Southern Copper Corporation (“SCC”)

INDEX TO FORM 10-K

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PART I

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ITEM 1. BUSINESS

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THE COMPANY

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We believe Southern Copper Corporation (“SCC”, “Southern Copper” or the “Company”) is one of the largest integrated copper producers in the world. Our major production includes copper, molybdenum, zinc and silver. All of our mining, smelting and refining facilities are located in Peru and Mexico and we conduct exploration activities in those countries and in Argentina, Chile and Ecuador. See Item 2 “Properties—Review of Operations” for maps of our principal mines, smelting facilities and refineries. OurThe considerable scale of our operations makemakes us one of the largest mining companies in Peru and Mexico. We believe we have the largest copper reserves in the world. 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 Lima Stock Exchanges.

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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 blister and 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 sulfuric acid. Our precious metals plant at the Ilo refinery produces refined silver, gold, and other materials. Additionally, we produce refined copper using solvent extraction/electrowinning technology (“SX-EW”). We operate the Toquepala and Cuajone open-pit 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.

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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 primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead. Minera Mexico operates through subsidiaries that are grouped into three separate units. Mexicana de Cobre, S.A. de C.V. (together with its subsidiaries, the “La Caridad” unit) operates La Caridad, an open-pit copper mine, a copper ore concentrator, a SX-EW plant, a smelter, refinery and a rod plant. The La Caridad refinery has a precious metals plant whichthat produces refined silver, gold and other materials. Operadora de Minas e Instalaciones Mineras, S.A de C.V. (the “Buenavista unit”) operates Buenavista, an open-pit copper mine, which is located aton the site of one of the world’s largest copper ore deposits, two copper concentrators and threetwo operating SX-EW plants. Industrial Minera Mexico, S.A. de C.V. (together with its subsidiaries, the “IMMSA unit”) operates five underground mines that produce zinc, lead, copper, silver and gold, a coal mine and a zinc refinery.

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We utilize modern, state of the art mining and processing methods, including global positioning systems and computerized mining processes. Our operations have a high level of vertical integration, thatwhich allows us to use our facilities, employees and equipment to manage the entire production process, from theincluding ore mining of the ore to theand production of refined copper rod and other products, and to execute most relatedassociated transport and logistics functions, using our own facilities, employees and equipment.functions.

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The sales prices for our products are largely determined by market forces beyond our control. Our management, therefore, focuses on cost control and production enhancement to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our focus is to remainon remaining profitable during periods of low copper prices and on maximizing results in periods of high copper prices. For additional information on the sale prices of the metals we produce, please see “Metal Prices” in this Item 1.

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Currency Information:

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Unless stated otherwise, all our financial information is presented in U.S. dollars and any reference herein to “U.S. dollars”, “dollars”,dollars,” “dollars,” or “$” are to U.S. dollars; references to “sol”,“sol,” “soles” or “S/”, are tosignify Peruvian soles; and references to “peso”, “pesos”,“peso,” “pesos,” or “Ps.,”, are to represent Mexican pesos.

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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 31, 20192020 we have purchased 119.5 million shares of our common stock at a cost of $2.9 billion. 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.

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REPUBLIC OF PERU AND MEXICO

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Our revenues are derived primarily from our operations in Peru and Mexico. Risks related to our operations in both countries include those associated with economic and political conditions, the effects of currency fluctuations and inflation, the effects of government regulations and the geographic concentration of our operations.

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AVAILABLE INFORMATION

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We file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document we file at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including Southern Copper Corporation) file electronically with the SEC. The SEC’s website is www.sec.gov.

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Our website is www.southerncoppercorp.com. Beginning withThe first document on the list of materials available on this website is Form 8-K, dated March 14, 2003, we have made available on this website,2003. We offer, free of charge, downloads of our annual, quarterly and current reports, as soon as they can be reasonably practical after we electronically file such materialmade available following electronic or physical filing with or furnish it to, the SEC. Our website also includes the Company’s Corporate Governance guidelines and the charters of our principalmain Board Committees. However, the information found on our website is not part of this or any other report.

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CAUTIONARY STATEMENT

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Forward-looking statements in this report and in other Company statements include information regarding expected commencement dates of mining or metal production operations, projected quantities of future metal production, anticipated production rates, operating efficiencies, costs and expenditures, including taxes, as well as projected demand or supply for the Company’s products. Actual results could differ materially depending upon certain factors, including the risks and uncertainties relating to general U.S. and international economic and political conditions, the cyclical and volatile prices of copper, other commodities and supplies, including fuel and electricity, the availability of materials, insurance coverage, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, lower than expected ore grades, water and geological problems, the failure of equipment or processes to operate in accordance with specifications, failure to obtain financial assurance to meet closure and remediation obligations, labor relations, litigation and environmental risks, as well as political and economic risk associated with foreign operations. Results of operations are directly affected by metal prices on commodity exchanges, which can be volatile.

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Additional business information follows:

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COPPER BUSINESS

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Copper is an important component in the world’s infrastructure.infrastructure chain. It is the third most widely used metal, after iron and aluminum. Copper has unique chemical and physical properties, including high ductility, malleability,ductility; malleability; thermal and electrical conductivity,conductivity; and resistance to corrosion, that has made itand as such, is considered a superiorprime material for use in electrical and electronic products, including components for power transmission and generation, which accounts for about three quarters of copper global use, and for telecommunications, building construction, transportation and industrial machinery. Copper is also an important metal in non-electrical applications such as plumbing and roofing and, when alloyed with zinc to form brass, is used in many industrial and consumer applications.

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Copper is an internationally traded commodity withwhose prices principallyare mainly determined by the major metal exchanges, the Commodities Exchange, or “COMEX”,“COMEX,” in New York and the London Metal Exchange or “LME.“LME,” in London. Copper is usually found in nature in association with sulfur. Pure copper metal is generally produced fromin a multistagemulti-stage process, beginning with the mining and concentrating of low-grade ores containing copper sulfide minerals, and followed by smelting and electrolytic refining to produce a pure copper cathode. An increasingincreasingly larger share of copper is being produced from acid leaching of oxidized ores. Copper is one of the oldest metals ever usedknown to man and has been one of the most important materials incontributed significantly to the development of civilization.

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BUSINESS REPORTING SEGMENTS:

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Our management viewsdivides Southern Copper as havinginto three reportable segments and manages it on the basis of these segments.each as a separate segment.

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The three segments identified are groups of individual mines, each of which constitutes an operating segment with similar economic characteristics, type of products,product types, processes and support facilities, regulatory environments, employee bargaining contracts and currency risks. In addition, each mine within the individual group earns revenues from similar types of customers for their products and services and each group incurs expenses independently, including commercial transactions between groups.

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Inter-segment sales are based on arm’s length prices at the time of sale. These may not be reflective of actual prices realized by the Company due to various factors, including additional processing, timing of sales to outside customers and transportation cost. Added to the segment data is informationInformation regarding the Company’s sales.sales is included in the segment data. The segments identified by the Company are:

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Financial information is regularlyperiodically prepared for each of the three segments and the results are reported to Senior managementthe Chief Operating Decision Maker (“CODM”) on a segment basis. Senior managementThe CODM focuses on operating income and on total assets as measures of performance to evaluate different segments and to make decisions to allocate resources to the reported segments. These are common measures in the mining industry.

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Segment information is included in Item 2 “Properties,” under the captions—“Metal Production by Segments” and “Ore Reserves.” More information on business segment and segment financial information is included in Note 18 “Segment and Related Information” of ourthe consolidated financial statements.

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CAPITAL INVESTMENT PROGRAM AND EXPLORATION ACTIVITIES

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For a description of our capital investment program, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Investment Program” and for our exploration activities, see Item 2 “Properties—Explorations Activities.”

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PRINCIPAL PRODUCTS AND MARKETS

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Copper is primarily used in the building and construction industries,industries; in the power generation and transmission industry,industry; and in the electrical and electronic productsproducts; and, to a lesser extent, in industrial machinery and equipment,equipment; consumer productsproducts; and in the automotive and transportation industries. Molybdenum is used to toughen alloy steels and soften tungsten alloy and is also used in fertilizers, dyes, enamels and reagents. Silver is used for photographic, electrical and electronic products and, to a lesser extent, in brazing alloys and solder, jewelry, coinage, silverware and catalysts. Zinc is primarily used as a coating on iron and steel to protect against corrosion andcorrosion; it is also used to make die cast parts in the manufacturing ofto manufacture batteries and in theto form of sheets for architectural purposes.

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Our marketing strategy and annual sales planning emphasize developing and maintaining long-term customer relationships. ThusAs such, acquiring annual or other long-term contracts for the sale of our products is a high priority. Generally, 80% to 90% of our metal production is sold under annual or longer-term contracts. Sales prices are determined based on the prevailing commodity prices for the quotation period according to the terms of the contract.

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We focus on the ultimate end-user customers as opposed to selling on the spot market or to trading companies. In addition, we devote significant marketing efforts to diversifying our sales both by region and by customer base. We also strive to provide superior customer service, including timely deliveries of our products. Our ability to consistently fulfill customer demand is supportedunderpinned by our substantial production capacity.

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For additional information on sales please see “Revenue recognition” in Note 2 “Summary of Significant Accounting Policies” and Note 18 “Segment and Related Information” of ourthe consolidated financial statements.

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METALS PRICES

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Prices for our products are principally a function of supply and demand and, with the exception of molybdenum, are established on COMEX and LME. Prices for our molybdenum products are established by reference to the publication Platt’s Metals Week. Our contract prices also reflect any negotiated premiums and the costs of freight and other factors. From time to time, we have entered into hedging transactions to provide partial protection against future decreases in the market price of metals and we may do so under certain market conditions. For a further discussion of our products market prices, please see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Metal Prices.”

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The table below shows the high, low and average COMEX and LME per pound copper prices during the last 10 years:

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The per pound COMEX copper price during the last 5 and 10 year periods averaged $2.63$2.69 and $3.07,$3.00, respectively. The per pound LME copper price during the last 5 and 10 year periods averaged $2.64$2.70 and $3.06,$3.00, respectively.

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The table below shows the high, low and average per-pound, exceptprices per pound with the exception of silver, which is priced per ounce,ounce. The market prices for our three principal by-products duringover the last 10 years:years are as follows:

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The per ounce COMEX silver price during the last 5 and 10 year periods averaged $16.32$17.31 and $21.10,$21.15, respectively. The per pound Platt’s Metals Week Dealer Oxide molybdenum price during the last 5 and 10 year periods averaged $8.85$9.25 and $10.94,$10.23, respectively. The per pound LME zinc price during the last 5 and 10 year periods averaged $1.12$1.15 and $1.03,$1.04, respectively.

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COMPETITIVE CONDITIONS

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Competition in the copper market is based primarily on price and service basis, with price being the most important factor when supplies of copper are ample. Our products compete with other materials, including aluminum and plastics. For additional information, see Item 1A “Risk Factors—The copper mining industry is highly competitive.”

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LABOR FORCEHUMAN CAPITAL RESOURCES

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As of December 31, 2019,2020, we had 14,30113,777 employees, approximately 71% of whom are unionized and represented by nine different labor unions. DespiteWe believe that the three strikes in 2017 at our Peruvian operations, we believe the Company has a positive labor environment in our operations in Mexico and Peru is favorable, which is allowinghas allowed us to increase productivity as well as helping us achievewe advance the goals of our capital expansion program.

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As a large integrated copper producer, we have a wide range of employees, including management professionals, technicians, engineers, and production employees.  In Peru and Mexico we provide a wide variety of opportunities for professional growth for all employees with trainings and on-the-job experience. As of December 31, 2020, approximately 6.5% of our total workforce was female.

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The Company seeks to create value for its employees to ensure that their working experience is optimal. Various efforts are made on this front, including promoting a safe and collaborative work environment and culture and ensuring employees continue to be engaged with the Company’s values and principles. We believe that this generates the bases for shared values and improves our employer brand for existing and future employees. We also focus on attracting and retaining employees by providing compensation and benefit packages that are competitive within the applicable market, taking into account the location of the position, responsibilities and compensation requirements in the countries where we operate. Our compensation practices consider many factors, including individual performance and responsibilities; years of service; elements of compensation mandated by Peruvian and Mexican law; future challenges and objectives; contributions to the future success of our Company; the employee’s total compensation and our financial performance. We may also look at the compensation levels of comparable companies.

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In 2020, in response to COVID-19, we incurred $27.6 million in COVID-19 related production costs, which included protective equipment and labor costs to support employees where operations were impacted; expanding, where possible, options for remote work; and enhancing safety protocols. For additional information, refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 “Description of the Business, COVID-19 Pandemic” to the consolidated financial statements.

In terms of corporate culture, the Company is committed to the continuous growth and development of its employees and surrounding communities. Through values such as creativity, honesty, equality and respect, we ensure that our employees are aligned with the same principles and work ethics, which in turn results in a standardized culture across the Company. The Company also seeks to promote goal-oriented principles to obtain results that positively affect our main stakeholders and communities and which focus on innovation, human growth and wellbeing, environmental care, and forward thinking.

We deploy several talent attraction programs, which entail leveraging organizational relations; establishing links with national and regional institutions of higher learning in the countries where we operate; and participating in job fairs. We also have a careers page and use several local and international job boards to publish openings.

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We offer professional internship programs to attract students before they graduate from universities or centers for vocational training. Additionally, we believe that we are a first-choice employer in the countries where we operate. This reflects our efforts to strengthen relationships with our stakeholders, including employees, and engage in community development. We have transparent selection processes and are committed to upholding principles for Human Rights and Diversity, Inclusion and Non-Discrimination.

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All our employees receive initial training and opportunities for continuous development throughout their careers, which favors talent retention. We also prioritize recruiting from our ranks and 60% of our vacant positions, on average, are filled by current employees looking to make career moves.

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Voluntary turnover indicators in all of the countries in which we operate remain at single digits year-over-year. We believe that this is proof that our employees have a strong desire to continue working with us.

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In addition, we conduct a biannual Employee Opinion Survey to measure employees’ perceptions of the Company to take actions that will increase employee engagement. We have decided to measure the factors that affect our organizational climate, which entails assessing how people perceive of the environment inside the organization, and how internal and/or external factors generate impact, and focuses on culture, which reflects the aggregate of behaviors, experiences, habits, practices, values, procedures and policies inside the organization.

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All employees, both unionized and non-unionized, are invited to participate in all of our human talent initiatives. This reflects our belief that it is in the Company’s best interest to listen to all of our people and create an open communications channel. We apply surveys every two years and approximately 70% of our employees participate. This number far exceeds that registered by other companies that apply similar surveys.

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We measure the employee engagement level with 18 sub-factors, which are grouped into two major sets of factors: loyalty and satisfaction. The first factor represents the degree to which an individual identifies with the organization and its business goals, whereas the second reflects the individual’s degree of satisfaction with his/her working conditions and draws a line between satisfaction levels and performance at work.

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The average of these factors indicates the level of engagement on a scale of 1 to 5 (a Likert scale). In 2017, we had an engagement rating of 3.71 and in 2019, our rating was situated at 3.77. This represents a 1.6% improvement from 2017 to 2019.

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We have adopted a corporate social responsibility policy that is designed to integrate the Company´s operations with local communities in areas influenced by our operations. This policy focuses on creating permanent and positive relationships to generate optimal social conditions and promote sustainable development in the area. We continue to make significant expenditures for community programs.  For additional information on our community programs, refer to Corporate Social Responsibility under Note 13 “Commitments and contingencies” to the consolidated financial statements.

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Peru

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65%66% of our 4,890the Company’s 4,739 Peruvian employees were unionized atas of December 31, 2019.2020. Currently, there are six separate unions, one large union and five smallersmall unions. In June 2018, the Company signed a three-year collective bargaining agreement with one of the smaller unions. This agreement includes, among other things, annual salary increases of 5% for each year starting September 2018, and a signing bonus of S/45,000 (approximately $13,600) which was recorded as labor expense. In August 2018, the Company signed a three-year collective bargaining agreement with three additional unions. This agreement includes, among other things, annual salary increases of 5% for each year starting December 2018, and a signing bonus of S/45,000 (approximately $13,600) which was recorded as labor expense. In March 2019, the Company signed an agreementresolved pending issues through arbitration with one additional union. The agreement alsoarbitral award included annual salary increases of 5% for each year starting September 2018 and a signing bonus of S/45,000 (approximately $13,600), which was recorded as a labor expense in the first quarter of 2019.

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In May 2019, arbitration resolved pending issues with the remaining union. The arbitral award included a salary increase of 5.5% beginning in September 2018 and a bonus of S/16,000 (approximately $4,800) for the one-year agreement, which was recorded as a labor expense in the second quarter of 2019. In November 2019, the Company signed two agreementsa collective bargaining agreement for three years with the remaining union, one of them for one year and thesame union. This agreement included, among other one consisting ofthings, a three-year collective bargaining agreement. The agreements also included annual salary

may occur in the prices of these raw materials may fluctuate outside ofthat are beyond our control, thereforecontrol; as such, we focus our efforts to reduce theseon reducing costs through cost and energy savingenergy-saving measures.

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Energy isgenerates the principalmain cost in mining, so the concern for its conservation and efficient usage is critical. We have energy management committees at most of our mines, which meet periodically to discuss consumption and to develop measures directed at saving energy. Also, alternative sources are being analyzed at the corporate level, fromincluding both traditional and renewable energy sources. This approach has helped us to develop a culture of energy conservation directed at ensuring the sustainability of our operations.

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Peru:

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Fuel: In Peru, we obtain fuel primarily from local companies. The Company believes that adequate supplies of fuel are available in Peru.

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Electricity: In June 2014, we entered into a power purchase agreement for 120 megawatt (“MW”) with the state company Electroperu S.A., which began supplying energy forto our Peruvian operations for twenty years startinga twenty-year period that started on April 17, 2017. In July 2014, we entered into a power purchase agreement for 120MW with a private power generator

completed in 2013 and the second was completed in the second quarter of 2014. The first plant began to supply power to the Company in December 2013, and the second plant began to supply power in June 2015.

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We also purchase electricity from the Comision Federal de Electricidad (the Federal Electricity Commission or the “CFE”), the state’s electrical power producer. In addition, we recover some energy from waste heat boilers at the La Caridad smelter. Accordingly, a significant portion of our operating costs in Mexico is dependent upon the pricing policies of CFE as well asand PEMEX, which reflect government policy, as well asare affected by political and regulatory environments, international market prices for crude oil and natural gasgas; and conditions in the refinery markets.

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Some IMMSA mining operations of IMMSA also purchase electricity from Eolica el Retiro, S.A.P.I de C.V. (“Eolica”), a windfarm energy producer that is an indirect subsidiary of Grupo Mexico. In August 2013, IMMSA and other of the Company’s mining operations of the Company entered into a purchase agreement and in late 2014 started to purchase electricity from Eolica. Due to the nature of the production process there is not a fixed power capacity contracted. In 2019, the2020, total purchases were approximately 28.6412.1 million kilowatt hours.

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Water: In Mexico, water is deemed a public property and industries that are not connected to a public service water supply must obtain a water concession from Comision Nacional del Agua (the National Water Commission or the “CNA”). Water usage fees are established in the Ley Federal de Derechos (the Federal Rights Law), which distinguishes several availability zones with different fees per unit of volume according to each zone, with the exception of Mexicana de

$1.4 million, $1.8 million $1.5 million and $1.2$1.5 million, respectively. We have two types of mining concessions in Peru: metallic and non-metallic concessions.

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In 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% of operating profits, with aprofits; the minimum royalty charge assessed atis equivalent to 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%. In 2020, 2019 2018 and 2017,2018, we made provisions of $60.6 million, $42.3 million $32.9 million and $23.4$32.9 million, respectively.

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At the same time the Peruvian Congress amended the mining royalty charge, it enacted a new tax for the mining industry. This tax is also based on operating income and its rates range from 2% to 8.4%. For additional information see Note 7 “Income Taxes” to the consolidated financial statements.

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Mexico:

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In Mexico we have 534,400503,104 hectares in concessions from the Mexican government for our exploration and exploitation activities as outlined on the table below:

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We believe that our Mexican concessions are in full force and in effect under applicable Mexican laws and that we are in compliance with all material terms and requirements applicable to these concessions. Under Mexican law, mineral resources belong to the Mexican nation and a concession from the Mexican federal government is required to explore or mine mineral reserves. Mining concessions have a 50-year term that can be renewed for another 50 years. Holding fees for mining concessions can be from $0.39$0.36 to $8.58$7.92 per hectare depending on the beginningstart date of the mining concession. Fees paid during 2020, 2019 2018 and 20172018 were approximately $6.6 million, $7.1 million and $6.3 million, and $5.8 million,

Over the last three years, approximately 81% of our revenues came from the sale of copper,copper; 7% from molybdenummolybdenum; 5% from silver; and 8%4% from silver and zinc. Please see the distribution of our revenues per product on Item 8 “Financial Statements and Supplementary Data” Note 18 “Segment and Related Information—Sales value per segment” on page 152.157.

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See also historical average price of our products on Item 1 Business caption “Metals prices”.

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We cannot speculate whetherpredict if metals prices will rise or fall in the future. Future declines in metals prices, and for copper in particular, copper, will have an adverse impact on our results of operations and financial condition. InUnder very adverse market conditions, we might consider curtailing or modifying some of our mining and processing operations.

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Our business requires levels of capital investments whichthat we may not be able to maintain.

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Our business is capital intensive. Specifically, the exploration and exploitation of copper and other metal reserves, mining, smelting and refining costs, the maintenance of machinery and equipment and compliance with laws and regulations require significant capital investments. We must continue to invest capital to maintain or increase the amount of copper reserves that we exploit and the amount of copper and other metals we produce. We cannot assure you that we will be able to maintain our production at levels tothat generate sufficient cash, or that we will have access to sufficient financing to continue our exploration, exploitation and refining activities at or above present levels.

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Restrictive covenants in the agreements governing our indebtedness and the indebtedness of our Minera Mexico subsidiary may restrict our ability to pursue our business strategies.

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Our financing instruments and those of our Minera Mexico subsidiary include financial and other restrictive covenants that, among other things, limit our and Minera Mexico’s abilities to incur additional debt and sell assets. If either we or our Minera Mexico subsidiary do notfails to comply with these obligations, we could be in default under the applicable agreements which,agreements. This situation, if not addressed or waived, could require immediate repayment of the indebtedness immediately.debt obligations. Our Minera Mexico subsidiary is further limited by the terms of its outstanding notes, which also restrict the Company’s applicable

Operational risks

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Our actual reserves may not conform to our current estimates of our ore deposits and we dependour long-term viability depends on our ability to replenish ore reserves for our long-term viability.reserves.

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There is a degree of uncertainty attributable to the calculation of reserves. Until reserves are actually mined and processed, the quantity of ore and grades must be considered as estimates only. The proven and probable ore reserves data included in this report are estimates prepared by us based on evaluation methods generally used in the mining industry. We may be required in the future to revise our reserves estimates based on our actual production. We cannot assure you that our actual reserves conform to geological, metallurgical or other expectations or that the estimated volume and grade of ore will be recovered. Market prices of our metals, increased production costs, reduced recovery rates, short-term operating factors, royalty charges and other factors may render proven and probable reserves uneconomic to exploit and may result in revisions of reserves data from time to time. Reserves data are not indicative of future results of operations. Our reserves are depleted as we mine. We depend on our ability to replenish our ore reserves for our long-term viability. We use several strategies to replenish and increase our ore reserves, including exploration and investment in properties located near our existing mine sites and investing in technology that could extend the life of a mine by allowing us to cost-effectively process ore types that were previously considered uneconomic. Acquisitions may also contribute to increaseincreasing ore reserves and we review potential acquisition opportunities on a regular basis. However, we cannot assure you that we will be able to continue with our strategy to replenish reserves indefinitely.

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Our operations are subject to risks, some of which are not insurable.

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The business of mining, smelting and refining copper, zinc and other metals is subject to a number of risks and hazards, including industrial accidents, labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment, environmental hazards, weather and other natural phenomena, such as seismic activity, wall failures and rock slides in our open-pit mines, structural collapses of our underground mines or tailings impoundments, and lower than expected ore grades or recovery rates. The Company’s operations may also be affected by mudslides and flash floods caused by torrential rains.

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Such occurrences could result in damage to, or destruction of, mining operations resulting in monetary losses and possible legal liability. In particular, surface and underground mining and related processing activities present inherent risks of injury to personnel, loss of life and damage to equipment.

Changes in the demand level for our products and copper sales agreements could adversely affect our revenues.

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Our financial results are subject tomay be affected by fluctuations on the level of industrial and consumerin demand for the refined, semi-refined metal products and concentrates we sell as well asat both the industrial and consumer level, and may also be affected by changes in the global economy, including economic slow-downs or recessions. Also, changesupturns and downturns of differing magnitudes. Changes in technology, industrial processes, concerns over weaknesses in the global economy and consumer habits may affect the level of demand to the extent that those increase or decrease the need for our metal products. Likewise, ourOur revenues couldmay also be adversely affected by events of force majeure that could have a negative impact on our sales agreements. These events include acts of nature, labor strikes, fires, floods, wars, transportation delays, government actions or other events that are beyond the control of the parties ofto the agreement.

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Interruptions of energy supply or increases in energy, fuel and gas costs, shortages of water supply, critical parts, equipment, skilled labor and other production costs may adversely affect our results of operations.

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We require substantial amounts of fuel oil, electricity, water and other resources for our operations. Fuel, gas and power costs constituted approximately 28%, 29% and 31% of our total production cost in 2020 and 2019, 2018 and 2017, respectively.29% in 2018. We rely upon third parties for our supply of the energy resources consumed in our operations so that prices for and availability of energy resources may be subject to change or curtailment due to, among other things, new laws or regulations,regulations; imposition of new taxes or tariffs,tariffs; interruptions in production by suppliers, worldwide price levelssuppliers; and variations in global prices or market conditions. Regarding water consumption, although each operation currently has sufficient water rights to cover its operational demands, the loss of some or all water rights for any of our mines or operations, in whole or in part, or shortages ofrelative to the water to which we have rights could require us to curtail or shut down mining production and could prevent us from pursuing expansion opportunities. In addition, future shortages of critical parts, equipment and skilled labor could adversely affect our operations and development projects.

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Our Company is subject to health and safety laws whichthat may restrict our operations, result in operational delays or increase our operating costs and adversely affect our financial results of operations.

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We are required to comply with occupational health and safety laws and regulations in Peru and Mexico where our operations are subject to periodic inspections by the relevant governmental authorities. These laws and regulations govern, among others, health and safety work placeworkplace conditions, including high risk labor and the handling, storage and disposal of chemical and other hazardous substances. We believe our operations are in compliancecomply in all material respects with applicable health and safety laws and regulations in the countries in which we operate. Compliance with these laws and regulations and with new or existing regulations that may be applicable to us in the future could increase our operating costs and adversely affect our financial results of operations and cash flows.

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Our metals exploration efforts are highly speculative in nature and may be unsuccessful.

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Metals exploration is highly speculative in nature. It involves many risks and is frequently unsuccessful. Once mineralization is discovered, it may take a number of years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are requiredmust be made to establishdetermine proven and probable ore reserves throughreserves; this requires drilling to determineestablish the metallurgical processes that will be needed to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. We cannot assure you that our exploration programs will result in the expansion or replacement of current production with new proven and probable ore reserves.

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Development projects have no operating history upon which we can base estimates of proven and probable ore reserves and estimates of future cash operating costs. Estimates are, to a large extent, based upon the interpretation of geological data obtained from drill holes and other sampling techniques and on feasibility studies that derivegenerate estimates of cash operating costs based upon anticipated tonnage and grades of ore to be mined and processed,processed; the configuration of the ore body,body; expected recovery rates of the mineral from the ore,ore; comparable facility and equipment operating costs,costs; anticipated climatic conditionsconditions; and other factors. As a result, actual cash operating costs and economic returns based upon development of proven and probable ore reserves may differ significantly from those originally estimated. Moreover, significant decreases in actual or expected prices may mean reserves, once found, will be uneconomical to produce.

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We may be adversely affected by challenges relating to slope stability.

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Our open-pit mines get deeper as we mine them, presenting certain geotechnical challenges including the possibility of slope failure. If we are required to decrease pit slope angles or provide additional road access to prevent such a failure, our stated reserves could be negatively affected. Furthermore, hydrological conditions relating to pit slopes, renewal of material displaced by slope failures and increased stripping requirements could also negatively affect our stated reserves. We have takentake actions in order to maintain slope stability, but we cannot assure you that we will not have to take additional action in the future or that our actions taken to date will be sufficient. Unexpected failureslope failures, or additional requirements to prevent slope failurefailures, may negatively affect our results of operations and financial condition as well as have the effect of diminishingand may diminish our stated ore reserves.

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We may be adversely affected by labor disputes.

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In the last several years we have experienced a number of strikes or other labor disruptions that have had an adverse impact on our operations and operating results. As of December 31, 2019,2020, unions represented approximately 71% of our workforce. Currently, we have labor agreements in effect for our Mexican and Peruvian operations.

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Our mining or metal production projects may be subject to additional costs due to community actions and other factors.

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In recent years, worldwide mining activity has been pressured by neighboring communities for financial commitments to fund social benefit programs and infrastructure improvements. Our projects in Peru are not exempt from these pressures. Our Tia Maria project in Peru has experienced delays while trying to resolve issues with community groups.

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It appears that it is becoming a part ofin the Peruvian mining environment, that in orderit is becoming increasingly important to obtain acceptance from local communities for projects in their localities,areas. This may entail demands for substantial investments in community infrastructure and upgrades that must be met in order to proceed with the mining projects.

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We are confident that we will move forward with the Tia Maria project. However, we cannot assure you when and that we will not continue to incur no additional costs for community infrastructure and upgrades in order to obtain approval from the approval ofcommunities for current or future mining projects.

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In addition, there are a number of collective action lawsuits and civil action lawsuits have been filed against the Company in Mexico´sMexico through both federal courts and the state courts ofin Sonora. A number of constitutional lawsuits have also been filed against various governmentalgovernment authorities and against the Company. These lawsuits are seeking damages and requesting remedialdemand remediation actions to restore the environment. The Company believes that it is not possible to determine the extent of the damages sought and considersbelieves the lawsuits are without merit. However, the Company cannot offer any assurances that the outcome of these lawsuits will not have an adverse effecteffects on the Company.

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Environmental regulatory response toregulation, climate change and other regulations may increase our costs of doing business, restrict our operations or result in operational delays.

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Our exploration, mining, milling, smelting and refining activities are subject to a number of Peruvian and Mexican laws and regulations, including environmental laws and regulations, and certain industry technical standards. Additional matters subject to regulation include, but are not limited to, concession fees, transportation, production, water use and discharge, power use and generation, use and storage of explosives, surface rights, housing and other facilities for workers, reclamation, taxation, labor standards, mine safety and occupational health.

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Environmental regulations in Peru and Mexico have become increasingly stringent over the last decade and we have been requiredhad to dedicate more time and money to compliance and remediation activities. Furthermore, the Mexican authorities have become more rigorous and strictstricter in enforcing Mexican environmental laws. We expect additional laws and regulations will be enacted over time with respect to environmental matters.

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Please refer to Note 13 “Commitments and Contingencies—Environmental matters” of our financial statements for further information on this subject.

Our mining and metal production projects may subjectexpose us to new risks.

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Our Company is in the midst of a large expansion program, which may subjectexpose us to additional risks in terms of industrial accidents. While we believe our contractors employ safety standards and other procedures to ensure these projects are completed with proper governance, it is possible that the increased activity occurring at our sites could cause environmental accidents of an environmental nature or danger toendanger human life.

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Our business depends upon information technology systems whichthat may be adversely affected by disruptions, damage, failure and risks associated with implementation and integration.

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Our operations depend upon information technology systems whichthat may be subject to disruption, damage or failure from different sources, including, without limitation, installation of malicious software, computer viruses, security breaches, cyber-attacks and defects in design. In recent years, cybersecurity incidents have increased in frequency and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. In 2020, we experienced no material cybersecurity breaches in our systems.

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However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to manipulation or improper use of our systems and networks, operational delays, the compromising ofsituations that compromise confidential or otherwise protected information, destruction or corruption of data, security breaches, or financial losses from remedial actions, any of which could have a material adverse effect on ourthe cash flows, competitive position, financial condition or results of our operations.

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Other risks

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Applicable law restricts the payment of dividends from our Minera Mexico subsidiary to us.

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Our subsidiary, Minera Mexico, is a Mexican company and, as such, may pay dividends only out of net income that has been approved by the shareholders. Shareholders must also approve the actual dividend payment, after mandatory legal reserves have been created and losses for prior fiscal years have been satisfied. These legal constraints may limit the ability of Minera Mexico to pay dividends to us, which in turn, may have an impact on our ability to pay stockholder dividends or to service debt.

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Global and local market conditions, including the high competitiveness in the copper mining industry, may adversely affect our profitability.

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Our industry is cyclical byin nature and fluctuates with economic cycles. Therefore, we are subject to the risks arising from adverse changes in domestic and global economic and political conditions, such as lower levels of consumer and corporate confidence, decreasedlower business investment, increasedhigher unemployment, reduced income and asset values in

Grupo Mexico has the ability to determine the outcome of substantially all matters submitted for a vote to our stockholders and thus exercises control over our business policies and affairs, including the following:

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We cannot assure you that increasedan increase in the financial obligations of Grupo Mexico or AMC, resulting from financingswhich may be attributable to financing or forto other reasons, will not result in a scenario in which our parent corporations obtainingobtain loans, increasedincrease dividends or receive other funding from us.

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In addition, we have in the past engaged in, and expect to continue to engageengaging in, transactions with Grupo Mexico and its other affiliates whichthat are related party transactions and may present conflicts of interest. For additional information regarding the share ownership of, and our relationships with, Grupo Mexico and its affiliates, see Note 17 “Related Party Transactions.”Transactions” to the consolidated financial statements.

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Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies may adversely affect our financial condition and results of operations.

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We are currently, and may in the future become, subject to litigation, arbitration or other legal proceedings with other parties. If decided adversely torulings are against the Company, these legal proceedings, or others that could be brought against us in the future, may adversely affect our financial position or prospects. For further detailed discussion of pending litigation, please see Note 13 “Commitment and Contingencies—Litigation matters”. of the consolidated financial statements.

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Developments in the United States, Europe and emerging market countries may adversely affect the Company business, our common stock price and our debt securities.

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The business and market value of securities of companies with significant operations in Peru and Mexico is, to varying degrees, affected by the economic policies and market conditions in the United States, Europe and emerging market countries. Although economic policies and conditions in suchthese countries may significantly differ from economicpolicies and conditions in Peru or Mexico, as the case may be, the business communitycommunity’s reactions to developments in any of these countries may adversely effectaffect the Company business or the market value or trading price of the securities, including debt securities, of issuers that have significant operations in Peru or Mexico.

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adverse impact on our business and results of operations. The adoption and expansion of trade restrictions,restrictions; changes in the state of China-U.S. relations, including the currenton-going trade tensions,tensions; or other governmental action related to taxes, tariffs, or trade agreements or other policies are difficult to predict, and could adversely affect demand for our products, our costs, our customers, our suppliers and the U.S. economy, which in turnand consequently, could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.

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Additionally, there is uncertainty in global markets arising fromdue to the June 2016 referendum in the United Kingdom, the

result of which wasresulted in a vote to leave the European Union (“Brexit”) which has resulted in. In December of 2020, the United Kingdom leavingleft the

European Union after an 11-month transition period that started in January. Brexit may adversely affect global political, regulatory, economic and market conditions, including capital markets and foreign exchange markets, which could adversely affect our business, financial condition and results of operations. It is likely that there will continue to be a period of instability and volatility will continue in global financial markets until the terms and timingof certain mechanisms of Brexit are clear.

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We cannot assure you that the market value or trading prices of our common stock and debt securities, will not be adversely affected by events in the United States or elsewhere, including in emerging market countries.

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Other international risks.risks

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We are a company with substantial assets located outside of the United States. We conduct production operations in Peru and Mexico and exploration activities in these countries as well as in Chile, Argentina and Ecuador. Accordingly, in addition to the usual risks associated with conducting business in foreign countries, our business may be adversely affected by political, economic and social uncertainties in each of these countries. Such risks include possible expropriation or nationalization of property, confiscatory taxes or royalties, possible foreign exchange controls, changes in the national policy toward foreign investors, extreme environmental standards, etc.

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Our international operations must comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws ofin the other jurisdictions in which we operate. There has been a substantial increase in the global enforcement of these laws in recent years. As such, our corporate policies and processes may not prevent or detect all potential breaches of law. Any violation of those laws could result in significant criminal or civil fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our cash flows, results of operations and financial condition.

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Our insurance does not cover most losses caused by the above describedaforementioned risks. Consequently, our production, development and exploration activities in these countries could be substantially affected by factors out of our control, some of which could materially and adversely affect our financial position or results of operations.

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We may be adversely affected by natural disasters, pandemics (including the recent coronavirus outbreak) and other catastrophic events, and by man-made problems such as terrorism, thatwhich could disrupt our business operations and our business continuity andcontinuity; additionally, disaster recovery plans may not adequately protect us from a serious disaster.

a) supply chain disruptions that make it difficult for the Company to order and receive the materials needed to produce

its products and to ship finished products to our end customers,

b) financial risks pertaining to receivables due from customers that may become insolvent or otherwise unable to

meet their financial obligations,

c) government responses, including mandates that make it difficult to remain open for business; restrict imports of raw

materials or exports of finished goods; prohibit the Company’s products from being sold in their countries, and other

seen and unforeseen actions taken by government entities,

d) absenteeism or loss of employees at our Company, or at our affiliated companies, which involves workers needed to develop, validate, manufacture and perform other necessary functions for our operations, whether due to health reasons or government restrictions,

e) equipment failures due to maintenance postponements, loss of utilities and other disruptions that could impact our

operations or render them inoperable,

f) litigation or government actions against the Company,

g) a local or global recession or depression that could harm the international banking system, limiting demand for all

products, including those made by the Company,

h) disruption of banking and financial institutions, which may limit access to loans, and

i) many other seen and unforeseen events and circumstances, all of which could negatively impact the Company.

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Risks Associated with Doing Business in Peru and Mexico

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There is uncertainty as to the termination and renewal of our mining concessions.

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Under the laws of Peru and Mexico, mineral resources belong to the state and government and concessions are required in both countries to explore for or exploit mineral reserves. In Peru, our mineral rights derive from concessions from Ministry of Energy and Mines (“MINEM”) for our exploration, exploitation, extraction and/or production operations. In Mexico, our mineral rights derive from concessions granted, on a discretionary basis, by the Ministry of Economy, pursuant to Mexican mining law and regulations thereunder.

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Mining concessions in both Peru and Mexico may be terminated if the obligations of the concessioner are not satisfied. In Peru, we are obligated to pay certain fees for our mining concession. In Mexico, we are obligated, among other things, to explore or exploit the relevant concession, to pay any relevant fees, to comply with all environmental and safety standards, to provide information to the Ministry of Economy and to allow inspections by the Ministry of Economy. Any termination or unfavorable modification of the terms of one or more of our concessions, or failure to obtain renewals of such concessions subject to renewal or extensions, could have a material adverse effect on our financial condition and prospects.

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Peruvian economic and political conditions may have an adverse impact on our business.

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A significant partportion of our operations areis conducted in Peru. Accordingly, our business, financial condition or results of operations could be affected by changes in economic or other policies of the Peruvian government or other political, regulatory or economic developments in the country. DuringOver the past several decades, Peru has had a succession of regimes with differing policies and programs. PastIn the twentieth century, past governments have frequently intervened in the nation’s economy and social structure. Among other actions, past governments have imposed controls on prices, exchange rates and local and foreign investments, as well asinvestments; placed limitations on imports, haveimports; restricted the ability of companiescompanies’ abilities to dismiss employees and have prohibited the remittance of profits to foreign investors.

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In 2019 and 2020, Peru continued experiencingto experience heightened political instability derived from various currentlyin a context marked by ongoing investigations into allegations of money laundering and corruption linked to the Operation(Operation Car Wash investigation that was initiated by Brazilian authorities. investigation) and confrontation on the political scene. Significant political turmoil in Peru led to a shutdown of the Peruvian Congress and the removal of two Peruvian presidents.

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Because we have significant operations in Peru, we cannot provide any assurance that political developments and economic conditions, including any changes to economic policies or the adoption of other reforms proposed by existing

or future administrations, in Peru and/or other factors will not have ano material adverse effecteffects on market conditions, the prices of our securities, our ability to obtain financing, and our results of operations, andor our financial condition.

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Mexican economic and political conditions, as well as drug-related violence, may have an adverse impact on our business.

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The Mexican economy is highly sensitive to economic developments in the United States, mainly because of its high level of exports to this market. Other risks in Mexico are increases in taxes on the mining sector and higher royalties, such as werethose enacted in 2013. As has occurred in other metal producing countries, the mining industry may be perceived as a source of additional fiscal revenue.

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In addition, security institutionspublic safety organizations in Mexico are under significant stress, as a result of drug-related violence. This situation creates potential risks, especiallyparticularly for transportation of minerals and finished products, which may affect a small partportion of our production. However, drug-relatedDrug-related violence has had a limited impact on our operations, as it has tended to concentrate outside of our areas of production. The potential risks to our operations might increase if the violence was to spreadspreads to our areas of production.

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OPEN-PIT MINING

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In an open-pit mine, the production process begins at the mine pit, where waste rock, leaching ore and copper ore are drilled and blasted and then loaded onto diesel-electric trucks by electric shovels. Waste is hauled to dump areas and leaching ore is hauled to leaching dumps. The ore to be milled is transported to the primary crushers.

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UNDERGROUND MINING

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In an underground mine, the production process begins at the stopes, where copper, zinc and lead veins are drilled and blasted and the ore is hauled to the underground crusher station. The crushed ore is then hoisted to the surface for processing.

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CONCENTRATING

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The copper ore with a copper grade over 0.4% from the primary crusher or the copper, zinc and lead-bearing ore from the underground mines is transported to a concentrator plant where gyratory crushers break the ore into sizes no larger than three-quarter of an inch. The ore is then sent to a mill section where it is ground to the consistency of fine powder. The finely ground ore is mixed with water and chemical reagents and pumped as a slurry to the flotation separator, where

SOLVENT EXTRACTION/ELECTROWINNING (“SX-EW”)

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A complementary processing method is the leaching and SX-EW process. During the SX-EW process, low-grade sulfides ore and copper oxides are leached with sulfuric acid to allow copper content recovery. The acid and copper solution is then agitated with a solvent that contains chemical additives that attract copper ions. As the solvent is lighter than water, it floats to the surface carrying with it the copper content. The solvent is then separated using an acid solution, freeing the copper. The acid solution containing the copper is then moved to electrolytic extraction tanks to produce copper cathodes.

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MOLYBDENUM PRODUCTION

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Molybdenum is recovered from copper-molybdenum concentrates produced at the concentrator. The copper-molybdenum concentrate is first treated with a thickener until it becomes slurry with 60% solids. The slurry is then agitated in a chemical and water solution and pumped to the flotation separator. The separator creates a froth that carries molybdenum to the surface but not the copper mineral (which is later filtered to produce copper concentrates containing approximately 27% copper). The molybdenum froth is skimmed off, filtered and dried to produce molybdenum concentrates of approximately 58% contained molybdenum.

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