Southern Copper Annual Report 2017

Plain-text annual report

A N N U A L R E P O R T 7 1 0 2 T R O P E R L A U N N A STATEMENT OF RESPONSIBILITY “To the best of our knowledge this document contains truthful and sufﬁcient information regarding the development of the business of Southern Copper Corporation (“SCC”) during 2017. SCC takes responsibility for its contents according to applicable requirements.” ANDRES FERRERO G. Assistant Secretary RAUL JACOB RUISANCHEZ Vice-President Finance and 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. X E D N I 02 LETTER TO SHAREHOLDERS 06 PRODUCTION STATISTICS 09 COPPER RESERVES 13 SELECTED AND FINANCIAL DATA 15 CAPITAL INVESTMENT PROGRAM AND EXPLORATION (EXPANSION & MODERNIZATION) 23 DEVELOPMENT - COMMUNITY OUTREACH 37 RESULTS OF OPERATIONS for the years ended December 31, 2017, 2016 and 2015 43 COMMITMENT - ENVIRONMENTAL AFFAIRS 57 GENERAL INFORMATION DESCRIPTION OF OPERATIONS AND DEVELOPMENT REGARDING THE ISSUING ENTITY 91 MEMBERS OF THE BOARD OF DIRECTORS LETTER TO SHAREHOLDERS During 2017, Southern Copper Corporation continued seeing the beneﬁt of its expansion and cost reduction programs which, despite the 18% increase in diesel prices during 2017, yielded a cash cost reduction from $0.95 to $0.92 per pound, the lowest in the industry. SCC also continued with its capital program with investments in excess of $1.0 billion. SCC believes that with these actions is in a great position to take advantage of the favorable price environment. In 2018, SCC will complete the Peruvian Toquepala expansion project adding 100,000 tons to our annual copper production, allowing us to reach one million tons of annual copper production capacity with an even lower cash cost per pound of copper. We believe, Southern Copper is uniquely positioned to continue delivering enhanced performance, sustainable growth and superior value. Our best-in-class low cost operations, coupled with a large, high-quality reserve base in only investment grade jurisdictions, continues to offer highly attractive growth opportunities. In addition, our robust capital structure provides the ﬁnancial and strategic ﬂexibility required for its execution. In 2018, we plan to invest $1,748.2 million in capital projects. In Mexico, the project is located within Buenavista facility and contemplates the development of a new concentrator to produce approximately 80,000 tons of zinc and 20,000 tons of additional copper per year that will allow us to double our current zinc production capacity. Pilares—Sonora: This project will be developed as an open-pit mine operation with a capacity of 35,000 tons of copper in concentrates per year. The ore will be transported by truck from the pit to the primary crushers of the La Caridad copper concentrator. In 2017, we started our new strategic plan to grow copper production capacity to exceed the 1 million ton milestone by mid- 2018, with the operation of the Toquepala expansion project, and by 2023 we expect to reach 1.5 million copper tons. We are convinced that we can do it. Landscape of Buenavista del Cobre mine, Sonora, Mexico. Our copper reserves exceed 70 million tons of copper content, giving us a 63-year mine life expectancy at the current production rate. We believe that SCC is the best company in its class in generating cash ﬂow. In Peru, we currently have a portfolio of projects with a total capital budget of $2,900 million, out of which $1,620 million have already been invested. This $1,255.0 million project includes a new state-of-the-art concentrator that will increase Toquepala’s annual copper production by 100,000 tons to reach 245,000 tons in 2019, a 69% production increase. The project consisted of replacing rail haulage at the Cuajone mine by an in-pit primary crusher with a 7 km overland conveyor belt Ore loading, Toquepala mine, Tacna, Peru. system to move ore to the concentrator. Operating savings are estimated at $23 million annually. As of December 31, 2017 the project is already completed and in operation. Total investment was $226 million as budgeted. We believe that Southern Copper has solid foundations that guarantee its business success, as well as a proper return that allows us to ﬁnance - simultaneously - both the development of productive projects and important social programs that we execute in each of the countries where we are present, beneﬁting neighboring towns to our operational areas. On behalf of Southern Copper Corporation’s Board, we express our thanks to all our personnel for their effort, hard work and dedication, to our clients for their continued trust and loyalty, and to you, our shareholders, for your permanent support. . GERMAN LARREA MOTA VELASCO OSCAR GONZALEZ ROCHA CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER 5 7 1 0 2 T R O P E R L A U N N A PRODUCTION STATISTICS Southern Copper Corporation and Subsidiaries Five-year Production Statistics C O P P E R P R O D U C T I O N M I N E S ( T O N S ) Mined Material Copper in concentrates Copper SX/EW Total Copper Molybdenum in concentrates Zinc in concentrates Silver in concentrates (thousand) (thousand ounces) S M E LT E R/ R E F I N E R I E S P R O D U C T I O N 2017 2016 2015 2014 2 01 3 743,163 711,720 165,259 876,979 21,328 68,665 15,926 742,935 715,360 184,595 899,955 21,736 73,984 16,172 764,532 569,072 173,921 742,993 23,347 61,905 13,288 758,965 532,291 144,308 676,599 23,120 66,614 12,992 641,456 498,361 118,658 617,019 19,897 99,372 13,513 Copper Zinc Silver 617,853 591,339 104,402 106,093 (thousand ounces) 13,688 15,196 597,945 100,576 13,638 561,939 545,082 92,133 13,348 97,692 15,572 T O Q U E PA L A Mined Material Copper in concentrates Molybdenum in concentrates C U A J O N E Mined Material Copper in concentrates Molybdenum in concentrates (thousand) (thousand) S M E LT E R/ R E F I N E R I E S I N P E R U SX/EW Smelt concentrates Blister produced Anode produced Cathode produced M E X I C A N A D E C O B R E - C A R I D A D 203,778 122,949 4,184 209,064 116,525 6,324 193,013 119,427 7,924 211,202 169,808 114,828 110,691 6,100 4,662 149,265 158,105 3,746 175,009 171,448 3,926 191,651 178,187 4,444 182,812 173,277 178,337 168,582 4,001 3,133 25,093 24,880 24,167 25,675 28,400 1,153,486 1,070,588 1,143,682 1,022,536 1,072,826 1,793 345,847 291,373 929 322,567 270,183 2,800 338,893 280,587 - 1,670 303,939 322,637 257,926 271,035 Mined Material (thousand) 98,534 98,435 94,283 91,454 88,595 6 Copper in concentrates Molybdenum in concentrates 106,271 104,949 103,861 101,062 96,863 9,934 9,911 10,040 10,800 11,742 B U E N A V I S TA Mined material Copper in concentrates S M E LT E R/ R E F I N E R I E S I N M E X I C O SX/EW Smelt concentrates Anode produced Cathode produced Rod produced 2017 2016 2015 2014 20 13 (thousand) 288,716 135,690 257,395 140,661 282,954 142,025 271,026 206,710 132,853 115,813 140,166 159,715 997,657 1,004,829 270,213 228,062 133,100 267,843 224,158 144,516 149,754 933,403 256,252 213,360 138,180 118,633 90,258 926,427 722,597 258,000 220,775 204,302 188,005 129,078 126,800 U N D E R G R O U N D M I N E S Contents in concentrates (tons) Zinc Lead Copper in concentrates Silver Gold 68,665 20,246 5,486 4,760 5,428 73,984 24,385 6,428 5,622 6,420 61,905 20,693 5,593 4,995 4,697 66,614 22,286 5,211 4,945 4,857 99,372 23,918 6,412 6,170 5,493 (thousand ounces) (thousand ounces) 7 7 1 0 2 T R O P E R L A U N N A COPPER RESERVES i , c m o n o c e s a l l e w s a , y g r u l l a t e m d n a , l a t n e m n o r i v n e , l a g e l , g n i t e k r a m r e h t o d n a l i a c o s , l a t n e m n r e v o g . s n o i t a r e d i s n o c y r a s s e c e n i g n n m i , e c r u o s e r e h t f o s t n e m s s e s s a e d u c n l i s e t a m i t s e s e v r e s e r e r o e h T COPPER RESERVES We believe we hold the world’s largest copper reserve position. At December 31, 2017, our copper ore reserves, calculated at a copper price of $2.90 per pound, totaled 70.6 million tons of contained copper (In 2017, the average LME and COMEX per pound copper prices were $2.80), our internal ore reserve estimation value is as follows. 2017 EBITDA was $3,292.4 million, 48.8% more than 2016 and reached a range of 49.5% C O P P E R C O N TA I N E D I N O R E R E S E R V E S Mexican open-pit Peruvian operations IMMSA Development projects Total T H O U S A N D T O N S 31,286 24,421 233 14,685 70,625 For further information about our ore reserves please refer to "Ore Reserves" at page 56 of our 10-K 2017 Form. 10 Tailings treatment plant, Toquepala, Tacna, Peru. Next page Confinement of waste, San Luis Potosi, Mexico. 12 S OU THERN COPPER CORPORATION AN D SUBSI D IARI ES Five-Year Selected Financial and Statistical Data For the years ended December 31 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS, EMPLOYEE DATA AND STOCK AND FINANCIAL RATIOS) C O N S O L I D AT E D S TAT E M E N T O F E A R N I N G S 2017 2016 2015 2014 20 13 Net sales Operating costs and expenses Operating income Net income attributable to Non-controlling interest $ 6,654.5 $ 5,379.8 $ 5,045.9 $ 5,787.7 $ 5,952.9 $ 4,035.6 2,618.9 3,815.6 1,564.2 3,631.5 3,555.0 1,414.4 2,232.7 3,420.8 2,532.1 3.9 2.3 4.7 4.9 5.7 N E T E A R N I N G S AT T R I B U TA B L E T O S C C $ 728.5 $ 776.5 $ 736.4 $ 1,333.0 $1,618.5 Per share amount Earnings basic and diluted Dividends paid C O N S O L I D AT E D B A L A N C E S H E E T $ 0.94 $ 1.00 $ 0.93 $ 1.61 $ 1.92 $ 0.59 $ 0.18 $ 0.34 $ 0.46 $ 0.68 Cash and cash equivalents $ 1,004.8 $ 546.0 $ 274.5 $ 364.0 $ 1,672.7 Total assets Total debt Total equity $ 13,780.1 13,234.3 12,593.2 11,393.9 10,970.0 5,957.1 5,954.2 5,951.5 4,180.9 4,178.9 $ 6,149.4 $ 5,870.9 $ 5,299.2 $ 5,836.6 $ 5,561.8 C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S Cash provided by operating activities 1,976.6 $ 923.1 $ 879.8 $ 1,355.9 $ 1,859.1 Dividends paid Capital investments 456.1 139.3 271.2 381.0 573.8 1,023.5 1,118.5 1,149.6 1,529.8 1,703.3 Depreciation, amortization and depletion 671.1 $ 647.1 $ 510.7 $ 445.0 $ 396.0 C A P I TA L S T O C K Common shares outstanding – basic and diluted 773,028 773.0 775.9 812.6 835.3 NYSE price – high NYSE price – low Book value per share P/E ratio F I N A N C I A L R AT I O S $ 47.63 $ 34.98 $ 33.14 $ 33.54 $ 41.96 $ 32.38 $ 22.29 $ 24.40 $ 26.08 $ 24.78 7.90 50.35 7.54 31.82 6.78 28.19 7.14 17.52 6.62 14.95 Current assets to current liabilities Net debt as % of Net capitalization (1) Employees (at year end) 2.71 44.4% 13,135 2.57 47.7% 13,414 2.70 48.9% 13,024 2.07 37.3% 12,735 4.36 29.2% 12,665 (1) Represents net debt divided by net debt plus equity. Net debt is deﬁned as total debt minus cash, cash equivalents and short-term investments balance. 13 7 1 0 2 T R O P E R L A U N N A CAPITAL INVESTMENT PROGRAM AND EXPLORATION (EXPANSION & MODERNIZATION) m a r g o r p t n e m t s e v n i l a t i p a c a d e v o r p p a s r o t c e r i D f o d r a o B e h t , 8 1 0 2 r o F . n o i l l i m 2 . 8 4 7 , 1 $ f o 16 CAPITAL EXPENDITURES AND EXPLORATION (EXPA NS ION & MODERNIZA TION) We made capital investments were $1,023.5 million for 2017, $1,118.5 million in 2016 and $1,250.0 million in 2015 (including the El Pilar acquisition). Capital investments in 2017 were 8.5% lower than in 2016, and represented 140% of net income. Our growth program to develop the full production potential of our Company is underway. In addition, the Buenavista expansion program was completed on time and under budget. For 2018, the Board of Directors approved a capital investment program of $1,748.2 million. We are currently developing a new organic growth plan to increase our copper volume production to 1.5 million tons by 2025 with the development of new projects. In addition to our ongoing capital maintenance and replacement spending, our principal capital programs include the following: PROJECTS IN MEXICO Buenavista Zinc, Sonora. This project is located within the Buenavista facility and contemplates the development of a new concentrator to produce approximately 80,000 tons of zinc and 20,000 tons of additional copper per year that will allow us to double our current zinc production capacity. We have concluded the basic engineering and we are working on the purchasing process for the main project components. We estimate an investment of $413 million for this project and expect to initiate operations in 2020. This $1.2 billion project includes a new state-of- the-art concentrator which will increase Toquepala’s annual copper production by 100,000 tons, a 69% production increase. Construction of new tailing thickeners, Toquepala, Tacna, Peru. Previous page Pilares, Sonora. This project, located six kilometers from La Caridad, will be developed as an open-pit mine operation. The ore will be transported by truck from the pit to the primary crushers of the La Caridad copper concentrator, signiﬁcantly improving the over-all mineral ore grade 17 7 1 0 2 T R O P E R L A U N N A (from 0.34% at La Caridad to 0.78% expected from Pilares). Currently, we continue with the mine plan preparation, including the ﬁnal outline design for the road through which the ore will be transported to the La Caridad mill. An investment of $159 million is estimated to produce 35,000 tons of copper in concentrates per year. We expect this project to start operations in 2019. PROJECTS IN PERU We currently have a portfolio of projects in Peru, with a total capital budget of $2,900 million, out of which $1,620 million have already been invested. 18 Toquepala Expansion Project, Tacna. This $1.2 billion project includes a new state-of-the-art concentrator which will increase Toquepala’s annual copper production by 100,000 tons to reach 245,000 tons in 2019, a 69% production increase. Through December 31, 2017, Advances in Toquepala Expansion Project, Tacna, Peru. 7 1 0 2 N I N O I L L I IN VE STED I N MILLION 5 . 3 2 0 , M 1 $ we have invested $892.9 million in this expansion. The project has reached 87% progress and is expected to initiate production in June 2018. The project to improve the crushing process at Toquepala with the installation of a High Pressure Grinding Roll (HPGR) system, has as its main objective, to ensure that our existing concentrator will operate at its maximum annual production capacity of 117,000 tons of copper while reducing operating costs through ore crushing efﬁ ciencies, even with an increase of the ore material hardness index. The budget for this project is $50 million and as of December 31, 2017, we have invested $38.9 million in this project. We expect that it will be completed by the ﬁ rst quarter of 2018. Cuajone Projects – Moquegua: The Mineral Crushing and Hauling Project consisted of replacing rail haulage at the Cuajone mine by an in-pit primary crusher with a 7 km overland conveyor belt system to move ore to the concentrator. Operating savings are estimated at $23 million annually. As of December 31, 2017, the project is already completed and in operation. Total investment was $226 million, as budgeted. The Cuajone tailing thickeners project at the concentrator will replace two of the three existing thickeners with a new hi-rate thickener. The purpose is to streamline the concentrator ﬂ otation process and improve water recovery efﬁ ciency, increasing the tailings solids content from 54% 19 7 1 0 2 T R O P E R L A U N N A to 61%, thereby reducing fresh water consumption and replacing it with recovered water. Equipment assembly is completed and we are in the commissioning process. As of December 31, 2017, we have invested $27.6 million in this project out of the approved capital budget of $30 million. We expect the project to be completed by the end of the ﬁrst quarter of 2018. Tailings disposal at Quebrada Honda – Moquegua: 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 ﬁnished the second stage with the installation of a new cyclone battery station that allows us to place more slurry at the dams. We are in a bidding process for a new stage which will improve the operational processes. The project has a total budgeted cost of $116.0 million. We have invested $85.7 million through December 31, 2017 and expect the project to be completed by the fourth quarter of 2018. 20 Personnel in Buenavista del Cobre in Cananea, Sonora, Mexico. Next page 21 7 1 0 2 T R O P E R L A U N N A COMMUNITY OUTREACH i e w h c h w h t i w , t n e m p o e v e d l l e b a n a t s u s i s t n e m t s e v n i r u o d n a s n o i t c a r u o i e d u g . e u a v l i c m o n o c e f o n o i t u b i r t s i d e h t d n a n o s e s u c o f l a o g s s e n i s u b r u O COMMUNITY OUTREACH We work hard to keep our stakeholders involved in our Company and make them participants in management and keep them informed of our performance always taking into account their expectations. Southern Copper Corporation (SCC) is a state-of-the-art, integrated mining company whose innovative style lies not only in the utilization of more efﬁcient processes and new technologies, but also in our day-to-day operations, where we work to have more and better results, always aiming at the sustainability of the organization over time. We constantly strive to ensure that the Company's performance in the social, economic and environmental areas takes into account the expectations of our stakeholders. Our business goal focuses on sustainable development, with which we guide our actions and our investments and the distribution of economic value. Every day we work to consolidate the conﬁdence of our stakeholders by making them participants in management, communicating our performance and listening to their expectations. OUR ENVIRONMENTAL COMMITMENT We maintain an ongoing commitment to advance with the challenges of our expansion and modernization programs in harmony with our environment. In this sense, we not only seek regulatory compliance, we also operate under the best environmental practices, in order to always achieve optimum environmental performance, to identify, evaluate and mitigate the impacts generated by our activities on the environment. In order to succeed, we have strategies to meet the speciﬁc environmental 24 needs of each region in which we operate, and use an environmental management system that we have developed, which has 9 lines of action. - Responsible use of water and natural resources - Prevention, control and reduction of air emissions - Efﬁcient use of energy SCC confirms its commitment to reduce carbon footprint, and enhance its position as a sustainable global company, thereby improving competitiveness and contributing to shift towards an environmentally friendly economic development. At SCC, we operate under the best environmental practices, in order to always achieve optimum environmental performance. certiﬁcations and Environmental Quality Certiﬁcations, are the result of the efforts of all our employees and result from a comprehensive application of our environmental practices. - Reduction of green-house-gas emissions per ton produced - Reduction in waste generation and its integrated management - Mine closure - Biodiversity conservation - Reforestation - Compliance with environmental regulations These lines of action are carried out in compliance with international and local certiﬁcations that rule our operating units in the countries where we are present. In 2017, four of our units were granted the ISO 14001: 2004. These certiﬁcations, together with the 15 Clean Industry ENVIROMENTAL EXPENDITURES (MILLION DOLLAR) Air Ground Waste Biodiversity Management Water Total SCC $ 88.41 $ 58.31 $ $ $ $ 36.40 3.12 7.29 15.42 $ 208.95 Copper cathodes, Ilo Smelter, Moquegua, Peru. 25 7 1 0 2 T R O P E R L A U N N A ENERGY AND CLIMATE CHANGE At SCC we believe that the ﬁght against climate change is everyone's responsibility, including the private sector and the industries in which we participate. In addition, we are aware of the effects of climate change on our operations, so, by anticipating an increase in the probability of occurrence of extreme weather events, we have identiﬁed potential risks from global warming. Given these challenges, we are taking measures, which include: • Using energy more efﬁciently. • Diversifying our energy matrix.. • Developing and using renewable energy sources. • Increasing the level of electric power self-sufﬁciency. • Promoting efforts to capture greenhouse gases. Accordingly, we are diversifying our sources of generation of clean, renewable energy for our supply. Our operations in Mexico have decreased their indirect greenhouse gas emissions by consuming clean energy supplied by SCC subsidiaries that generate electric power through its high efﬁciency combined cycle plant and a wind farm. By replacing traditional sources of energy with more efﬁcient and renewable sources, in 2017 we achieved a mitigation of 552,973 tons of CO2eq., equivalent to taking 118,410 passenger vehicles out of circulation for a year. Simultaneously with our environmental policy, we continue implementing actions to maximize electricity generation using our own energy sources. In Mexico, we uses smelter' gases to recover boiler heat and generate energy. In Peru, we generate energy from 26 renewable sources, in particular from two hydroelectric plants with a combined capacity of 130 terajoules. In addition to generating and consuming energy from renewable sources and cleaner fuels, we have also implemented practices that have resulted in higher energy efﬁciency in our operations, In 2017, four of our units were granted the ISO 14001: 2004. These certifications, together with the 15 Clean Industry certifications and Environmental Quality Certifications, are the result of the efforts of all our employees and result from a comprehensive application of our environmental practices. In 2017 we achieved a mitigation of 552,973 tons of CO2. Greenhouse, Buenavista del Cobre, Cananea, Sonora, Mexico. including the improvement, redesign, conversion and retroﬁtting of equipment, rational use of resources, and personnel training to improve their performance during operations. It is important to highlight that in terms of climate change SCC, along with Grupo México, have been working together with non- governmental organizations to contribute in the ﬁght against climate change. Such is the case of Grupo Mexico's second report in 2017 to the Carbon Disclosure Project, through which we have developed and reported our inventory of greenhouse gases at SCC. With these actions, and others, SCC conﬁrms its commitment to reduce carbon footprint, and enhance its position as a sustainable global company, thereby improving competitiveness and contributing to shift towards an environmentally friendly economic development. 27 7 1 0 2 T R O P E R L A U N N A In the last 5 years, we have increased our trees production annual capacity in 187%. BIODIVERSITY We are the Company with the highest productive capacity of trees in the mining industry in Mexico, we produced 4,966,200 trees in 2017. In the last 5 years, we have increased our trees production annual capacity in 187%. In our operating units we have six forest nurseries and greenhouses whose production of regional native species is used to reforest and rehabilitate ecosystems, including those areas not adjacent to our operations. These forest nurseries contribute to biological biodiversity and enrichment of ﬂora and fauna; and in addition, they act as natural carbon sinks, trapping CO2 from the atmosphere. As part of our conservation efforts, we have a 5.7 hectare Environmental Management Unit (EMU) that has been developed to replicate the wildlife environment of threatened and endangered species, including Mexican Gray Wolf and Turkey Gould, along with other species that are part of our program. The EMU strategy is focuses on reproduction and release of species, as well as ecosystems regeneration. In addition, the program reﬂects our efforts to involve community in the protection of the environment, in particular, biodiversity of Sonora. In an Ecological Path, along 1.8 kilometers, EMU works offering educational and recreational activities, which involved 5,000 people and 52 schools per year in average. In Peru, we continue making signiﬁcant environmental expenditures in Ite bay remediation program in Tacna. In an area of 1,600 hectares, the contaminant removal program is successfully. It 28 is the largest and most diverse coastal waterfowl wetland in the country, and it is also a tourist attraction that improve economic development. WATER MANAGEMENT Water is the most important input for our mining operations. SCC develops projects to ensure water sustainability, does an efﬁcient use of source, promotes, and reuse of water discharged by third parties. The efﬁcient use of water and savings programs are based on the implementation of pumping systems to recover water, continuous water recovery from tailings and thickener processes, implementation and maintenance of closed circuits to use the total volume of process water, and Implementation of the Zero Wastewater Discharge Program, looking for a more efﬁcient management of water resource. These reused water programs represent a large portion of total water consumption. In 2017, 71% of total water consumption in mining operations was reclaimed water, which management results speaks by itself. In Toquepala and Cuajone, Peru, we are installing 7 additional high efﬁciency thickeners that will allow us to recover 104,000 m3 / day in each plant. Those equipment will increase water recovery 12%, which represents 320 liters per second. In some of our units, SCC uses municipal wastewater, which are treated previously, such in San Luis Potosí and Cananea (Mexico), so that we support regular fresh water supply to local population. OUR COMMUNITIES SCC looks to improves life quality in communities around its operations, promoting an approach based on management responsibility. SCC has developed a model which people become as generators of its own development. 29 7 1 0 2 T R O P E R L A U N N A This model is known as "Casa Grande", and it has been implemented through the following tools: • 15 Community Development Centers Those are Open Houses for community, where courses and workshops are held to promote development. • Participatory Diagnostics Together, community and SCC participate carrying out development actions. • Community Committees Integrated by volunteer leaders from community, as well as members of the Company who collaborate in evaluating sustainable proposals. • Seed Capital As a result of the participation in social projects, it is possible to implement strategies to improve quality of life in community. • Productive Projects Projects that transform community lives by productive skills. For SCC, social welfare represents: synergy of different factors that strengthen through a multi-strategy, and close dialogue with communities. Therefore, health, education, culture and sports in each location we operate are strengthen. Participatory Diagnostics motivate local people to be part of the project to identify needs and expectations, priorizing opportunities and start 30 In 2017, 71% of total water consumption in mining operations was reclaimed water. Wetland, Ite Bay, Tacna, Peru. Next page 31 7 1 0 2 T R O P E R L A U N N A working with them. Our Model, Casa Grande, permits recognize those opportunities. By this model, our team of experts materialize Company initiatives, includes its participation of SCC volunteers, community, and community centers are meeting point to generate shared value. SCC organizes events to receive initiatives from communities, where education and environment are main axes. In addition, health, security and productive development programs are complementary axes. For us, children and young people are priority, because they will set future. The projects presented in those calls are evaluated by community services, media and citizen which participate in these events. In 2017, SCC invested $60 million in community development actions in areas as education, health, productive projects and development of infrastructure and services. Together, SCC’ social team and volunteers from communities neighboring developed projects in 2017. We carried out 1,283 activities and more than 110 projects, 12,868 community and corporate volunteers participated in these programs. With projects named as seed capital, and summer camps we encouraged the formation of 32 INVESTING IN COMMUNITY DEVELOPMENT PROGRAMS (US$) scc Community development programs, social linking and productive projects $ 4,995,021 Infrastructure and equipment in neighboring communities $ 37,558,049 Investment in town site infrastructure $ 17,944,493 Total $ 60,497,563 development generators and proactive leaders that states of Oaxaca and Mexico City in September 2017. strengthen the well-being in their communities. We support demolition, debris removal, food delivery, structural diagnostics of houses and buildings, and Moreover, SCC participated with other institutions provisional spaces were develop; as well, we provided supporting activities in favor to earthquakes victims in psychological and emotional care to these communities In 2017, we carried out 1,283 activities and more than 110 projects, 12,868 community and corporate volunteers participated in these programs. Greenhouse, Buenavista del Cobre, Cananea, Sonora, Mexico. Juchitan and La Ventosa, Oaxaca. In Mexico City, 24 members of our rescue brigade supported the activities of “Secretaría de Defensa Nacional y Proteccion Civil Estatal”. We also activated 20 centers to receive donations along the country. 33 7 1 0 2 T R O P E R L A U N N A In Peru, our mining operations are located in southern with rural and remote characteristics. SCC contributes in close cooperation with authorities and local institutions to promote development of this area. Our commitment with the community is improving nutrition, health, education and population capacities, support agricultural sector and develop infrastructure. SCC contributes to expand water supply in provinces where we operate, developing infrastructure and modern irrigation system, particularly in Torata, Moquegua region. Those consists in water reservoirs, installation of pipes, construction of support walls, and maintenance of watering infrastructure. By dialogues, we promote in communities around us life quality improve, access to different sources of wealth and well-being. SCC supported transportation of more than 4,000 people, promotes commerce, education and economic diversiﬁcation. By the Act “Obras por Impuestos”, SCC ﬁnanced Ilabaya - Cambaya - Camilaca way which represents the largest investment in this kind of road, and it has increased connectivity between Andean communities. This road was promoted by Ilabaya Municipality in Jorge Basadre province. With an investment of more than US $ 39 million, local commerce, safety road and regional tourism have beneﬁted four communities in Tacna, Peru. 34 'Forjando Futuro' is another program promotes by SCC. It trainers local people to improve their capabilities according human resources demand in direct inﬂuence area of our operations. It also allows select workers from southern region for Cuajone and Toquepala mines and Ilo smelter. SCC contributes to expand water supply in provinces where we operate, developing infrastructure and modern irrigation systems. Finally, ICT project (Information and Communication Technologies) in Moquegua, which is very important, is reducing technological gap in rural areas in Peru. Through cooperation between Regional Government and SCC, ICT has incorporated in teaching and learning process, beneﬁting 33,560 students and teachers from Mariscal Nieto, Sánchez Cerro and Ilo provinces in this region, Peru. To date, SCC has invested more than $ 33 million to incorporate ICT. Students and teachers beneﬁt with this program in Moquegua. At Southern Copper Corporation, our business model is focused on continuously improving quality of life in communities around our operation areas, by encouraging meaningful development, and strengthening collective participation that will result in common good, placing people as central agents of development. Geologist analyzing ore in the El Arco project, Baja California, Mexico. Our parent company, Grupo México was selected to be part of the S&P Dow Jones Sustainability Indices MILA Pacific Alliance (DJSI MILA) that includes the 42 leading sustainability companies in the countries that are part of the Pacific Alliance. 35 7 1 0 2 T R O P E R L A U N N A RESULTS OF OPERATIONS 7 1 0 2 n i C C S o t l e b a t u b i r t t a e m o c n i t e n r u O . n o i l l i m 5 . 8 2 7 $ s a w RESULTS OF OP ERATIONS THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015. Our net income attributable to SCC in 2017 was $ 728.5 million or diluted earnings per share of $ 0.94, compared with net income attributable to SCC of $776.5 million or diluted earnings per share of $1.00 in 2016, and net income attributable to SCC of $736.4 million or diluted earnings per share of $0.93 in 2015. 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. 7 1 0 2 N I 5 . 8 2 7 $ 38 Net sales in 2017 were $6,654.5 million, compared to $5,379.8 million in 2016, an increase of $1,274.7 million. The Company’s operating cash cost, as previously deﬁned, for the three years ended December 31, is as follows: 2017 2016 D O L L A R P E R P O U N D 201 5 Operating Cash Cost without by-product revenues 1.49 1.45 1.65 Operating Cash Cost with by-product revenues 0.92 0.95 1.11 Cuajone mine, Moquegua, Peru. 39 7 1 0 2 T R O P E R L A U N N A As seen on the chart above, our 2017 operating cash cost per pound of copper without by-product revenues was $0.05 per pound higher than in 2016, an increase of 3.5%. This was due to higher production costs. 2017-2016: Net sales in 2017 were $6,654.5 million, compared to $5,379.8 million in 2016, an increase of $1,274.7 million. This 23.7% increase was principally the result of higher metal prices as shown below, and also due to slightly higher sales volumes of copper (+1.8%) and zinc (+2.0%), partially offset by lower sales volumes of silver (2.1%) and molybdenum (1.7%). Sales prices for the Company’s metals are established, mainly by reference to the prices quoted in the London Metal Exchange (LME) and The New York Commodity Exchange (COMEX), or published in the Platt’s Metals WeekMetals Week. 2016-2015: Net sales in 2016 were $5,379.8 million, compared to $5,045.9 million in 2015, an increase of $333.9 million or 6.6%. The increase was principally the result of higher sales Maintenance plant, Toquepala, Tacna, Peru. 40 volume of copper (+18.3%) and silver (+18.9%), partially offset by lower prices for copper and molybdenum. Prices: Sales prices for the Company’s metals are established, mainly by reference to the prices quoted in the London Metal Exchange (LME) and The New York Commodity Exchange (COMEX), or published in the Platt’s Metals Week, for dealer oxide mean prices for molybdenum. . P R I C E/ V O L U M E D ATA 2017 2016 2015 A V E R A G E M E TA L P R I C E S Copper (per pound - LME) Copper (per pound - COMEX) Molybdenum (per pound) Zinc (per pound - LME) Silver (per ounce - COMEX) S A L E S V O L U M E ( I N T H O U S A N D S) Copper (pounds) Molybdenum (pounds) (1) Zinc (pounds) Silver (ounces) $ 2.80 $ 2.80 $ 8.13 $ 1.31 $ 17.03 2.21 2.20 6.42 0.95 17.10 2.50 2.51 6.59 0.88 15.68 1,959.2 1,923.9 1,625.8 47.1 237.2 16.9 47.9 232.4 17.2 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. 41 7 1 0 2 T R O P E R L A U N N A ENVIRONMENTAL MATTERS e v i s n e t x e d e t u t i t s n i s a h y n a p m o C e h T s m a r g o r p n o i t a v r e s n o c l a t n e m n o r i v n e d n a u r e P n i s e i t i l i c a f i i g n n m s t i t a . o c i x e M ENVIRONM ENTAL 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 the 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 2017, 2016 and 2015, were as follows (in millions): Mexican operations Peruvian operations Total 2017 $ 128.9 $ 93.1 $ 222.6 2016 $140.1 $110.3 $250.4 2016 $ 22.0 $ 98.8 $120.8 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 44 enforces Mexican environmental laws, regulations and ofﬁcial standards. It may also initiate administrative proceedings against companies that violate environmental laws, which in the most extreme cases may result in the temporary or permanent shutdown of non-complying facilities, the revocation of operating licenses and/or other sanctions or ﬁnes. In 2011, the General Law was amended, giving an individual or entity the ability to contest administrative acts, including environmental authorizations, permits or concessions granted, without the need to demonstrate the actual existence of harm to the environment as long as it can be argued that the harm may be caused. In addition, in 2011, amendments to the Civil Federal Procedures Code (‘‘CFPC’’) were enacted. These amendments establish three categories of collective actions by means of which 30 or more people claiming injury derived from environmental, consumer protection, financial services and economic competition issues will be considered 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’’). Coppers cathodes, SX-EW Plant, Toquepala, Tacna, Peru. 45 7 1 0 2 T R O P E R L A U N N A to be sufficient in order to have a legitimate interest to seek through a civil procedure restitution or economic compensation or suspension of the activities from which the alleged injury derived. The amendments to the CFPC may result in more litigation, with plaintiffs seeking remedies, including suspension of the activities alleged to cause harm. In 2013, the Environmental Liability Federal Law was enacted. The law establishes general guidelines for actions to be considered to likely cause environmental harm. If a possible determination regarding harm occurs, environmental clean-up and remedial actions sufﬁ cient to restore environment to a pre-existing condition should be taken. Under this law, if restoration is not possible, compensation measures should be provided. Criminal penalties 46 and monetary ﬁ nes can be imposed under this law. 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 investments. 2014 accidental spill at Buenavista mine: In 2014, an accidental spill of approximately 40,000 cubic meters of copper sulfate solution occurred at a Buenavista mine leaching pond. This solution Loading of sulfuric acid, Punta Tablones Pier, Ilo, Moquegua, Peru. reached the Bacanuchi River and the Sonora River. The Company took immediate actions to contain the spill, and to comply with all necessary legal requirements. The Company hired contractors including environmental specialists and assigned more than 1,200 of its own personnel to clean the river. In addition, the Company developed a service program to assist the residents of the Sonora River region. Administrative proceedings: The National Water Commission, the Federal Commission for the Protection of Sanitary Risk and PROFEPA initiated administrative proceedings regarding the spill to determine possible environmental and health damages. On September 15, 2014, the Company executed an administrative agreement with PROFEPA, providing for the submission of a remediation action plan to the Mexican Ministry of Environment and Natural Resources (Secretaria de Medio Ambiente y Recursos Naturales ‘‘SEMARNAT’’). The general remediation program submitted to SEMARNAT was approved on January 6, 2015. 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. The Company also created a trust with a Mexican development bank, acting as a Trustee to support environmental remedial actions in connection with the spill, to comply with the remedial action plan and to compensate those persons adversely affected by the spill. The Company committed up to two billion Mexican pesos (approximately $150 million). A technical committee for 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 served as an alternative mechanism for dispute resolution to mitigate public and private litigation risks. 47 7 1 0 2 T R O P E R L A U N N A On December 1, 2016, SEMARNAT issued its ﬁnal resolution which held that all remediation actions contained in the remediation plan, had been fulﬁlled and that all requirements had been complied with, except for biological monitoring activities at the Sonora River that will continue until the ﬁrst semester of 2019 pursuant to the plan. On January 26, 2017, PROFEPA issued its ﬁnal resolution under which it declared all mitigation actions completed and its investigation closed. In light of the above, the Company has obtained all necessary formal rulings from SEMARNAT and PROFEPA. On February 7, 2017, the Company closed the trust. As a result, $10.2 million of excess provision was credited to income in the ﬁrst quarter of 2017. The total expense recorded for this accident in 2014 and 2015 was $136.4 million. Therefore, the remediation concerns raised by SEMARNAT and PROFEPA have been addressed. Other procedures: On August 19, 2014, PROFEPA, as part of the administrative proceeding initiated after the spill, announced the ﬁling of a criminal complaint against Buenavista del Cobre S.A. de C.V. (‘‘BVC’’), a subsidiary of the Company, in order to determine those responsible for the environmental damages. The Company is vigorously defending itself against this complaint. As of December 31, 2017, the case remains pending resolution. Through the ﬁrst half of 2015, six collective action lawsuits were ﬁled in federal courts in Mexico City and Sonora against two subsidiaries of the Company seeking economic compensation, clean up and remedial activities in order to restore the environment to its pre-existing conditions. Two of the collective action lawsuits have been dismissed by the court. The plaintiffs in the four remaining lawsuits are: Acciones Colectivas de Sinaloa, A.C. which established two collective actions, 48 Defensa Colectiva A.C.; and Ana Luisa Salazar Medina et al. which has been granted a collective action certiﬁcation. The remaining plaintiffs have requested cautionary measures on the construction of facilities for the monitoring of public health services and the prohibition of the closure of the Rio Sonora Trust. As of December 31, 2017, these cases remain pending resolution. Similarly, during 2015, eight civil action lawsuits were ﬁ led against BVC in the state courts of Sonora seeking damages for alleged injuries and for moral damages as a consequence of the spill. The plaintiffs in the state court lawsuits are: Jose Vicente Arriola Nunez et al; Santana Ruiz Molina et al; Andres Nogales Romero et al; Teodoro Javier Robles et al; Gildardo Vasquez Carvajal et al; Rafael Noriega Soufﬂ e et al; Grupo Banamichi Unido de Sonora El Dorado, S.C. de R.L. de C.V; and Marcelino Mercado Cruz. In 2016, three additional civil action lawsuits, claiming similar damages, were ﬁ led by Juan Melquicedec Lebaron; Blanca Lidia Valenzuela Rivera et al and Ramona Franco Quijada et al. In 2017, BVC was served with thirty-three additional civil action lawsuits, claiming similar damages. SCC with a power generation capacity of 574 megawatts (MW) using edge technology. Sunset in Combined Cycle plant, La Caridad, Nacozari, Sonora, Mexico. 49 7 1 0 2 T R O P E R L A U N N A During 2015, four constitutional lawsuits were ﬁled have a material effect on its ﬁnancial position or results before Federal Courts against various authorities of operations. and against a subsidiary of the Company, arguing; (i) the alleged lack of a waste management program Peruvian operations: The Company’s operations approved by SEMARNAT; (ii) the alleged lack of are subject to applicable Peruvian environmental a remediation plan approved by SEMARNAT with laws and regulations. The Peruvian government, regard to the August 2014 spill; (iii) the alleged lack through the Ministry of Environment (‘‘MINAM’’) of community approval regarding the environmental conducts annual audits of the Company’s Peruvian impact authorizations granted by SEMARNAT to mining and metallurgical operations. Through these one subsidiary of the Company; and (iv) the alleged environmental audits, matters related to environmental inactivity of the authorities with regard of the spill obligation, compliance with legal requirements, in August 2014. The plaintiffs of these lawsuits are: atmospheric emissions, effluent monitoring and waste Francisca Garcia Enriquez, et al which established two management are reviewed. The Company believes that lawsuits, Francisco Ramon Miranda, et al and Jesus it is in material compliance with applicable Peruvian David Lopez Peralta et al. During the third quarter of environmental laws and regulations. Peruvian law 2016, four additional constitutional lawsuits, claiming requires that companies in the mining industry provide similar damages were ﬁled by Mario Alberto Salcido et assurances for future mine closure and remediation. al; Maria Elena Heredia Bustamante et al; Martin Eligio In accordance with the requirements of this law, the Ortiz Gamez et al; and Maria de los Angeles Enriquez Company’s closure plans were approved by MINEM. Bacame et al. During the third quarter of 2017, BVC was served with another constitutional lawsuit ﬁled by Francisca Garc´ıa Enriquez et al. As of December 31, 2017, these cases remain pending resolution. It is not currently possible to determine the extent of the damages sought in these state and federal lawsuits 50 but the Company considers that these lawsuits are without merit. Accordingly, the Company is vigorously defending against them. Nevertheless, the Company considers that none of the legal proceedings resulting from the spill, individually or in the aggregate, would In Peru, our mining operations are located in the south of the country in a rural environment, and SCC contributes to its development in close cooperation with authorities and representative organizations of the region. SX-EW Plant, Toquepala, Tacna, Peru. Next page 51 7 1 0 2 T R O P E R L A U N N A See Note 9 ‘‘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 March 2016, MINEM approved the Mining Closure Plan for the Toquepala expansion project. The closure plan for the Tia Maria project was approved in February 2017. The Company, 52 however, has not recorded a retirement obligation for the project as the construction permit has not been received, and work on the project is on hold. The Company believes that under these SCC participated with other institutions supporting activities in favor to earthquakes victims in states of Oaxaca and Mexico City in September 2017. circumstances the recording of a retirement obligation is not appropriate. In December 2017, the Company submitted the SX-EW pad, Toquepala, Tacna, Peru. mine closure plan update for the Cuajone operations, World Health Organization and establishes a mean 24- which is under review and evaluation by MINEM. hour AQS equal to 250 micrograms per cubic meter In 2008, the Peruvian government enacted environmental regulations establishing stringent air quality standards (‘‘AQS’’) for daily sulfur dioxide (‘‘SO2’’) in the air for the Peruvian territory. These regulations, as amended in 2013, recognized distinct zones/areas, as atmospheric (ug/m3) of SO2 to replace the current 24-hour AQS of 20 ug/m3 of SO2, effective since 2014. The decree also establishes a mean 24-hour AQS equal to 2 ug/m3 of gaseous mercury and a mean monthly AQS equal to 1.5 ug/m3 of lead in PM10. basins. MINAM had established three atmospheric The Company believes that these new AQS are basins that required further attention to comply with appropriate for Peru and will allow Peruvian industry to the air quality standards. The Ilo basin was one of these be competitive with other countries. The Company has three areas and the Company’s smelter and reﬁnery are evaluated the potential impact of these new standards part of the area. and expects that its adoption will not have a material In June 2017, MINAM enacted a supreme decree impact on the ﬁnancial SO2, than those required by the new AQS. In addition, in June 2017, MINAM which deﬁnes new AQS for daily sulfur dioxide and enacted a supreme decree which establishes new gaseous mercury for the Peruvian territory, as well as quality standards for water in the Peruvian territory. monthly lead in particulate matter (PM10), in order to The Company has reviewed this decree and considers adopt standards similar to comparable countries and that its adoption will not have a material impact on its conform them to the technical capabilities available in ﬁnancial position. Peru, while ensuring the protection of public health. This decree also considers criteria established by the In 2013, the Peruvian government enacted soil We promote in communities around us life quality improve, access to different sources of wealth and well-being. environmental quality standards (‘‘SQS’’) applicable to any existing facility or project that generates or could generate the risk of soil contamination in its area of operation or inﬂuence. In March 2014, MINAM issued a supreme decree, which establishes additional provisions for the gradual implementation of SQS. Under this rule the Company had twelve months to identify contaminated sites in and around its facilities and present a report of identiﬁed contaminated sites. 53 7 1 0 2 T R O P E R L A U N N A These documents were submitted to MINEM for approval in April 2015. After MINEM’s review, the documents for the Company’s operations were fully approved in July 2017. The next step is for the Company to prepare a characterization study to determine the depth, extent and physio-chemical composition of the contaminated areas and deﬁne an appropriate remediation plan with time-frame for completion. In addition, the Company must submit for approval a Soil Decontamination Plan (SDP) within 30 months after being notiﬁed by the authority. This SDP must include remediation actions, a schedule and compliance deadlines. Also under this rule, if deemed necessary and given reasonable justiﬁcation, the Company may request a one year extension for the decontamination plan. 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 goals will carry penalties, although no speciﬁc sanctions have been established yet. During compliance with this 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, 54 which is expected for the ﬁrst quarter of 2020. At that time 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 The Company believes that these new Air Quality Standards (AQS) are appropriate for Peru and will allow Peruvian industry to be competitive with other countries. substantially progressed and therefore is not be able to disclose a range of costs that is meaningful. The Company believes that all of its facilities in Peru and Mexico 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, ﬁ nancial condition or prospects and will not result in material capital investments. Tailing disposal plant in Quebrada Honda, Toquepala, Tacna, Peru. 55 7 1 0 2 T R O P E R L A U N N A GENERAL INFORMATION g n i s u , s n o i t c n u f s c i t s i g o l d n a t r o p s n a r t d e t a e r l t s o m d n a s t c u d o r p r e h t o d n a s e e y o p m e l , s e i t i l i c a f n w o r u o r e p p o c d e n ﬁ e r f o n o i t c u d o r p . t n e m p u q e i d n a , s s e c o r p n o i t c u d o r p e r i t n e e h t e g a n a m o t f o l e v e l h g h i a e v a h s n o i t a r e p o r u O s u s w o l l a t a h t n o i t a r g e t n i l a c i t r e v e h t o t e r o e h t f o i i g n n m e h t m o r f 58 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 74. Brief Description: Southern Copper Corporation (SCC) 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. At December 31, 2017, SCC is the mining company with the largest copper inventory worldwide. We were incorporated in Delaware in 1952 and have conducted copper mining operations since 1960. Since 1996, our common stock has been listed on both the New York and the Lima Stock Exchanges. Our Peruvian copper operations involve mining, milling and ﬂotation of copper ore to produce copper concentrates and molybdenum concentrates, the smelting of copper concentrates to produce anode copper, and the reﬁning of anode copper to produce copper cathodes. As part of this production process, we also produce signiﬁcant amounts of molybdenum concentrate and reﬁned silver. We also produce reﬁned copper using SX/EW technology. We operate the Toquepala and Cuajone mines high in the Andes Mountains, approximately 860 kilometers southeast of the city of Lima, Peru. We also operate a smelter and reﬁnery west of the Toquepala and Cuajone mines in the coastal city of Ilo, Peru. 59 7 1 0 2 T R O P E R L A U N N A Interior view of SX-EW III, Buenavista del Cobre, Sonora, Mexico. Preview page Our Mexican operations are conducted through our subsidiary, Minera Mexico S.A. de C.V. (“Minera Mexico”), which we acquired in 2005. Minera Mexico engages principally in the mining and processing of Rod plant in Metallurgic Complex, La Caridad, Sonora, Mexico. copper, molybdenum, zinc, silver, gold and lead. Minera S.A. de C.V. (together with its subsidiaries, the “IMMSA Mexico operates through subsidiaries that are grouped unit”) operates ﬁve underground mines that produce into three separate units. Mexicana de Cobre S.A. de zinc, lead, copper, silver and gold, a coal mine and a C.V. (together with its subsidiaries, the “Mexcobre zinc reﬁnery. Effective February 1, 2012, Minerales unit”) operates La Caridad, an open-pit copper mine, Metalicos del Norte S.A was merged with Industrial a copper ore concentrator, a SX/EW plant, a smelter, Minera Mexico S.A. de C.V. (IMMSA). IMMSA absorbed reﬁnery and a rod plant. Minerales Metalicos del Norte S.A. Operadora de Minas e Instalaciones Mineras S.A de We utilize modern/state of the art mining and processing C.V. (the “Buenavista unit”) operates Buenavista, methods, including global positioning systems and formerly named Cananea, an open-pit copper mine, computerized mining operations. Our operations which is located at the site of one of the world’s largest have a high level of vertical integration that allows us 60 copper ore deposits, a copper concentrator and two to manage the entire production process, from the SX/EW plants. The Buenavista mine was operated until mining of the ore to the production of reﬁned copper December 11, 2010 by Mexicana de Cananea S.A. de and other products and most related transport and C.V. and by Buenavista del Cobre S.A. de C.V. from logistics functions, using our own facilities, employees that date until July 2012. Industrial Minera Mexico, and equipment. ECONOMIC GROUP SCC, indirectly, is part of “Grupo Mexico S.A.B. de C.V.” which owns 100% of Americas Mining Corporation (“AMC”). NAME OF THE COMPANY S E V E R A L A C T I V I T I E S L O C AT I O N INSCRIPTION IN THE RPMV % 1 2 3 4 5 6 7 8 9 10 11 12 Grupo México, S.A.B. de C. V. Grupo México Servicios, S.A. de C.V. ACTIVIDADES DE TRANSPORTE FERROVIARIO Mexico Mexico Infraestructura y Transportes México, S.A. de C. V. Mexico ACTIVIDADES MINERAS Americas Mining Corporation (“AMC”) Southern Copper Corporation (SCC) Minera México, S. A. de C. V. Industrial Minera México, S.A. de C. V. Buenavista del Cobre, S.A. de C. V. Mexicana de Cobre, S.A. de C. V. Southern Peru Copper Corporation, Agencia en Chile Southern Peru Copper Corporation, Sucursal del Perú Compañía Minera Los Tolmos, S.A. USA USA Mexico Mexico Mexico Mexico Chile Peru Peru 100 100 100 88.91 99.96 100 100 98.20 100 (cid:57) 99.291 100 CORPORATE CAPITAL AND COMMON STOCK The authorized number of shares Issues an Paid Capital: Common Shares Nominal Value of Common Shares SHARES 2,000,000,000 884,596,086 $ 0.01 TOTAL NUMBER AND PERCENT OF SHARES SHARES INTEREST Americas Mining Corporation Common Shares Total 687,275,997 85,7521,472 773,028,469 88.91% 11.09% 100.0% 1 Include 82.69% of common shares and 16.60% of investment shares. 61 7 1 0 2 T R O P E R L A U N N A OPERATIONS IN MEXICO LA CARIDAD MINE “La Caridad Concentrator” began operations in 1979. ounces of silver per day, 247 ounces of gold per day The concentrator has a current capacity of 94,500 tons and 342 kilograms of selenium per day. of ore per day. “Molybdenum Plant” started operations in 1982, with a production capacity of 2,000 tons of “La Caridad Wire Rod Plant”, a rod plant at the La copper-molybdenum concentrate per day. Caridad complex began operations in 1998 and reached its full annual operating capacity of 150,000 tons in “La Caridad SX-EW” has an annual production capacity 1999. The plant is producing eight millimeter copper of 21,900 tons of copper cathodes. Approximately rods with a purity of 99.99%. 835.5 million tons of leaching ore with an average grade of approximately 0.243% copper have been extracted Efﬂuent and Dust Treatment Plant, a dust and efﬂuent from the La Caridad open-pit mine and deposited in plant with a treatment capacity of 5,000 tons of smelter leaching dumps from May 1995 to December 31, 2017. dusts per year which will produce 1,500 tons of copper by-products and 2,500 tons of lead sulfates per year. LA CARIDAD METALLURGIC COMPLEX This plant started its operating in 2012. La Caridad Smelter started operations in July, 1986. The actual installed capacity of the smelter is 1,000,000 BUENAVISTA MINE tons per year, a capacity that is sufﬁcient to treat all A “Buenavista Concentrator”, the original concentrator the concentrates of La Caridad and almost 40.5% currently has a nominal milling capacity of 76,700 tons of total production of the OMIMSA I and OMIMSA II per day. The second concentrator began operations in concentrators from Buenavista, and starting in 2010, 2015 with a nominal milling capacity of 100,000 tons the concentrates from the IMMSA mines, as we closed per day. the San Luis Potosi smelter. “Buenavista SX/EW I Plant” started operating in 1980, “La Caridad Reﬁnery” started operations in July, 1997, with a capacity of 30 tons per day. with a production capacity of 493 tons of copper cathode per day and was expanded to 822 tons in “Buenavista SX/EW II Plant” started operating in 1989, 62 January, 1998. The installed capacity of the reﬁnery is with a capacity of 66 tons per day and was expanded to 300,000 tons per year. 120 tons per day in 2001. “La Caridad Precious Metals Plant” started operations “Buenavista SX/EW III Plant” started operating during in May, 1999, with a production capacity of 43,836 the June 2014, we completed the construction of a Operator in Central Warehouse, Ilo, Moquegua, Peru. new SX-EW plant that signiﬁcantly has increased production of leachable material by approximately 120,000 tons per year. The SX- EW facilities have a cathode production capacity of 174,470 tons per year. UNDERGROUND MINES 1. The Santa Barbara Unit with a milling capacity of 5,800 tons of ore per day. 2. The Santa Eulalia Unit with a milling capacity of 1,450 tons of ore per day. 3. The San Martin Unit with a milling capacity of 4,400 tons of ore per day. 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. 63 7 1 0 2 T R O P E R L A U N N A 7. The Zinc Reﬁnery with a capacity of 288 tons per de Mineria” authorized construction and expansion day. PERUVIAN OPERATIONS TOQUEPALA 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 1. Toquepala Concentrator. Directorial Resolution a throughput of 18,737 tons/day. No.455-91-EM/DGM/DCM dated July 5, 1991 approved the operation of the Toquepala CUAJONE Concentrator. The resolution granted 240 hectares 1. 1. Botiﬂaca Concentrator in Cuajone: Directorial of surface land and authorized a throughput of Resolution No. 150-81-EM/DCM dated August 39,000 tons/day. 14, 1981 approved the operation of Botiﬂaca Concentrator. The resolution granted 56 hectares Based on Report No. 413-97-EM/DGM/DPDM of surface land. dated July 7, 1997, the “Director General de Mineria” authorized the expansion of the Toquepala Based on Report No. 266-99-EM/DGM/DPDM Concentrator to a 43,000 tons/day throughput. dated July 20, 1999 the “Director General de Mineria” authorized the expansion of Botiﬂaca Based on Report N° 547-2002-EM/DGM/DPDM, Concentrator to 87,000 MT per day throughput. dated November 6, 2002, the “Director General de Mineria” authorized the expansion of the Toquepala Resolution N° 379-2010-MEM-DGM/V dated Concentrator to a capacity of 60,000 MT per day. October 7, 2010, based on Report N°312-2010- MEM-DGM-DTM/PB, authorized construction and 2. Toquepala Leaching Plant (SX/EW). Directorial expansion of Botiﬂaca Concentrator to 90,000 MT Resolution No. 166-96-EM/DGM dated May 7, 1996, per day throughput. approved the operation of the Toquepala SX/EW plant. The resolution granted 60 hectares of surface land For operating reasons as part of the crusher process 64 and authorized a throughput of 11,850 tons/day. optimization, on November 18, 2011, we requested Based on Report No. 660-98-EM-DGM/DPDM 2144941 to add three additional facilities (HPGR dated November 10, 1998 the “Director General mill and others). to the Peruvian authorities through resources N° On May 2012, with Directoral Resolution N° surface land and authorized a throughput of 2,100 153-2012-MEM-DGM-V based on report MT per day. Based on Report No. 988-2009-MEM- 165-2012-MEM-DGM-DTM-PB. MEM approved DGM/V, dated December 16, 2009, Cuajone SX and authorized the project to include three additional plant operation was approved and authorized the of facilities aforementioned on the procedure of the the, with a capacity of 3100 MT per day. amendment and increase of the installed capacity from 87,000 to 90,000 MT per day. ILO 1. Ilo Smelter: Authorized (deﬁnitely) by Directorial 2. Cuajone Leaching Plant (LX/EW). Directorial Resolution No. 078-69-EM/DGM dated August 21, Resolution No.155-96-EM/DGM dated May 6, 1996 1969 approved the operation of the Ilo Smelter. The approved the operation of the Cuajone Leaching resolution authorized a production of 400 Short plant. The resolution granted 400 hectares of tons/day of blister copper. 65 7 1 0 2 T R O P E R L A U N N A Based on Report No.204-2000-EM-DGM-DPDM Resolution N°520-2010-MEM-DGM/V dated dated June 20, 2000 the “Director General de December 30, 2010, based on Report N° N°414- Mineria” authorized the expansion of the Ilo Smelter 2010-MEM-DGM-DTM/PB, authorized changes in to a 3,100 MT per day throughput of copper Ilo copper reﬁnery without expanded its capacity concentrates. throughput. On February 4, 2010, by the Application Nº 3. Sulfuric Acid Plant: Authorized by Directorial 1961695, the Company began the process to Resolution No. 024-96-EM/DGM dated January obtain authorization from the MINEM to operate a 19, 1996, approved the operation of the sulfuric capacity of 3,770 MT per day, which is included acid plant, installed at the smelter, at a production as an ancillary facility to Acid Plant No. 2, with a rate of 150,000 tons per year. capacity of 2,880 MT per day or 1,051,200 MT per year. Based on Report No. 313-98-EM/DGM/DPDM dated May 21, 1998 the “Director General de 2. Ilo Reﬁnery: Authorized by Report No. 056-94-EM/ Mineria”, authorized the expansion of the Ilo Sulfuric DGM/DRDM dated May 27, 1994 the “Director Acid Plant to a capacity of 300,000 tons per year General de Mineria” authorized the operation of the production. Ilo Copper Reﬁnery at 533 MT per day throughput of blister copper. 4. “Coquina Wash Plant and Sea shell Concentrates” authorized to operate by Directorial Resolution Nº Based on Report No. 506-97-EM/DGM/DPDM 110-93-EM/DGM of August 3, 1993. The plant dated September 2, 1998 the “Director General processes 95 TC/h of raw material (coquina) de Mineria” authorized the expansion of Ilo recovered from nearby mines. Seashell is produced Copper Reﬁnery to a capacity of 658 MT per day separating sand and other materials from the throughput. coquina using sea water washing screens. 66 Based on Report N° 080-2002-EM-DGM/DPDM, dated March 14, 2002, the “Director General de Mineria” authorized the expansion of the Ilo Copper Reﬁnery to a capacity of 800 MT per day. Continuously, we carry out exploration activities for locate more minerals resources and for discover new deposits. With a capital investment of $ 2,900 million, we are currently working in several copper projects in Peru. Cuajone mine, Moquegua, Peru. Resolution N°038-2011-MEM-DGM-DTM/PB dated February 2, 2011, 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. By the Application Nº 2499277 dated on May 19, 2015, SPCC requested temporary suspension for three years of its plant Dry Sea shell Concentrates. 67 7 1 0 2 T R O P E R L A U N N A D ES C RIPTION OF OPERATIONS AND D EV E LOP M E N T R EG ARDING THE ISSUING ENTITY P URP O SE THE PURPOSE The purpose of 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 SCC: 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. 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. 68 The Branch is registered in the Electronic Record Nº 03025091 of the Juridical People of the Registry Ofﬁce of Lima and Callao. ACTOS POSTERIORES A LA CONSTITUCIÓN DE SCC: ACTIONS FOLLOWING COMPANY INCORPORATION: Capital Increase: By Public Deed dated May 31, 1995, signed before notary public of Lima, Dr. Carlos A. Sotomayor Bernos, the Branch capital increase was formalized. It was made through money contribution by the Company in favor of its Peru Branch and by the owners of labor shares, pursuant to Legislative Decree No. 677. The capital contribution made by the Company was aimed at increasing the capital allotted to the Branch by the headquarters and registered in Peru. The capital contribution made by the Labor Shares (today Investment Shares) owners was assigned to the Labor Shares account of the Branch for issuing new Labor Shares. Miners in Santa Eulalia underground mine, Chihuahua, Mexico. Part of the money contribution made by the Company in favor of its Branch and by the Labor Shares owners was applied as a capital premium to the Resident account as Additional Capital. 69 7 1 0 2 T R O P E R L A U N N A EXCHANGE OF INVESTMENT SHARES (LABOR SHARES) FOR COMMON SHARES: Dated September 7, 1995, “Southern Peru Copper Holding Company” was also incorporated pursuant to the Laws of the State of Delaware, aiming at acting as a holding company that owns all Southern Peru Copper Corporation shares, and at performing an exchange of the shares that were then called “Labor Shares” (today Investment Shares) issued by the branch in Peru, delivering the owners of labor shares a certain number of Common Shares issued by SPCC in the United States. As a consequence of this share exchange, at that times, 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). 70 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. Toquepala Expansion Project, Tacna, Peru. As a consequence of this corporate name change, the Mexico, acquired in the United States 100% of ASARCO mining activities of the Company in Peru started being Incorporated, the main shareholder of Southern Peru performed under the name of Southern Peru Limited, Copper Corporation at that time. In this way, SPCC became Peru Branch (SPL). a subsidiary of Grupo Mexico, who keeps its shareholding through Americas Mining Corporation (AMC). On December 31, 1998, the merger between Southern Peru Copper Corporation and Southern Peru Limited ACQUISITION OF MINERA MEXICO (“MM”), was agreed. The ﬁrst company absorbed the second AND OTHER CORPORATE CHANGES: one and assumed all its assets and liabilities, including SCC shareholders, in a shareholder extraordinary the Branch in Peru. This merger did not imply any meeting dated March 28, 2005, approved issuance change to the share percentage in the corporate capital of Common Shares and required actions related to or in the Net Worth Share Account (Investment Shares), the acquisition of MM, a ﬁrm incorporated pursuant to which were kept the unchanged. the Laws of the Republic of Mexico. This transaction was approved by more than 90% of the stocks and As a consequence of the merger, the mining activities circulating capital of SCC. To acquire Minera Mexico, of the corporation in Peru were again carried out under SCC issued 67,207,640 shares in exchange for MM the name of Southern Peru Copper Corporation, Peru shares. Once the shares related to the acquisition were Branch, or the abbreviated name of “Southern Peru” issued, AMC increased its share in SCC from 54.2% to and/or the acronym SPCC. approximately 75.1%. CHANGE OF ECONOMIC GROUP: AMC Increased its Participation in SCC: In November 1999, Grupo Mexico S.A.B. de C. V., a ﬁrm In 2008 and 2009 Grupo Mexico, through its wholly incorporated pursuant to the Laws of the Republic of owned subsidiary Americas Mining Corporation, SCC looks to improves life quality in communities around its operations, promoting an approach based on management responsibility. SCC has developed a model which people become as generators of its own development. purchased 11.8 million and 4.9 million shares of the Company’s common Stock, respectively. SCC $500 Million Share Repurchase Program: In 2008, our Board of Directors (‘‘BOD’’) authorized a $500 million share repurchase program that has since been increased by the BOD and is currently authorized to $3 billion. Pursuant to this program, through December 71 7 1 0 2 T R O P E R L A U N N A 31, 2017 we have purchased 119.5 million shares of our common stock at a cost of $2,900 million. These shares are available for general corporate purposes. We may purchase additional shares from time to time, based on market conditions and other factors. This repurchase program has no expiration date and may be modiﬁed or discontinued at any time. At December 31, 2016, Grupo Mexico indirect ownership is 88.91%. CHANGE IN THE CERTIFICATE OF INCORPORATION: On March 28, 2005, following Board of Directors recommendations, SCC shareholders approved in an extraordinary meeting the amendments to the Articles of Incorporation Deed, changing the composition and obligations of some Board committees. Special Independent Director: The changes to the Articles of Incorporation Deed require the Board to include a certain number of special independent directors. A special independent director is a person who (i) complies with the independence standards of the New York Stock Exchange (or any other stock exchange or association in which Common Shares are listed) and (ii) is appointed by the Special Appointment Committee of the Board. A special independent director may only be removed from the Board upon a justiﬁed cause. Our Amended and Restated Certiﬁcate of Incorporation determine 72 that the minimum number of Special Independent Directors in that Directory at any time shall equal the total number of directors in the Board multiplied by the percentage of Common Shares all the shareholders (that are not Grupo Mexico and its afﬁliates) have, rounding up to the following integer number. Notwithstanding the abovementioned, the total number of people appointed as special independent directors (not belonging to Grupo Mexico) cannot be less than two or more than six. Special Nominating Committee A Currently, the Special Nominating Committee functions as a special committee to nominate special independent directors to the Board. Pursuant to our Amended and Restated Certiﬁcate of Incorporation, as amended, a special independent director is any director who (i) satisﬁes the independence requirements of the New York Stock Exchange or NYSE (or any other exchange or association on which the Common Stock is listed) and (ii) is nominated by the Special Nominating Committee. The Special Nominating Committee has the right to nominate a number of special independent directors based on the percentage of our Common Stock owned by all holders of our Common Stock, other than Grupo Mexico and its afﬁliates. Casa Grande provides open spaces for communities, where courses and workshops are taught to encourage development. 73 7 1 0 2 T R O P E R L A U N N A The Special Nominating Committee consists of three be necessary for the adoption of any resolution or the directors. Two directors (2) of whom are Luis Miguel taking of any action. Palomino and Carlos Ruiz Sacristan (each an “Initial Member” and, together with their successors, “Special Notwithstanding the foregoing, the power of the Special Designees”) and such other director, currently Gilberto Nominating Committee to nominate special independent Perezalonso Cifuentes, as may be appointed by the directors is subject to the rights of the stockholders to Board of Directors or the “Board Designee”. The Board make nominations in accordance with our by-laws. Designee will be selected annually by the Board of Directors. The Special Designees will be selected The provisions of the Amended and Restated Certiﬁcate annually by the members of the Board who are special of Incorporation, as amended, relating to Special independent directors or Initial Members. Only Special 74 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 Casa Grande has been implemented Community Committees, integrated by volunteer leaders from community, as well as members of the Company who collaborate in evaluating sustainable proposals. Independent Directors may only be amended by the Company lends and borrows funds among affiliates afﬁrmative vote of a majority of the holders of shares of for acquisitions and other corporate purposes. These Common Stock (calculated without giving effect to any financial transactions bear interest and are subject to super majority voting rights) other than Grupo Mexico review and approval by senior management, as are all and its afﬁliates. related party transactions. It is the Company’s policy that the Audit Committee of the Board of Directors shall TRANSACTIONS WITH AFFILIATES: review all related party transactions. The Company The Company has entered into certain transactions is prohibited from entering or continuing a material in the ordinary course of business with parties that related party transaction that has not been reviewed are controlling shareholders or their affiliates. These and approved or ratified by the Audit Committee. transactions include the lease of office space, air transportation, construction services and products CHANGE OF CORPORATE NAME AND OTHER and services related to mining and refining. The CORPORATE CHANGES: SCC provides educational materials to our stakeholders. On September 20, 2005, by written consent instead of an extraordinary shareholder meeting, the majority shareholder approved the corporate name change of 75 7 1 0 2 T R O P E R L A U N N A 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 of acknowledging the position of the Peruvian Branch with 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 acquisition of some mining exploration concessions, and the copper market, and the need to prevent any possible its exploration activities in the Republics of Argentina client loss, as well as to guarantee the revenue ﬂow and Ecuador. from sales, its ﬁnancial and economic revenues and its solvency, the Board of Directors agreed to maintain Additionally, on the same date, the majority shareholder the original corporate name to the Peru Branch, that is, approved an amendment of our Articles of Incorporation Southern Peru Copper Corporation, Peru Branch, or the Deed to remove others’ provisions in our Deed related abbreviated name “Southern Peru” and/or the acronym with our Class A Common Shares that were formerly SPCC. in circulation, which were converted to Common Shares on May 19, 2005, and to change the number Changes in the Certiﬁcate of Articles of of Corporate directors from ﬁfteen to a number that will Incorporation and Bylaws be regularly established following agreement of most of Dated January 26, 2006, the Board approved Board members stipulating the number of directors will amendment to Southern Copper Corporation’s bylaws: not be less than six or more than ﬁfteen. (i) aiming at removing the provisions related to Class A Common Shares among other changes.(ii) adding The Deed amendment was submitted to the Secretary a new provision for advance notice to shareholders of State of the State of Delaware, and came into effect seeking to nominate directors or to propose other on October 11, 2005. business at annual or special meetings of the Common PERU BRANCH NAME: Stockholders (as applicable) (iii) substitute Grupo Mexico for ASARCO Incorporated in the “Change in Control” 76 Generally, the change of headquarters corporate deﬁnition in the Corporation’s by-laws (iv) and eliminate name should comprise the corresponding name of the the 80% supermajority vote requirement for certain ancillary organizations linked to it, as is the case of the corporate actions. The modiﬁcation of the Modiﬁed Peru Branch through which the Corporation develops its Certiﬁcate of Incorporation increased the capital stock mining activities in Peru. from 167,207,640 shares to 320,000,000 shares. These modiﬁcations were submitted for approval of the Stock had an afﬁrmative vote of 79.85% of the required shareholders at the shareholders annual meeting held votes. Because the required vote for the approval of this on April 27, 2006 which was adjourned and reconvened proposal was 80% and because there were still votes for May 4, 2006, and later on adjourned and reconvened that needed to be tabulated, the annual meeting for this for May 11, 2006. proposal was adjourned until May 4, 2006. On May 4, 2006, at the adjourned and reconvened meeting the At the annual meeting, on April 27, 2006, the proposal stockholders approved the proposal with an afﬁrmative to amend the by-laws to eliminate certain extraneous vote of 80.61% of the required votes. provisions relating to the retired series of Class A Common SCC participated with other institutions supporting activities in favor to earthquakes victims in Mexico. 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 77 7 1 0 2 T R O P E R L A U N N A substitute Grupo Mexico for ASARCO Incorporated in the “Change in Control” deﬁnition in the Corporation’s bylaws; (iii) the amendments to the Amended and Restated Certiﬁcate of Incorporation to increase the number of shares of Common Stock, which the Corporation is authorized to issue from 167,207,640 shares to 320,000,000 shares; and (iv) the selection of the independent accountants. On April 27, 2006, the proposal to amend the by-laws to eliminate the 80% supermajority vote requirement for certain corporate actions had received preliminary votes, representing an affirmative vote of 78.35% of the required votes. Because the required vote for the approval of this proposal was 80% and because there were still votes that needed to be tabulated, the annual meeting for this proposal was adjourned first until May 4, 2006, and subsequently until May 11, 2006. On May 11, 2006, at the adjourned and reconvened meeting stockholders did not approve the proposal having received an affirmative vote of 79.61% of the required votes. SCC is indirectly, part of Grupo Mexico S.A.B. de C.V. which owns 100% of Americas Mining Corporation (AMC) shareholding, owner of 88.91% of SCC shares. INFORMATION ABOUT PLANS AND INVESTMENT POLICIES: See Capital Expenditures and Exploration on page 15. Relationship between the Issuer and the Government On November 20, 1996, SCC and the Peruvian Government (Ministry of Energy and Mines) signed a contract that remained effective until the year 2010 and guaranteed the tax stability and the availability of 78 exchange to foreign currency of the Branch’s earnings related to the operation of the SX/EW plant at Toquepala and the Solvent Extraction (SX) operation in Cuajone. Also, on April 18, 1995, SCC and the Peruvian Government (CONITE) signed a contract that remained effective during ten years and guaranteed the availability of foreign currencies, free remittance of dividends to the exterior, among other guarantees related to the acid plant of the Ilo Smelter. SCC obtains refunds for tax credits in Peru for the general sales tax (IGV) paid in connection with the acquisition of capital goods and other goods and services used in its operations, counting these credits as a paid expense in advance. By virtue of these refunds, SCC is entitled to credit the amount of the IGV against its Peruvian tax obligations or to receive a refund. Special Mining tax In September 2011, the Peruvian government enacted a new tax for the mining industry. This tax is based on operating income and its rate ranges from 2% to 8.4%. It begins at 2% for the ﬁrst 10% of operating income margin and for each additional 5% of operating income margin is increased by an additional rate of 0.4% until 85% of operating income margin is reached. Mining Royalty In September 2011, the Peruvian Congress approved an amendment to the mining royalty charge. The new mining royalty charge is based on operating income margins with graduated rates ranging from 1% to 12%, with a minimum royalty charge assessed at 1% of net sales. If the operating income margin is 10% or less, the royalty charge is 1% and for each 5% increment in the operating income margin, the royalty charge rate increases by 0.75%, up to a maximum of 12%. SCC, indirectly, is part of “Grupo Mexico S.A.B. de C.V.” which owns 100% of Americas Mining Corporation (“AMC”). 79 7 1 0 2 T R O P E R L A U N N A SAFETY AND HEALTH In Southern Copper Corporation, life caring, health and welfare of our employees and their families is 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 identiﬁ cation, control and mitigation of risks, prioritizing actions and the necessary care to prevent accidents. In 2017 we maintained 11 units in Mexico and Peru whose Occupational Safety and Health Management System, have been certiﬁ ed according to OHSAS 18001: 2007. Additionally, in Mexico we have 17 units certiﬁ ed 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 2017 on occupational health and safety include: S T N E D I C C A LE SS % 8 2 • The occupational accident rates at our mining operations in 80 SCC is 41% below average mining industry in USA, according to Mine Safety and Health Administration. • The Mining Chamber of Mexico (CAMIMEX) awarded the “Jorge Rangel Zamorano” Silver Helmet Trophy to Mexicana de Cobre and Santa Eulalia unit, for achieving the lowest recorded accident rates in the industry, as for his efforts in the ﬁeld of accident prevention. • In Peru, SCC has reduced its rate of accidents by 33% during the last 5 years by the implementation of programs to reinforce prevention culture. As a result of our commitment with safety and health, SCC has reduced its rate of accidents by 28%. Every year, we reinforce our policy of prevention to identify risks and set strategies to reduce accidents in our processes for the care of the physical integrity of our employees. Cuajone mine, Moquegua, Peru. 81 7 1 0 2 T R O P E R L A U N N A ACCIDENT RATE (IR), SCC, 2012 - 2017 SEVERITY RATE (SR), SCC, 2013 - 2017 2 1 0 2 9 0 . 1 3 1 0 2 1 0 . 1 4 1 0 2 9 8 . 0 5 1 0 2 2 7 . 0 6 1 0 2 7 7 . 0 7 1 0 2 9 7 . 0 2 1 0 2 9 6 . 0 3 1 0 2 1 2 . 0 4 1 0 2 8 5 . 0 5 1 0 2 4 2 . 0 6 1 0 2 2 3 . 0 7 1 0 2 1 5 . 0 IR = No.of disabling accidents No.of total men - hours worked x 200,000 GR = No.of days lost x 1.00 No.of total men - hours worked These results reﬂect the efforts in our culture of safety During the last ﬁve years, we reduced our rate of activities, the implementation of inspection plans and, occupational diseases by 52% as a result of various especially, the work and commitment of our employees. programs on education, prevention and control risks, as OCCUPATIONAL HEALTH Healthy environments are part of the organizational to our employees and, in some cases, to their families, contractors, suppliers, institutions and the general well as diseases treatment. These programs are offered culture and management system, as a responsibility of public. 82 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. OCCUPATIONAL DISEASE RATE, SCC, 2013-2017 3 1 0 2 7 4 . 0 4 1 0 2 2 3 . 0 5 1 0 2 2 1 . 0 6 1 0 2 7 3 . 0 7 1 0 2 2 4 . 0 ODR = No. of Cases of Occupational Diseases No. of Total Men-Hours Worked x 200,000 ACTIVITIES: TARGETING WORKPLACE PERSONNEL / LABOR • Security courses and conferences TARGETING EMPLOYEES’ FAMILIES AND • Expo safety • Internal Security • Health Fair • Health Career Forum COMMUNITY / FAMILY: • Guided tours “Knowing my Company” • Health career • Parades Familiar Promote values • Awards to employees or Departments with • Firefighting courses ZERO ACCIDENTS • Familiar contests and contests to • Health fair 83 7 1 0 2 T R O P E R L A U N N A INVESTMENT IN SAFETY AND HEALTH During 2017, we invested over $112 million in occupational safety and health, focusing efforts on engineering works, purchase of personal protective equipment, training, coaching, and industrial hygiene studies. In enhanced occupational health, we have developed programs in promotion and protection 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 3.31 0.67 8.89 1.13 94.52 108.52 $ $ $ $ $ $ INVESTMENT IN OCCUPATIONAL HEALTH (in millions) Development, Promotion and Protecition of Health Detection and prevention Treatment Rehabilitation 84 Total SCC 0.72 2.39 0.31 0.04 3.46 $ $ $ $ $ EMPLOYEES FOR THE YEAR ENDED DECEMBER 31TH M E X I C A N O P E R AT I O N S Total P E R U V I A N O P E R AT I O N S Total E C U A D O R O F F I C E Total A R G E N T I N A O F F I C E Total C H I L E O F F I C E Total C O R P O R AT E O F F I C E Total T O TA L E M P L O Y E E S I N S C C Total Mexico Total Peru Total Ecuador Total Argentina Total Chile Total Corporate Ofﬁce Total 2017 2016 2015 2014 2013 8,450 8,762 8,316 8,105 8,182 4,628 4,562 4,602 4,524 4,430 27 18 10 2 8,450 4,628 27 18 10 2 47 20 20 3 8,762 4,562 47 20 20 3 52 26 26 2 8,316 4,602 52 26 26 2 52 26 26 2 8,105 4,524 52 26 26 2 17 16 18 2 8,182 4,430 17 16 18 2 13,135 13,414 13,024 12,735 12,665 85 7 1 0 2 T R O P E R L A U N N A PRINCIPL ES OF COR PO RA TE G OVERN AN CE Information referred to the Resolution of “Superintendencia del Mercado de Valores” No. 012-2014-SMV / 01, consisting of a "Report on Compliance with the Code of Good Corporate Governance for Peruvian Companies" is applicable only to Peruvian companies. Not being SCC a Peruvian company, this report is not submitted to the “Superintendencia del Mercado de Valores” (SMV) of Peruvian Republic. Notwithstanding, SCC submits the "Annual Written Afﬁrmation" to SMV. This document is an informative of Good Corporate Governance which our company remits annually to the New York Stock Exchange. 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 12 “Commitments and Contingencies” to our Consolidated Financial Statements. Changes of those responsible for the preparation and revision of the ﬁnancial Information. At December 31, 2017, no changes have been done. INFORMATION RELATED TO THE STOCK ENTERED IN THE STOCK MARKET PUBLIC Common Stock 86 On November 29, 1995 the Company offered to exchange the recently issued common shares for all and any labor shares of the Peruvian Branch of the Company, at a ratio of one common share per four S-1 shares and one common share per ﬁve S-2 shares. The exchange expired on December 29, 1995, with 80.8% of the total labor shares in circulation exchange for 22,959,334 common shares. These common shares are quoted in New York Stock Exchange and the Lima Stock Exchange and are entitled to one vote per share. Along with the exchange of labor shares the holders of common shares of the Company exchanged their shares for Class A common shares, with the right to ﬁve votes per share. In connection with the Minera Mexico acquisition (April 1, 2005), 134,415,280 new common shares were issued and class A common shares of the Company were converted to common shares, and preferential votes were eliminated. On June 9, 2005, Cerro Trading Company, Inc., SPC Investors L.L.C., Phelps Dodge Overseas Capital Corporation and Climax Molybdenum B.V., subsidiaries of two of SCC’s founding shareholders and afﬁliates, sold their share in SCC. On August 30, 2006 the Executive Committee of the Board of Directors declared a two-for-one split of the Company’s outstanding common stock. On October 2, 2006 common shareholders of record at the close of business on September 15, 2006, received one additional share of common stock for every share owned. The Company’s common stock began trading at its post-split price on October 3, 2006. The split increased the number of shares outstanding to 294,460,850 from 147,230,425. 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. 87 7 1 0 2 T R O P E R L A U N N A Since 2008 and 2017, the Company and AMC had bought shares periodically. At December 31, 2017, there were of record 773,028,469 shares of common stock of the Company, par value $0.01 per share, outstanding. CORPORATE BONDS Between July 2005 and October 2015 the Company issued senior unsecured notes eight times totaling $6.2 billion as listed above. Interest on the notes is paid semi-annually in arrears. The notes rank pari passu 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 $51.2 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. 88 At December 31, 2017, the Company was in compliance with this covenant. Toquepala Expansion Project, Tacna, Peru. Please see Note 11 “Financing” for a discussion about the covenants requirements related to our long-term debt, on Form 10-K 2017. Cuajone mine, Moquegua, Peru. Next page 89 7 1 0 2 T R O P E R L A U N N A 90 MEMBERS OF THE BOARD OF DIRECTORS AT DECEMBER 31, 2017 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 91 7 1 0 2 T R O P E R L A U N N A Company, since August 2010. Previously, he was the the most recent being that of President and Chief Company’s President and General Director and Chief Executive Officer from June 1975 to June 1987. He Operating Ofﬁcer from December 1999 to October later served as Mexico’s Ambassador to Canada from 20, 2004. Mr. Gonzalez Rocha has been a director of July 1987 to February 1989. Mr. Carrillo Gamboa Grupo Mexico since 2002. He was General Director of served from 2002 through March 2010 on the board Mexicana de Cobre, S.A. de C.V. from 1986 to 1999 and on the audit committee of Empresas ICA, S.A.B. and of Buenavista del Cobre, S.A. de C.V. (formerly de C.V. (NYSE—ICA), an engineering, procurement Mexicana de Cananea, S.A. de C.V.) from 1990 to and construction company. He has been a member 1999. He was an alternate director of Grupo Mexico of the valuation, contract review, nominating and from 1998 to April 2002. Mr. Gonzalez Rocha is a civil corporate governance, and audit committees of The engineer with a degree from the Autonomous National Mexico Fund, Inc. since 2002. Mr. Carrillo Gamboa University of Mexico ("UNAM") in Mexico City, Mexico. has served on the board and audit committee of Grupo Mexico since 2004 and on the boards of EMILIO CARRILLO GAMBOA Grupo Nacional Provincial S.A.B. (Mexican insurance Director. company) since 2007, Grupo Posadas, S.A.B. de Mr. Carrillo Gamboa has been a director of the C.V. (Mexican hotel operation company) since 2006, Company since May 30, 2003 and is our fourth Grupo Profuturo, S.A.B. de C.V. (Mexican insurance independent director nominee. Mr. Carrillo Gamboa and pension holding company) since 2009, and is a prominent lawyer in Mexico and has been the Kimberly-Clark de Mexico, S.A.B. de C.V. (consumer Senior Partner of the Bufete Carrillo Gamboa, products) since 2002. Mr. Carrillo Gamboa has a law S.C., a law firm specializing in corporate, financial, degree from the UNAM in Mexico City, Mexico. He commercial, and public utility issues, for the last five also attended a continuous legal education program years. Mr. Carrillo Gamboa has extensive business at Georgetown University Law Center in Washington experience and currently serves on the boards of many D.C., and practiced at the World Bank. prestigious international and Mexican corporations, as well as charitable organizations. Since March 9, ALFREDO CASAR PEREZ 92 2005, he has been Chairman of the board of The Director. Mexico Fund, Inc. (NYSE—MXF), a nondiversified Mr. Casar Perez has been a director of the Company closed-end management investment company. Mr. since October 26, 2006. He has been a member of the Carrillo Gamboa held various offices with Telefonos de board of directors of Grupo Mexico since 1997. He is Mexico, S.A. de C.V. (“TELMEX”) from 1960 to 1987, also a member of the board of directors of Ferrocarril Mexicano, S.A. de C.V., an afﬁliated company of Grupo Mexico, since 1998 and its Chief Executive Ofﬁcer since 1999. From 1992 to 1999, Mr. Casar Perez served as General Director and member of the board of directors of Compañia Perforadora Mexico, S.A. de C.V. and Mexico Compañia Constructora, S.A. de C.V., two afﬁliated companies of Grupo Mexico. Mr. Casar Perez served as Project Director of ISEFI, a subsidiary of Banco Internacional, in 1991 and Executive Vice President of Grupo Costamex in 1985. Mr. Casar Perez also worked for the Real Estate Firm, Agricultural Ministry, and the 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. ENRIQUE CASTILLO SANCHEZ MEJORADA Director. Mr. Castillo Sanchez Mejorada has been a director of the Company since July 26, 2010 and is our fourth 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). Since November 2016 to date, Mr. Castillo Sanchez Mejorada has been Chairman of the Board of Banco Nacional de Mexico, S.A. (Citibanamex) one of the largest banks in Mexico. From April 2011 to May 2013, Mr. Castillo Sánchez Mejorada was a senior advisor at Grupo Financiero Banorte, S.A.B. de C.V. (“GFNorte”) a ﬁnancial holding institution that controls a bank, a broker dealer 93 7 1 0 2 T R O P E R L A U N N A and other ﬁnancial institutions in Mexico. From October 2000 to March 2011, Mr. Castillo Sánchez 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 on April 2011. In addition, from March 2007 to March 2009, Mr. Castillo Sánchez Mejorada was the President of the Mexican Banking Association (Asociación de Bancos de México). Currently, Mr. Castillo Sánchez Mejorada is Chairman of the Board of Banco Nacional de Mexico, S.A. (Citbanamex), one of the largest banks in Mexico and serves as an independent director on the board 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) Médica Sur, S.A.B. de C.V., a Mexico-based company engaged in the hospital business and (iv) UNIFIN, an independent leasing company. He is also a Senior Advisor for General Atlantic in Mexico, a private equity ﬁrm based out of New York. From April 2012 to April 2016, Mr. Castillo Sánchez Mejorada served as a member of the board of directors of Organización 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. From April 2012 until April 2014, Mr. Castillo Sánchez 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 twelve airports in 94 the Paciﬁc and central regions of Mexico. From April 2010 until 2013, Mr. Castillo Sánchez Mejorada was a member of the board of directors of Grupo Casa Saba, S.A.B. de C.V., a Mexican wholesale distributor of pharmaceutical, health, beauty and other consumer products and operator of a retail pharmacy chain. Mr. Castillo Sánchez Mejorada has been a member of the audit committee of Alfa, S.A.B. Condumex, S.A. de C.V. (telecommunications, electronic de C.V. since 2010. Mr. Castillo Sánchez Mejorada and automotive parts producer) for eight years. Mr. Garcia holds a Bachelor’s degree in Business Administration de Quevedo was the Chairman of the Mining Chamber from the Anáhuac University, in Mexico City, Mexico. of Mexico from November 2006 to August 2009. He is a chemical engineer with a degree from the UNAM XAVIER GARCIA DE QUEVEDO TOPETE in Mexico City, Mexico. He also attended a continuous Director. business administration and ﬁnance program at the Mr. Garcia de Quevedo has been a director of the Technical Institute of Monterrey in Monterrey, Mexico. Company since November 1999. He was our Chief Operating Ofﬁcer from April 12, 2005 until April 23, DANIEL MUÑIZ QUINTANILLA 2015. Since November 1, 2014 Mr. Garcia de Quevedo Director. Topete serves as the President of the infrastructure Mr. Muñiz has been a director of the Company since May division of Grupo Mexico, composed of the energy, gas, 28, 2008. He was appointed Executive Vice President of oil and construction subsidiaries of Grupo Mexico. Mr. the Company on April 28, 2016. Mr. Muñiz has been the Garcia is the Chief Financial Ofﬁcer of Grupo Mexico. Chief Financial Ofﬁcer of Grupo Mexico since April 2007 He was the President and Chief Executive Ofﬁcer of to October 2015. He has been Executive Vicepresident Southern Copper Minera Mexico from September 2001 of AMC since October 2015. Prior to joining Grupo until November 1, 2014. He was the President and Mexico, Mr. Muñiz was a practicing corporate-ﬁnance Chief Executive Ofﬁcer of Americas Mining Corporation lawyer from 1996 to 2006. During this time he worked at from September 7, 2007 to October 31, 2014. From Cortes, Muñiz y Nuñez Sarrapy; Mijares, Angoitia, Cortes December 2009 to June 2010, he was Chairman and y Fuentes; and Baker & McKenzie (London and Mexico Chief Executive Ofﬁcer of Asarco LLC, previously he City ofﬁces). He holds a Master’s degree in Financial Law was President of Asarco LLC from November 1999 to from Georgetown University Law Center in Washington September 2001. Mr. Garcia de Quevedo began his D.C., and a Master’s degree in Business Administration professional career in 1969 with Grupo Mexico. He was from Instituto de Empresa in Madrid, Spain. President of Grupo Ferroviario Mexicano, S.A. de C.V. and of Ferrocarril Mexicano, S.A. de C.V. from December LUIS MIGUEL PALOMINO BONILLA 1997 to December 1999, and Executive Vice-President Director. of Exploration and Development of Grupo Mexico from Dr. Palomino has been a director of the Company since 1994 to 1997. He has been a director of Grupo Mexico March 19, 2004 and is a special independent director since April 2002. He was also Vice President of Grupo nominee. Dr. Palomino has been Chairman of the board 95 7 1 0 2 T R O P E R L A U N N A of directors of Aventura Plaza, S.A. (commercial real in economics and ﬁnance, acquired from extensive estate developer and operator) since January 2008, academic studies, including a PhD in Finance from Manager of the Peruvian Economic Institute (economic the Wharton School of the University of Pennsylvania think tank) since April 2009, Partner of Proﬁt Consultoria in Philadelphia, Pennsylvania, his expertise, his wise e Inversiones (a ﬁnancial consulting ﬁrm) since July counsel, and his extensive business experience gained 2007, director of the Master in Finance Program at the from his past and current activities from serving as University of the Paciﬁc in Lima, Peru since July 2009, a ﬁnancial analyst, including of the mining sectors in and a director and chairman of the audit committee of Mexico and Peru. the Bolsa de Valores de Lima (Lima Stock Exchange) since March 2013. He was a member of the board of GILBERTO PEREZALONSO CIFUENTES directors of Access SEAF SAFI from December 2007 Director. to April 2010. Dr. Palomino was previously Principal Mr. Perezalonso has been a director of the Company and Senior Consultant of Proconsulta International since June 2002 and is a special independent director (ﬁnancial consulting) from September 2003 to June nominee. Mr. Perezalonso was Chairman of the board 2007. Previously he was First Vice President and Chief of directors of Volaris Compañia de Aviacion, S.A.P.I. Economist, Latin America, for Merrill Lynch, Pierce, de C.V. (airline) from March 2, 2011 to November Fenner & Smith, New York (investment banking) from 2014. He was Chief Executive Ofﬁcer of Corporacion 2000 to 2002. He was Chief Executive Ofﬁcer, Senior Geo, S.A. de C.V. (housing construction) from February Country and Equity Analyst of Merrill Lynch, Peru 2006 to February 2007. Mr. Perezalonso was the (investment banking) from 1995 to 2000. Dr. Palomino Chief Executive Ofﬁcer of Aeromexico (Aerovias de has held various positions with banks and ﬁnancial Mexico, S.A. de C.V.) (airline company) from 2004 until institutions as an economist, ﬁnancial advisor and December 2005. From 1998 until April 2001, he was analyst. He has a PhD in ﬁnance from the Wharton Executive Vice President of Administration and Finance School of the University of Pennsylvania in Philadelphia, of Grupo Televisa, S.A.B. (media company). From 1980 Pennsylvania and graduated from the Economics until February 1998, Mr. Perezalonso held various Program of the University of the Paciﬁc in Lima, Peru. positions with Grupo Cifra, S.A. de C.V. (department 96 stores), the most recent position being that of General Dr. Palomino is a member of our Audit Committee and Director of Administration and Finance. Now he is a a special independent director nominee. He is also our member of the advisory council of Banco Nacional de “ﬁnancial expert,” as the term is deﬁned by the SEC. Mexico, S.A. de C.V. (banking), the board of directors and Dr. Palomino contributes to the Company his education the investment committee of Afore Banamex (banking), the board and the investment committee of Siefore Banamex No. 1 (banking), and is a member of the boards of directors of Gigante, S.A. de C.V. (retail), Masnegocio Co. S. de R.L. de C.V. (information technology), Intellego (technology), Telefonica Moviles Mexico, S.A. de C.V. (wireless communication), Cruz Roja Mexicana (emergency and medical services), Construction Company Marhnos (housing construction), and Fomento de Investigacion y Cultura Superior, A.C. (Foundation of the Iberoamerican University) . Mr. Perezalonso was a director of Cablevision, S.A. de C.V., Grupo Televisa, S.A.B. and a member of the audit committee of Grupo Televisa, S.A.B. from March 1998 to September 2009. Mr. Perezalonso has a law degree from the Iberoamerican University in Mexico City, Mexico and a Master’s degree in Business Administration from the Business Administration Graduate School for Central America (INCAE) in Nicaragua. Mr. Perezalonso has also attended a Corporate Finance program at Harvard University in Cambridge, Massachusetts. 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 97 7 1 0 2 T R O P E R L A U N N A 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. RAFAEL MAC GREGOR ANCIOLA Director. Mr.Mac Gregor has been a director of the Company since July 2017 and is an independent director. Mr. Mac Gregor has served as managing Partner of RMAC Asociados (Mexican consulting ﬁrm) since 2016. He has been an independent director of the Board of Grupo Financiero Citibanamex (Mexican banking company), Chairman of its Risk Committee, Chairman of Citibanamex’s Impulsora de Fondos Committee (Asset Management Co), and member of Citibanamex’s Audit Committee since 2016. In 98 addition, he is an independent member of the Board of directors of Corporación Multi Inversiones (CMI) (multi-national agro-industrial company) since 2016. From February 1999 to July 2015, he served as a Corporate Director of Grupo Bal (Mexican companies principally engaged in agricultural and livestock, commercial operations, industrial operations, and ﬁnancial services businesses). From April 1999 to 2015, he was a member of the Board of Directors of the Mexican Stock Exchange. From 2001 to 2016, he served as a member of the Board of the Instituto Tecnológico Autónomo de México (ITAM) and from April 2008 to 2016, he served as a member of the Board of Fresnillo PLC (Mexican-based mining company). From April 1995 to July 2015, he served as President of the Board of a Mexican Brokerage House and Valmex Leasing Company (Mexican leasing company). Additionally, from April 1995 to July 2015, Mr. Mac Gregor Anciola served on the Boards of Grupo Nacional Provincial, S.A.B. (Mexican insurance company), Grupo Palacio de Hierro, S.A.B. (Mexican department stores), Industrias Peñoles, S.A.B. (Mexican mining company), Crédito Aﬁanzador, S.A. (Mexican ﬁnancing company), MineraTizapa, S.A. de C.V. (Mexican mining company), MineraPenmont, S.A. de C.V.(Mexican mining company), Profuturo G.N.P., S.A. de C.V., Afore, Profuturo GNP Pensiones, S.A. de C.V. (Mexican insurance and pension holding company) and Vice President of the MexDer (Mexican derivatives exchange). Mr. Mac Gregor Anciola holds the recognition of the Professional Merit Award from ITAM. Mr. Mac Gregor Anciola holds a degree in Business Administration from the Instituto Tecnológico Autónomo de México in Mexico City and he attended the Stanford University Executive program in Palo Alto, California. Mr. Mac Gregor Anciola brings to the Company more than 30 years of experience in the ﬁnancial sector. He also adds to the Board of Directors his leadership experience and expertise attained through his participation as a director of the Mexican Stock Exchange and as an independent director of various other companies. 99 7 1 0 2 T R O P E R L A U N N A EXECUTIVE OFFICERS GERMAN LARREA MOTA-VELASCO Chairman of the Board of Directors OSCAR GONZALEZ ROCHA President and Chief Executive Ofﬁcer DANIEL MUÑIZ QUINTANILLA Executive Vice President RAUL JACOB RUISANCHEZ Vice-President, Finance Treasurer and Chief Financial Ofﬁcer EDGARD CORRALES AGUILAR Vice-President, Exploration JORGE LAZALDE PSIHAS Secretary ANDRES FERRERO G. General Counsel LINA VINGERHOETS VILCA Comptroller 100 General Auditor RAFAEL FERNANDO LÓPEZ ABAD 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 88.91 % of the stock of the Company, as of December 31, 2017. 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, Enrique Castillo Sanchez Mejorada and Rafael Mac Gregor Anciola are our fourth, ﬁfth and sixth independent directors. At its meeting on January 26, 2017 and July 20, 2017, the Board of Directors determined that Messrs. Luis Miguel Palomino Bonilla, Gilberto Perezalonso Cifuentes, Carlos Ruiz Sacristan, Emilio Carrillo Gamboa, Enrique Castillo Sanchez Mejorada and Rafael Mac Gregor Anciola 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. 101 7 1 0 2 T R O P E R L A U N N A SPECIAL COMMITTEES OF THE BOARD SCC’s Board of Directors has organized the following Special Committees: 1. Executive Committee. It is comprised of ﬁve members who substitute for the Board when sessions or decisions are required concerning urgent matters, or matters for which the Board would have expressly delegated its mandate. 2. Audit Committee. It is comprised of three independent Board members who are knowledgeable in accounting and ﬁnancial matters. Its main purpose is to: (a) assist the Board in monitoring (i) the quality and integrity of the Company’s ﬁnancial statements; (ii) the qualiﬁcations and independence of the independent auditors; (iii) the performance of the internal audit function and of the independent auditors; and (iv) the Company’s compliance with legal and regulatory requirements; and (b) prepare the report required by SEC rules. 3. Compensation Committee. It is comprised of four Board members and its principal objective is to evaluate and establish the remunerations of principal ofﬁcers and key employees of the Company and its subsidiaries. 4. Special Nominating Committee. It is comprised of two independents Board members and one nominated by the Board and it has the exclusive authority to propose and evaluate individuals who are 102 proposed as special independents directors. 5. Corporate Governance Committee. It is comprised of four Board members and has as its primary functions to consider and make recommendations to the Board concerning the appropriate function and needs of the Board, to develop and recommend to the Board corporate governance principles, to oversee evaluation of the Board and management, and to oversee and review compliance with the disclosure and reporting standards of the Company that require full, fair, accurate, timely, and understandable disclosure of material information regarding the Company in reports and documents that it ﬁles with the SEC, the NYSE and equivalent authorities in the countries in which the Company operates, as well as in other public communications that it regularly makes. 6. Administrative Committee. It is designated by the Named Fiduciary appointed by the Board for the beneﬁt plans as required by the Employee Retirement Income Security Act – ERISA of the United States. ERISA is the law that covers employee retirement and other beneﬁt plans. Mr. Daniel Muñiz Quintanilla is the Board-appointed Named Fiduciary for the Company’s beneﬁts plans subject to US regulations, including ERISA. This Ofﬁcer appoints an Administrative Committee, which is comprised of three management members and its purpose is to administer and manage said plans and to oversee the performance of the trust agents and other ﬁduciaries charged with investing the plans’ funds. 103 7 1 0 2 T R O P E R L A U N N A ADMINISTRATION AND BOARD INCOME Total remunerations of Board and Administration members, in relation to the Company´s gross income is 0.06%. 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 26, 2018 at 9:00 A.M., Mexico City time. CORPORATE OFFICES United States 1440 East Missouri Avenue, Suite 160 Phoenix, Az. 85014, USA 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 Caminos del Inca Avenue Nº 171 104 Chacarilla del Estanque Santiago de Surco, Lima 33, Peru Phone: +(511) 512-0440, Ext. 3181 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. 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. 105 7 1 0 2 T R O P E R L A U N N A 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: Southern Copper Corporation USA: 1440 East Missouri Avenue, Suite 160 Phoenix, Az. 85014, USA Phone: (602)264-1375, Fax (602) 264-1397. MEXICO: Campos Eliseos No. 400, 11 ﬂoor, Col. Lomas de Chapultepec Mexico D.F. Phone +(52-55) 1103-5000, Extension 5855. PERU: Caminos del Inca Avenue 171 (B-2), Chacarilla del Estanque, Santiago de Surco – Lima 33 - Peru. Phone. +(511) 512-0440, Ext. 3181. 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. 106 1Form 10-K Phone. +(511) 512-0440, extension 3442 for Spanish MEMBERS OF THE BOARD OF DIRECTORS German Larrea Mota-Velasco Oscar Gonzalez Rocha Emilio Carrillo Gamboa Enrique Castillo Sanchez Mejorada Alfredo Casar Perez Xavier Garcia de Quevedo Topete Daniel Muñiz Quintanilla Luis Miguel Palomino Bonilla Gilberto Perezalonso Cifuentes Carlos Ruiz Sacristan Rafael Mac Gregor Anciola AUDIT COMMITTEE Emilio Carrillo Gamboa, Chairman Luis Miguel Palomino Bonilla Gilberto Perezalonso Cifuentes Enrique Castillo Sanchez Mejorada Ite wetlands, Moquegua, Peru. Next page 107 7 1 0 2 T R O P E R L A U N N A 108 SOUTHERN COPPER CORPORATION CORPORATE OFFICES UNITED STATES 1440 E. Missouri Avenue, Suite 160, Phoenix, AZ 85014, U.S.A. Phone: +(602) 264-1375 MEXICO Ediﬁ cio Parque Reforma, Campos Eliseos Nº 400. Col. Lomas de Chapultepec, Mexico D.F. Phone: + (52-55) 1103-5000 PERU Caminos del Inca Avenue 171 Chacarilla del Estanque, Santiago de Surco Lima 33 - Peru Phone: +(511) 512-0440, Ext. 3181 Symbol: SCCO E-mail address: southerncopper@southernperu.com.pe

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