Amended and Restated Certificate of Incorporation, as amended, relating to special independent directors may only be amended by the affirmative vote of a majority of the holders of shares Grupo Mexico is indirectly owner of 88.6% of SCC shares. 80 | 81 In 2008 and 2009 Grupo Mexico, through its wholly owned subsidiary AMC, purchased 11.8 million and 4.9 million shares of the Company’s common Stock, respectively. ANNUAL REPORT 201582 | DIVISIÓN82 | 83 of Common Stock (calculated without giving effect to any acquisition of some mining exploration concessions, and super majority voting rights) other than Grupo Mexico its exploration activities in the Republics of Argentina and and its affiliates. Ecuador. TRANSACTIONS WITH AFFILIATES: Additionally, on the same date, the majority shareholder Amendments to the Deed also prohibit the Company approved an amendment of our Articles of Incorporation to commit in important transactions with the affiliates, Deed to remove others’ provisions in our Deed related except if the transaction has been revised by a committee with our Class A Common Shares that were formerly in of at least three Board members, each one of which will circulation, which were converted to Common Shares on comply with the New York Stock Exchange (or any other May 19, 2005, and to change the number of Corporate stock exchange or association in which Common Shares directors from fifteen to a number that will be regularly are listed) independence regulations. An important established following agreement of most of Board transaction of the affiliate is defined as an important members stipulating the number of directors will not be transaction, commercial negotiation or financial share less than six or more than fifteen. in any transaction, any series of transactions between Grupo Mexico or one of its affiliates (different from the The Deed amendment was submitted to the Secretary of Company or any of the subsidiaries), on the one hand, State of the State of Delaware, and came into effect on and to the Company or one of the subsidiaries, on the October 11, 2005. other hand, comprising a total consideration of more than $10.0 million. PERU BRANCH NAME: CHANGE OF CORPORATE NAME AND OTHER CORPORATE should comprise the corresponding name of the ancillary CHANGES: organizations linked to it, as is the case of the Peru On September 20, 2005, by written consent instead Branch through which the Corporation develops its Generally, the change of headquarters corporate name of an extraordinary shareholder meeting, the majority mining activities in Peru. shareholder approved the corporate name change of Southern Peru Copper Corporation to Southern Copper After consulting with Peruvian lawyers, the Board of Corporation or SCC. The change was adopted because Directors, taking into consideration the net worth and the new corporate name reflects more precisely the assets importance of the Branch, the need to continue Company’s operational reach outside the Republic acknowledging the position of the Peruvian Branch with of Peru after its acquisition of Minera Mexico and the its local and international copper clients, the need to latter’s presence in the Republic of Chile through the preserve its proceeds and its position in good name in ANNUAL REPORT 2015GENERAL INFORMATION 84 | Copper cathodes. SCC produces LME grade A copper cathodes. Our copper cathodes exceeds 99.99% of copper. 84 | 85 the copper market, and the need to prevent any possible client loss, as well as to guarantee the revenue flow from sales, its financial and economic revenues and its solvency, the Board of Directors agreed to maintain the original corporate name to the Peru Branch, that is, Southern Peru Copper Corporation, Peru Branch, or the abbreviated name “Southern Peru” and/or the acronym SPCC. Changes in the Certificate of Articles of Incorporation and Bylaws Dated January 26, 2006, the Board approved amendment to Southern Copper Corporation’s bylaws (i) aiming at removing the provisions related to Class A Common Shares among other changes.(ii) adding a new provision for advance notice to shareholders seeking to nominate directors or to propose other business at annual or special meetings of the Common Stockholders (as applicable) (iii) substitute Grupo Mexico for ASARCO Incorporated in the “Change in Control” definition in the Corporation’s by-laws (iv) and eliminate the 80% supermajority vote requirement for certain corporate actions. The modification of the Modified Certificate of Incorporation increased the capital stock from 167,207,640 shares to 320,000,000 shares. These modifications were submitted for approval of the shareholders at the shareholders annual meeting held on April 27, 2006 which was adjourned and reconvened for May 4, 2006, and later on adjourned and reconvened for May 11, 2006. At the annual meeting, on April 27, 2006, the proposal to amend the by-laws to eliminate certain extraneous provisions relating to the retired series of Class A Common Stock had an affirmative vote of 79.85% of the required votes. Because the required vote for the approval of this proposal was 80% and because there were still votes that needed to be tabulated, the annual meeting for this proposal was adjourned until May 4, 2006. On May 4, 2006, at the adjourned and reconvened ANNUAL REPORT 201586 | meeting the stockholders approved the proposal with an affirmative vote of 80.61% of the required votes. On April 27, 2006, stockholders approved (i) the amendment to the by-laws to introduce a new provision for advance notice to shareholders seeking to nominate directors or to propose other business at annual or special meetings of the Common Stockholders (as applicable); (ii) the amendment to the by-laws to substitute Grupo Mexico for ASARCO Incorporated in the “Change in Control” definition in the Corporation’s bylaws; (iii) the On April 27, 2006, the proposal to amend the by-laws to eliminate the 80% supermajority vote requirement for certain corporate actions had received preliminary votes, representing an affirmative vote of 78.35% of the required votes. Because the required vote for the approval of this proposal was 80% and because there were still votes that needed to be tabulated, the annual meeting for this proposal was adjourned first until May 4, 2006, and subsequently until May 11, 2006. On May 11, 2006, at the adjourned and reconvened meeting stockholders did not approve the proposal having received an affirmative amendments to the Amended and Restated Certificate vote of 79.61% of the required votes. of Incorporation to increase the number of shares of Common Stock, which the Corporation is authorized to issue from 167,207,640 shares to 320,000,000 shares; and (iv) the selection of the independent accountants. SCC is indirectly, part of Grupo Mexico S.A.B. de C.V. which owns 100% of Americas Mining Corporation (AMC) shareholding, owner of 88.6% of SCC shares. DIVISIÓN86 | 87 Southern Copper Corporation is one of the largest copper producers in the world and expects to duplicate its production with its expansion programs. INFORMATION ABOUT PLANS AND INVESTMENT POLICIES: See Capital Expenditures and Exploration on page 16. Special Mining tax In September 2011, the Peruvian government enacted Relationship between the Issuer and the Government a new tax for the mining industry. This tax is based on On November 20, 1996, SCC and the Peruvian operating income and its rate ranges from 2% to 8.4%. Government (Ministry of Energy and Mines) signed a It begins at 2% for the first 10% of operating income contract that remained effective until the year 2010 margin and for each additional 5% of operating income and guaranteed the tax stability and the availability of margin is increased by an additional rate of 0.4% until exchange to foreign currency of the Branch’s earnings 85% of operating income margin is reached. related to the operation of the SX/EW plant at Toquepala and the Solvent Extraction (SX) operation in Cuajone. Mining Royalty Also, on April 18th, 1995, SCC and the Peruvian In September 2011, the Peruvian Congress approved Government (CONITE) signed a contract that remained an amendment to the mining royalty charge. The new effective during ten years and guaranteed the availability mining royalty charge is based on operating income of foreign currencies, free remittance of dividends to the margins with graduated rates ranging from 1% to 12%, exterior, among other guarantees related to the acid with a minimum royalty charge assessed at 1% of net plant of the Ilo Smelter. sales. If the operating income margin is 10% or less, the royalty charge is 1% and for each 5% increment in SCC obtains refunds for tax credits in Peru for the general the operating income margin, the royalty charge rate sales tax (IGV) paid in connection with the acquisition increases by 0.75%, up to a maximum of 12%. 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. ANNUAL REPORT 2015GENERAL INFORMATION 88 | In 2015, we maintained 12 units in Mexico and Peru whose Occupational Safety and Health Management System have been certified according to OHSAS 18001: 2007. OPERATIONS IN MEXICO 2015 In Southern Copper Corporation, caring for the life, health and integrity of our employees and their families is the number one priority in all our operations. No task is more important. Accordingly, our main commitment is to create optimal and safe work environments for our employees, applying the highest safety and occupational health standards. Our goal: ZERO accidents. An Integrated Occupational Health and Safety Management System allows us to implement effective processes and provide our employees knowledge and skills necessary for the identification, control and mitigation of risks, prioritizing actions and the necessary care in preventing accidents. In 2015 we maintained 12 units in Mexico and Peru whose Occupational Safety and Health Management System, have been certified according to OHSAS 18001: 2007. Additionally, in Mexico we have 18 units certified with the Secretariat of Labour and Social Welfare in Self-Managed Occupational Health and Safety (PASST), endorsing our commitment to best practices in health and safety at work. The accomplishments achieved in 2015 on occupational health and safety include: • The Mining Chamber of Mexico (CAMIMEX) awarded the “Jorge Rangel Zamorano” Silver Helmet Trophy to the SX-EW plant of Mexicana de Cobre and SX-EW plant of Buenavista del Cobre, for achieving the lowest recorded accident rates in the industry, as for his efforts in the field of accident prevention. • The occupational accident rates at our mining operations in Mexico are 54% below de national average. 88 | 89 • In Peru, it was launched the process Safety Based on As a result of the work and commitment of our people to Behavior (SBC), which aims to reinforce safe behavior safety and health, at the end of 2015 the accident rate of individuals through observation and feedback (IR) decreased significantly from 1.01 in 2013 to 0.72 in during the performance of daily work, creating a 2015. In the past five years, SCC has reduced its rate positive environment that encourages participation of accidents by 41% and the severity of them by 70%, and pride in the efforts to create a safe working showing that our activities to identify and address risks environment. have significantly reduced the frequency and severity of accidents in our mining operations. • A total of 5 colonies, 6 workplaces and 4 schools were certified as Healthy Environments. The certification These results reflect the efforts in our culture of safety issued by the Ministry of Health recognizes the actions activities, the implementation of inspection plans and, of the Company to make joint efforts to improve the especially, the work and commitment of our employees. health of its people. ANNUAL REPORT 201590 | GENERAL INFORMATION OCCUPATIONAL HEALTH Healthy environments are part of the organizational culture and management system, as a responsibility of the Company that establishes a culture of involvement, participation and commitment to generate better health conditions that lead to improving the quality of life of our employees, their families and the communities in which we operate. During 2015, we reduced our rate of occupational diseases by 75% as a result of the various programs on education, prevention and control of risks, as well as on treatment of diseases. These programs are offered to our employees and, in some cases, to their families, contractors, suppliers, institutions and the general public. We maintain a focus on gender equality. We have highly competitive female staff. SCC values good performance of its personnel. 90 | 91 ACCIDENT RATE (IR), SCC, 2013 - 2015 2015 2014 2013 IR = 0.72 No. of disabling accidents No. of total - men hours worked SEVERITY RATE (GR), SCC, 2013 - 2015 0.89 1.01 x 200,000 2015 2014 2013 GR = 0.24 0.21 0.38 No.of days lost No. of total - men hours worked x 1,000 OCCUPATIONAL DISEASE RATE (ODR), SCC, 2013 - 2015 2015 2014 2013 0.14 0.57 0.78 ODR = No. of cases of occupational diseases No. of total - men hours worked x 200,000 ANNUAL REPORT 201592 | ACTIVIDADES DIRIGIDAS A: PERSONAL DE ENTORNO LABORAL FAMILIAS DE LOS TRABAJADORES Y COMUNIDAD 1 Foro de células de seguridad inerno 1 Visitas guiadas “Conoce mi empresa” 2 Expo seguridad 3 Feria de la salud 4 Carrera de la salud 2 Convivios familiares y desfiles 3 Feria de la salud 4 Carrera de la salud 5 Cursos y conferencias de seguridad 5 Cursos de combate vs incendios 6 Premiación a trabajadores o departamentos con CERO ACCIDENTES 6 Concursos familiares de promoción de valores DIVISIÓN92 | 93 INVESTMENT IN SAFETY AND HEALTH During 2015, we invested over $104.06 million in occupational safety and health, a 10% 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. INVESTMENT IN OCCUPATIONAL SAFETY (in Millions) Management costs Training Personal protection equipment Industrial hygiene studies Engineering works Total SCC 2.76 4.49 7.19 1.03 81.82 97.29 $ $ $ $ $ $ INVESTMENT IN OCCUPATIONAL HEALTH (in Millions) Development, Promotion and Protecition of Health Detection and prevention Treatment Rehabilitation Total SCC 0.49 0.45 5.81 0.03 6.77 $ $ $ $ $ ANNUAL REPORT 2015 GENERAL INFORMATION 94 | OPERATIONS IN PERU 2015 The safety and health results in 2015, for the open pit mining operations at the Toquepala and Cuajone mines, metallurgical operations at the Ilo Unit, which includes smelter and refinery plants, were as follows: Frequency Index 2.2, Severity Index 122.3 and Accidentability rate 0.3; these indicators are better, compared with 2014 rates, principally due to Severity Index (677) and Accidentability rate (1.5). In 2015, no fatal accident was registered. In order to improve Safety rates, Southern Peru hired Safety Quality Edge to implement “Based Safety Behavior” (SBC) in its operations units, this project is ongoing and is expected the continue reducing of these rates in the next years. Investment in occupational health. More than $6.52 millions. EMPLOYEES FOR THE YEAR ENDED DECEMBER 31TH 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 2015 2,219 6,097 8,316 2,388 2,214 4,602 14 38 52 10 16 26 12 14 26 2 8,316 4,602 52 26 26 2 2014 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 2013 2,141 6,041 8,182 2,272 2,158 4,430 - - 17 - - 16 - - 18 2 8,182 4,430 17 16 18 2 2012 1,979 5,996 7,475 2,101 2,465 4,566 - - 18 - - 14 - - 12 1 7,475 4,566 18 14 12 1 13,024 12,735 12,665 12,086 12,145 94 | 95 2011 1,979 5,996 7,975 2,031 2,128 4,159 - - - - - - - - 10 1 7,975 4,159 - - 10 1 ANNUAL REPORT 201596 | 96 | 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, 2015, no changes have been done. DIVISIÓN96 | 96 | 97 Electrowining plant. SCC recovered mineral low grade of copper from its SX/EW processes, which obtains copper cathodes of 99.999% of copper. INFORMATION RELATED TO THE STOCK ENTERED IN THE STOCK MARKET PUBLIC Common Stock On November 29, 1995 the Company offered to exchange the recently issued common shares for all and any labor shares of the 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 ANNUAL REPORT 201598 | At December 31, 2015, there were of record 775’942,270 shares of common stock of the Company. 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. On June 19, 2008 the Executive Committee of the Board of Directors declared a three-for-one split of the Company’s outstanding common stock. On July 10, 2008 common shareholders of record at the close of business on June 30, 2008, received two additional shares of common stock for every share owned. The split increased the number of shares outstanding to 883,410,150 from 294,470,050. All share and per share amounts were retroactively adjusted to reflect the stock splits. Since 2008 and 2015, the Company and AMC had bought shares periodically. At December 31, 2015, there were of record 775,942,270 shares of common stock of the Company, par value $0.01 per share, outstanding. CORPORATE BONDS Between July 2005 and November 2012 the Company issued senior unsecured notes six times totaling $4.2 billion as listed above. Interest on the notes is paid semi-annually in arrears. The notes rank pari passu DIVISIÓN98 | 99 with each other and rank pari passu in right of payment with all of the Company’s other existing and future unsecured and unsubordinated indebtedness. The indentures relating to the notes contain certain restrictive covenants, including limitations on liens, limitations on sale and leaseback transactions, rights of the holders of the notes upon the occurrence of a change of control triggering event, limitations on subsidiary indebtedness and limitations on consolidations, mergers, sales or conveyances. Certain of these covenants cease to be applicable before the notes mature if the Company obtains an investment grade rating. The Company obtained investment grade rating in 2005. In addition, the Company´s Mexican operations hold $51.1 million in bonds referred above as “Yankee bonds”, contain a covenant requiring Minera Mexico to maintain a ratio of EBITDA to interest expense of not less than 2.5 to 1.0 as such terms are defined in the debt instrument. At December 31, 2015, the Company was in compliance with this covenant. Please see Note 11 “Financing” for a discussion about the covenants requirements related to our long-term debt, on Form 10-K 2015. ANNUAL REPORT 2015100 | The new production of the Buenavista mine will be processed in the new copper- molybdenum concentrator. With an annual production capacity of 188,000 tons of copper and 2,600 tons of molybdenum. This project has a 99% progress with an investment of $1.16 billion out of the approved capital budget of $1.38 billion. DIVISIÓNANNUAL REPORT 2015 100 | 101 MEMBERS OF THE BOARD OF DIRECTORS AT DECEMBER 31, 2015 GERMAN LARREA MOTA-VELASCO Director. Mr. Larrea has been Chairman of the Board of Directors since December 1999, Chief Executive Officer from December 1999 to October 2004, and a member of our Board of Directors since November 1999. He has been Chairman of the board of directors, President and Chief Executive Officer of Grupo Mexico, S.A.B. de C.V. (“Grupo Mexico”) (holding) since 1994. Mr. Larrea has been Chairman of the board of directors and Chief Executive Officer of Grupo Ferroviario Mexicano, S.A. de C.V. (railroad company) since 1997. Mr. Larrea was previously Executive Vice Chairman of Grupo Mexico and has been member of the board of directors since 1981. He is also Chairman of the board of directors and Chief Executive Officer of Empresarios Industriales de Mexico, S.A. de C.V. (“EIM”) (holding) and Fondo Inmobiliario (real estate company), since 1992. He founded Grupo Impresa, a printing and publishing company in 1978, remaining as the Chairman and Chief Executive Officer until 1989 when the company was sold. He is a director of the Consejo Mexicano de Negocios since 1999, was a director of Banco Nacional de Mexico, S.A. (Citigroup) from 1992 to 2015 and was also a director of Grupo Televisa, S.A.B. from 1999 to 2014. OSCAR GONZALEZ ROCHA Director. Mr. Gonzalez Rocha has been our President since December 1999 and our President and Chief Executive Officer since October 21, 2004. He has been a director of the Company since November 1999. Mr. Gonzalez Rocha has been the President and Chief Executive Officer of Americas Mining Corporation (“AMC”) since November 1, 2014 and the Chief Executive Officer and a director of Asarco LLC (integrated US copper producer), an affiliate of the Company, MEMBERS OF THE BOARD 102 | 102 | since August 2010. Previously, he was the Company’s as Mexico’s Ambassador to Canada from July 1987 to President and General Director and Chief Operating February 1989. Mr. Carrillo Gamboa served from 2002 Officer from December 1999 to October 20, 2004. Mr. through March 2010 on the board and on the audit Gonzalez Rocha has been a director of Grupo Mexico committee of Empresas ICA, S.A.B. de C.V. (NYSE— since 2002. He was General Director of Mexicana ICA), an engineering, procurement and construction de Cobre, S.A. de C.V. from 1986 to 1999 and of company. He has been a member of the valuation, Buenavista del Cobre, S.A. de C.V. (formerly Mexicana contract review, nominating and corporate governance, de Cananea, S.A. de C.V.) from 1990 to 1999. He was and audit committees of The Mexico Fund, Inc. since an alternate director of Grupo Mexico from 1998 to 2002. Mr. Carrillo Gamboa has served on the board and April 2002. Mr. Gonzalez Rocha is a civil engineer with audit committee of Grupo Mexico since 2004 and on a degree from the Autonomous National University of the boards of Grupo Nacional Provincial S.A.B. (Mexican Mexico (“UNAM”) in Mexico City, Mexico. insurance company) since 2007, Grupo Posadas, S.A.B. EMILIO CARRILLO GAMBOA Director. de C.V. (Mexican hotel operation company) since 2006, Grupo Profuturo, S.A.B. de C.V. (Mexican insurance and pension holding company) since 2009, and Kimberly- Mr. Carrillo Gamboa has been a director of the Company Clark de Mexico, S.A.B. de C.V. (consumer products) since May 30, 2003 and is our fourth independent since 2002. Mr. Carrillo Gamboa has a law degree from director nominee. Mr. Carrillo Gamboa is a prominent the UNAM in Mexico City, Mexico. He also attended a lawyer in Mexico and has been the Senior Partner of continuous legal education program at Georgetown the Bufete Carrillo Gamboa, S.C., a law firm specializing University Law Center in Washington D.C., and practiced in corporate, financial, commercial, and public utility at the World Bank. issues, for the last five years. Mr. Carrillo Gamboa has extensive business experience and currently serves on ALFREDO CASAR PEREZ the boards of many prestigious international and Mexican Director. corporations, as well as charitable organizations. Since Mr. Casar Perez has been a director of the Company March 9, 2005, he has been Chairman of the board of since October 26, 2006. He has been a member of the The Mexico Fund, Inc. (NYSE—MXF), a nondiversified board of directors of Grupo Mexico since 1997. He is closed-end management investment company. Mr. also a member of the board of directors of Ferrocarril Carrillo Gamboa held various offices with Telefonos de Mexicano, S.A. de C.V., an affiliated company of Grupo Mexico, S.A. de C.V. (“TELMEX”) from 1960 to 1987, the Mexico, since 1998 and its Chief Executive Officer since most recent being that of President and Chief Executive 1999. From 1992 to 1999, Mr. Casar Perez served as Officer from June 1975 to June 1987. He later served General Director and member of the board of directors ANNUAL REPORT 2015 102 | 103 102 | of Compañia Perforadora Mexico, S.A. de C.V. and Mexico Compañia Constructora, S.A. de C.V., two affiliated companies of Grupo Mexico. Mr. Casar Perez served as Project Director of ISEFI, a subsidiary of Banco Internacional, in 1991 and Executive Vice President of Grupo Costamex in 1985. Mr. Casar Perez also worked for the Real Estate Firm, Agricultural Ministry, and the College of Mexico. Mr. Casar Perez holds a degree in Economics from the Autonomous Technological Institute of Mexico, ITAM, and one in Industrial Engineering from Anahuac University in Mexico City, Mexico. He also holds a Master’s degree in Economics from the University of Chicago in Chicago, Illinois. LUIS CASTELAZO MORALES Director. Mr. Castelazo Morales has been a director of the Company since September 20, 2010. Mr. Luis Castelazo Morales has been the General Director of EIM since 2008. Mr. Castelazo Morales was previously Chief Executive Officer of Desarrollo de Ingenieria, S.A. de C.V. (DISA), a Mexican construction company, for more than ten years. Mr. Castelazo Morales has also participated in different projects in Mexico through joint ventures with Raytheon Engineers and Constructors and also with the McCarthy Construction Group. Later he, along with two colleagues, founded AGBC S.C., a firm dedicated to financial consulting and advising for investments in the Mexican stock market, where he worked for more than 15 years. Mr. Castelazo Morales holds the recognition of the AMIB (Asociacion Mexicana de Intermediarios Bursatiles) as a certified “Advisor in Investment Strategies” for the Mexican stock market. Mr. Castelazo Morales holds a degree in Civil Engineering from the Universidad Iberoamericana in Mexico City, Mexico and a Master’s degree in Business Administration from the University of Texas at Austin in Austin,Texas. MEMBERS OF THE BOARD 104 | ENRIQUE CASTILLO SANCHEZ MEJORADA Director. Mr. Castillo Sanchez Mejorada has been a director of the Company since July 26, 2010 and is our fifth independent director nominee. From May 2013 to date, Mr. Castillo Sanchez Mejorada has been Senior Partner of Ventura Capital Privado, S.A. de C.V. (Mexican financial company) and since October 2013 to date, he has been Chairman of the board of directors of Maxcom Telecomunicaciones, S.A.B. de C.V. (Mexican Telecommunications Company). From April 2011 to May 2013, Mr. Castillo Sanchez Mejorada was a senior advisor at Grupo Financiero Banorte, S.A.B. de C.V. (“GFNorte”). From October 2000 to March 2011, Mr. Castillo Sanchez Mejorada was the Chairman of the board of directors and Chief Executive Officer of Ixe Grupo Financiero, S.A.B. de C.V., a Mexican financial holding company that merged into GFNorte as of April 2011. In addition, from March 2007 to March 2009, Mr. Castillo Sanchez Mejorada was the President of the Mexican Banking Association (Asociacion de Bancos de Mexico). Currently, Mr. Castillo Sanchez Mejorada serves as an independent director on the boards of directors of (i) Grupo Herdez, S.A.B. de C.V., a Mexican holding company for the manufacture, sale and distribution of food products; (ii) Alfa, S.A.B. de C.V., a Mexico-based holding company that, through its subsidiaries, is engaged in the petrochemical, food processing, automotive and telecommunication sectors; (iii) Organizacion Cultiba, S.A.B. de C.V. (formerly Grupo Embotelladoras Unidas, S.A.B. de C.V.), a Mexico-based holding company primarily engaged in the beverage industry; and (iv) Medica Sur, S.A.B. de C.V., a Mexico-based company engaged in the hospital business. From April 2012 until April 2014, Mr. Castillo Sanchez Mejorada served as an independent director on the board and as a member of the audit committee of Grupo Aeroportuario del Pacifico, S.A.B. de C.V., a Mexico-based and NYSE- listed company that operates, maintains and develops 12 airports in the Pacific and central regions of Mexico. Mr. Castillo Sanchez Mejorada was a member of the board of directors of Grupo Casa Saba, S.A.B. de 104 | 105 C.V., a Mexican wholesale distributor of pharmaceutical, since April 2002. He was also Vice President of Grupo health, beauty and other consumer products and operator Condumex, S.A. de C.V. (telecommunications, electronic of a retail pharmacy chain, from April 2010 until 2013. and automotive parts producer) for eight years. Mr. Garcia Mr. Castillo Sanchez Mejorada has been a member of de Quevedo was the Chairman of the Mining Chamber the audit committee of Alfa, S.A.B. de C.V. since 2010. of Mexico from November 2006 to August 2009. He Mr. Castillo Sanchez Mejorada holds a Bachelor’s degree is a chemical engineer with a degree from the UNAM in Business Administration from the Anahuac University, in Mexico City, Mexico. He also attended a continuous in Mexico City, Mexico. business administration and finance program at the Technical Institute of Monterrey in Monterrey, Mexico. XAVIER GARCIA DE QUEVEDO TOPETE Director. DANIEL MUÑIZ QUINTANILLA Mr. Garcia de Quevedo has been a director of the Director. Company since November 1999. He was our Chief Mr. Muñiz has been a director of the Company since May Operating Officer from April 12, 2005 until April 23, 28, 2008. Mr. Muñiz has been the Chief Financial Officer 2015. Since November 1, 2014 Mr. Garcia de Quevedo of Grupo Mexico since April 2007. Prior to joining Grupo Topete serves as the President of the infrastructure Mexico, Mr. Muñiz was a practicing corporate finance division of Grupo Mexico, composed of the energy, lawyer from 1996 to 2006. During this time he worked at gas, oil and construction subsidiaries of Grupo Mexico. Cortes, Muñiz y Nuñez Sarrapy; Mijares, Angoitia, Cortes He was the President and Chief Executive Officer of y Fuentes; and Baker & McKenzie (London and Mexico Southern Copper Minera Mexico from September 2001 City offices). He holds a Master’s degree in Financial Law until November 1, 2014. He was the President and from Georgetown University Law Center in Washington Chief Executive Officer of Americas Mining Corporation D.C., and a Master’s degree in Business Administration from September 7, 2007 to October 31, 2014. From from Instituto de Empresa in Madrid, Spain. December 2009 to June 2010, he was Chairman and Chief Executive Officer of Asarco LLC, previously he LUIS MIGUEL PALOMINO BONILLA was President of Asarco LLC from November 1999 to Director. September 2001. Mr. Garcia de Quevedo began his Dr. Palomino has been a director of the Company since professional career in 1969 with Grupo Mexico. He was March 19, 2004 and is a special independent director President of Grupo Ferroviario Mexicano, S.A. de C.V. nominee. Dr. Palomino has been Chairman of the board and of Ferrocarril Mexicano, S.A. de C.V. from December of directors of Aventura Plaza, S.A. (commercial real 1997 to December 1999, and Executive Vice-President estate developer and operator) since January 2008, of Exploration and Development of Grupo Mexico from Manager of the Peruvian Economic Institute (economic 1994 to 1997. He has been a director of Grupo Mexico think tank) since April 2009, Partner of Profit Consultoria ANNUAL REPORT 2015MEMBERS OF THE BOARD 106 | e Inversiones (a financial consulting firm) since July February 2007. Mr. Perezalonso was the Chief Executive 2007, director of the Master in Finance Program at the Officer of Aeromexico (Aerovias de Mexico, S.A. de C.V.) University of the Pacific in Lima, Peru since July 2009, (airline company) from 2004 until December 2005. From and a director and chairman of the audit committee of 1998 until April 2001, he was Executive Vice President the Bolsa de Valores de Lima (Lima Stock Exchange) of Administration and Finance of Grupo Televisa, S.A.B. since March 2013. He was a member of the board of (media company). From 1980 until February 1998, Mr. directors of Access SEAF SAFI from December 2007 Perezalonso held various positions with Grupo Cifra, S.A. to April 2010. Dr. Palomino was previously Principal de C.V. (department stores), the most recent position and Senior Consultant of Proconsulta International being that of General Director of Administration and (financial consulting) from September 2003 to June Finance. Now he is a member of the advisory council 2007. Previously he was First Vice President and Chief of Banco Nacional de Mexico, S.A. de C.V. (banking), Economist, Latin America, for Merrill Lynch, Pierce, Fenner the board of directors and the investment committee of & Smith, New York (investment banking) from 2000 to Afore Banamex (banking), the board and the investment 2002. He was Chief Executive Officer, Senior Country committee of Siefore Banamex No. 1 (banking), and is a and Equity Analyst of Merrill Lynch, Peru (investment member of the boards of directors of Gigante, S.A. de C.V. banking) from 1995 to 2000. Dr. Palomino has held (retail), Masnegocio Co. S. de R.L. de C.V. (information various positions with banks and financial institutions as technology), Intellego (technology), Telefonica Moviles an economist, financial advisor and analyst. He has a Mexico, S.A. de C.V. (wireless communication), Cruz PhD in finance from the Wharton School of the University Roja Mexicana (emergency and medical services), of Pennsylvania in Philadelphia, Pennsylvania and Construction Company Marhnos (housing construction), graduated from the Economics Program of the University and Fomento de Investigacion y Cultura Superior, A.C. of the Pacific in Lima, Peru. (Foundation of the Iberoamerican University) . Mr. Perezalonso was a director of Cablevision, S.A. de GILBERTO PEREZALONSO CIFUENTES C.V., Grupo Televisa, S.A.B. and a member of the audit Director. committee of Grupo Televisa, S.A.B. from March 1998 Mr. Perezalonso has been a director of the Company to September 2009. Mr. Perezalonso has a law degree since June 2002 and is a special independent director from the Iberoamerican University in Mexico City, Mexico nominee. Mr. Perezalonso was Chairman of the board and a Master’s degree in Business Administration from of directors of Volaris Compañia de Aviacion, S.A.P.I. de the Business Administration Graduate School for Central C.V. (airline) from March 2, 2011 to November 2014. America (INCAE) in Nicaragua. Mr. Perezalonso has He was Chief Executive Officer of Corporacion Geo, S.A. also attended a Corporate Finance program at Harvard de C.V. (housing construction) from February 2006 to University in Cambridge, Massachusetts. ANNUAL REPORT 2015 106 | 107 MEMBERS OF THE BOARD OF DIRECTORS AT DECEMBER 31, 2015 German Larrea Mota-Velasco Oscar Gonzalez Rocha Emilio Carrillo Gamboa Alfredo Casar Perez Luis Castelazo Morales Enrique Castillo Sanchez Mejorada Xavier Garcia de Quevedo Topete Daniel Muñiz Quintanilla Luis Miguel Palomino Bonilla Gilberto Perezalonso Cifuentes Carlos Ruiz Sacristan CARLOS RUIZ SACRISTAN Director. Mr. Ruiz Sacristan has been a director of the Company since February 12, 2004 and is a special independent director nominee. Since November 2001, he has been the owner and Managing Partner of Proyectos Estrategicos Integrales, a Mexican investment banking firm specialized in agricultural, transport, tourism, and housing projects. Mr. Ruiz Sacristan has held various distinguished positions in the Mexican government, the most recent being that of Secretary of Communications and Transportation of Mexico from 1995 to 2000. While holding that position, he was also Chairman of the board of directors of the Mexican-owned companies in the sector, and member of the board of directors of development banks. He was also the Chairman of the board of directors of Asarco LLC. Mr. Ruiz Sacristan was a member of the board of directors from 2007 to 2012 and of the audit, and environmental and technology committees of Sempra Energy (energy services). In 2012, Mr. Ruiz Sacristan was appointed Chairman and Chief Executive Officer of IEnova, the Mexican operating subsidiary of Sempra Energy. He is a member of the boards of directors of Constructora y Perforadora Latina, S.A. de C.V. (Mexican geothermal exploration and drilling company), of Banco Ve Por Mas, S.A. (Mexican bank), of OHL Concesiones Mexico (a construction and civil engineering company), and of AMAIT (an international airport in Mexico). Mr. Ruiz Sacristan holds a Bachelor’s degree in Business Administration from the Anahuac University in Mexico City, Mexico, and a Master’s degree in Business Administration from Northwestern University in Chicago, Illinois. 108 | 108 | EXECUTIVE OFFICERS EXECUTIVE OFFICERS GERMAN LARREA MOTA-VELASCO Chairman of the Board of Directors OSCAR GONZALEZ ROCHA President and Chief Executive Officer RAUL JACOB RUISANCHEZ Vice-President, Finance and Chief Financial Officer JUAN MANUEL RODRIGUEZ ARRIAGA Vice-President Commercial JAVIER GOMEZ AGUILAR Vice-President, Legal and legal Manager HANS A. FLURY Secretary and Legal Advisor AGUSTIN AVILA MARTINEZ Comptroller VIDAL MUHECH DIP Vice-President, Projects EDGARD CORRALES AGUILAR Vice-President, Explorations 108 | 108 | 109 109 ANNUAL REPORT 2015 NEXT OF KIN A company of which more than 50% of the voting power is held by a single entity, a “controlled company”, need not comply with the requirements of the New York Stock Exchange (“NYSE”) corporate governance rules requiring a majority of independent directors and independent compensation and nomination/corporate governance committees. SCC is a controlled company as defined by the rules of the NYSE. Grupo Mexico owns indirectly 88.6 % of the stock of the Company, as of December 31, 2015. The Company has taken advantage of the exceptions to comply with the corporate governance rules of the NYSE. The Board of Directors of the Company determined that Messrs. Luis Miguel Palomino Bonilla, Gilberto Perezalonso Cifuentes, and Carlos Ruiz Sacristan, the three members of the Company’s Audit Committee, are independent of management and financially literate in accordance with the requirements of the NYSE and the Securities and Exchange Commission (“SEC”), as such requirements are interpreted by the Company’s Board of Directors in its business judgment. Additionally, Messrs. Emilio Carrillo Gamboa and Enrique Castillo Sanchez Mejorada are our fourth and fifth independent directors. At its meeting on January 28, 2016, the Board of Directors determined that Messrs. Luis Miguel Palomino Bonilla, Gilberto Perezalonso Cifuentes, Carlos Ruiz Sacristan, Emilio Carrillo Gamboa, and Enrique Castillo Sanchez Mejorada are independent of management in accordance with the requirements of the NYSE as such requirements are interpreted by our Board of Directors in its business judgment. To the best of the Company’s knowledge, no relationship of affinity and/ or consanguinity exists among the members of the Board, and between them and the Executive Officers of Southern Copper Corporation. ANNUAL REPORT 2015SPECIAL COMMITTEES 110 | SPECIAL COMMITTEES OF THE BOARD 5. Corporate Governance Committee. It is comprised of four Board members and has as its primary SCC’s Board of Directors has organized the following functions to consider and make recommendations to Special Committees: the Board concerning the appropriate function and needs of the Board, to develop and recommend to the 1. Executive Committee. It is comprised of five members Board corporate governance principles, to oversee who substitute for the Board when sessions or evaluation of the Board and management, and to decisions are required concerning urgent matters, oversee and review compliance with the disclosure or matters for which the Board would have expressly and reporting standards of the Company that require delegated its mandate. full, fair, accurate, timely, and understandable disclosure of material information regarding the 2. Audit Committee. It is comprised of three independent Company in reports and documents that it files with Board members who are knowledgeable in accounting the SEC, the NYSE and equivalent authorities in the and financial matters. Its main purpose is to: (a) assist countries in which the Company operates, as well the Board in monitoring (i) the quality and integrity of the as in other public communications that it regularly Company’s financial statements; (ii) the qualifications makes. and independence of the independent auditors; (iii) the performance of the internal audit function and 6. Administrative Committee. It is designated by of the independent auditors; and (iv) the Company’s the Named Fiduciary appointed by the Board for compliance with legal and regulatory requirements; the benefit plans as required by the Employee and (b) prepare the report required by SEC rules. Retirement Income Security Act – ERISA of the United States. ERISA is the law that covers 3. Compensation Committee. It is comprised of four Board employee retirement and other benefit plans. Mr. members and its principal objective is to evaluate and Daniel Muñiz Quintanilla is the Board-appointed establish the remunerations of principal officers and Named Fiduciary for the Company’s benefits plans key employees of the Company and its subsidiaries. subject to US regulations, including ERISA. This Officer appoints an Administrative Committee, 4. Special Nominating Committee. It is comprised of two which is comprised of three management members independents Board members and one nominated by and its purpose is to administer and manage said the Board and it has the exclusive authority to propose plans and to oversee the performance of the trust and evaluate individuals who are proposed as special agents and other fiduciaries charged with investing independents directors. the plans’ funds. 110 | 111 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 28, 2016 at 9:00 A.M., Mexico City time. CORPORATE OFFICES: UNITED STATES 1440 E. Missouri Avenue, Suite 160, Phoenix, AZ 85014 U.S.A. Phone: +(602) 264-1375 MEXICO Edificio Parque Reforma, Campos Eliseos No. 400 Col. Lomas de Chapultepec Mexico D.F. Phone: +(52-55) 1103-5000 PERU Av. Caminos del Inca No. 171 Chacarilla del Estanque Santiago de Surco Lima 33, Peru ANNUAL REPORT 2015 CORPORATE INFORMATION 112 | Web Page: www.southerncoppercorp.com Email address: southerncopper@southernperu.com.pe FORM 10-K1 Attached Form 10-K contains Management’s Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Combined Financial Statements and the accompanying notes are an integral part of these Annual Report. 1 Form 10-K Phone. +(511) 512-0440, extension 3442 for Spanish TRANSFER AGENT, REGISTRAR AND STOCKHOLDER SERVICES Computershare 480 Washington Boulevard Jersey City, NJ 07310-1900 Phone: +1(866)230-0172 DIVIDEND REINVESTMENT PROGRAM SCC stockholders can have their dividends automatically reinvested in SCC common shares. SCC pays all administrative and brokerage fees. This plan is administered by The Bank of New York Mellon Corporation. For more information, contact The Bank of New York Mellon Corporation at phone +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. 112 | 113 OTHERS The Branch in Peru has issued, in accordance with Peruvian law, ‘investment shares’ (formerly named labor shares) that are quoted in the Lima Stock Exchange under the symbol SPCCPI1 and SPCCPI2. Transfer Agent, registrar and stockholders services are provided by Banco de Credito of Peru at Avenue Centenario 156, La Molina, Lima 12, Peru. Phone +(511) 313-2478, Fax +(511) 313-2556 OTHER CORPORATE INFORMATION For other information on the corporation or to obtain additional copies of the annual report, Form 10-K 2015 contact to Investor Relations Department at our corporate offices: ANNUAL REPORT 2015 MEMBERS OF THE BOARD OF DIRECTORS MEMBERS OF THE BOARD OF DIRECTORS 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 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 SOUTHERN COPPER CORPORATION CORPORATE OFFICES ESTADOS UNIDOS 1440 East Missouri Avenue, Suite 160 Phoenix, Az. 85014, USA Phone: (602)264-1375. MEXICO Campos Eliseos No. 400, 11 floor, Col. Lomas de Chapultepec Mexico D.F. Phone +(52-55) 1103-5000. PERU Avenue Caminos del Inca 171 (B-2), Chacarilla del Estanque, Santiago de Surco – Lima 33 - Peru. Phone. +(511) 512-0440, Ext. 3442. Symbol: SCCO E-mail southerncopper@southernperu.com.pe www.southerncoppercorp.com 

Continue reading text version or see original annual report in PDF format above