Southern Copper (SCCO) 10-Q 4 May 10 2010 Q1 Quarterly report Financial data

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Net sales	$1,219,405	$621,998
Operating costs and expenses:
Cost of sales (exclusive of depreciation, amortization and depletion shown separately below)	499,198	375,455
Selling, general and administrative	21,718	18,792
Depreciation, amortization and depletion	81,253	78,221
Exploration	8,465	5,402
Total operating costs and expenses	610,634	477,870
Operating income	608,771	144,128
Interest expense	(23,788)	(23,966)
Capitalized interest		2,075
Loss on derivative instruments		(2,604)
Other income (expense)	1,433	3,363
Interest income	2,052	4,275
Income before income taxes	588,468	127,271
Income taxes	203,241	48,025
Net income	385,227	79,246
Less: Net income attributable to the non-controlling interest	1,983	554
Net income attributable to SCC	$383,244	$78,692
Per common share amounts:
Net income attributable to SCC - basic (in dollars per share)	0.45	0.09
Net income attributable to SCC - diluted (in dollars per share)	0.45	0.09
Dividends paid to SCC common shareholders (in dollars per share)	0.43	0.12
Weighted average common shares outstanding - basic (in shares)	850,000	852,772
Weighted average common shares outstanding - diluted (in shares)	850,000	852,772

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEET (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current assets:
Cash and cash equivalents	$651,964	$772,306
Short-term investments	20,080	22,948
Accounts receivable trade, less allowance for doubtful accounts (2010 - $4,509; 2009 - $4,614)	469,402	407,979
Accounts receivable other (including affiliates 2010 - $5,571; 2009 - $4,491)	27,901	31,971
Inventories	469,075	456,122
Deferred income tax	27,185	19,672
Other current assets	52,961	67,131
Total current assets	1,718,568	1,778,129
Property, net	3,973,569	3,969,558
Leachable material, net	95,477	107,262
Intangible assets, net	113,647	113,840
Deferred income tax	51,907	52,670
Other assets	47,419	41,113
Total assets	6,000,587	6,062,572
Current liabilities:
Current portion of long-term debt	10,000	10,000
Accounts payable	254,230	283,703
Accrued income taxes	69,198	91,359
Due to affiliated companies	1,488
Accrued workers' participation	119,968	150,692
Accrued interest	15,633	39,795
Other accrued liabilities	31,907	26,876
Total current liabilities	502,424	602,425
Long-term debt	1,270,327	1,270,252
Deferred income taxes	156,863	143,508
Non-current taxes payable	28,178	26,201
Other liabilities and reserves	80,388	77,607
Asset retirement obligation	49,725	48,925
Total non-current liabilities	1,585,481	1,566,493
Commitments and Contingencies (Note M)
STOCKHOLDERS' EQUITY
Common stock	8,846	8,846
Additional paid-in capital	1,022,549	1,013,326
Retained earnings	3,487,677	3,469,930
Accumulated other comprehensive loss	(13,061)	(13,061)
Treasury stock	(612,105)	(603,413)
Total SCC stockholders' equity	3,893,906	3,875,628
Non-controlling interest	18,776	18,026
Total equity	3,912,682	3,893,654
Total liabilities and equity	$6,000,587	$6,062,572

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
CONDENSED CONSOLIDATED BALANCE SHEET
Accounts receivable trade, allowance for doubtful accounts	$4,509	$4,614
Accounts receivable from affiliates	$5,571	$4,491

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
OPERATING ACTIVITIES
Net income	$385,227	$79,246
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation, amortization and depletion	81,253	78,221
Loss (gain) on currency translation effect	8,364	(1,394)
Provision for deferred income taxes	5,853	18,927
Gain on sale of property	(1,603)
Gain on sale of short-term investment	(519)	(707)
Unrealized gain on derivative instruments		(25,079)
Cash provided from (used for) operating assets and liabilities:
Accounts receivable	(57,353)	(107,336)
Inventories	(12,953)	2,306
Accounts payable and accrued liabilities	(106,606)	(250,462)
Other operating assets and liabilities	5,576	12,472
Net cash provided from (used for) operating activities	307,239	(193,806)
INVESTING ACTIVITIES
Capital expenditures	(75,363)	(63,456)
Net proceeds from sale of short-term investments	3,387	12,102
Sale of property	4,809	204
Net cash used for investing activities	(67,167)	(51,150)
FINANCING ACTIVITIES
Dividends paid to common stockholders	(365,498)	(99,555)
Distributions to non-controlling interest	(1,149)
Repurchase of common shares		(71,566)
Other	75	70
Net cash used for financing activities	(366,572)	(171,051)
Effect of exchange rate changes on cash and cash equivalents	6,158	(9,458)
Decrease in cash and cash equivalents	(120,342)	(425,465)
Cash and cash equivalents, at beginning of period	772,306	716,740
Cash and cash equivalents, at end of period	$651,964	$291,275

Management Statement:

Management Statement:
	3 Months Ended Mar. 31, 2010
Management Statement:
Management Statement:	A. In the opinion of Southern Copper Corporation, (the Company, Southern Copper or SCC), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to state fairly the Companys financial position as of March31, 2010 and the results of operations and cash flows for the three months ended March31, 2010 and 2009. The condensed consolidated financial statements for the three months ended March31, 2010 and 2009 have been subject to a review by Galaz, Yamazaki, Ruiz Urquiza S.C., a member firm of Deloitte Touche Tohmatsu, the Companys independent registered public accounting firm, whose report dated April29, 2010, is presented on page49. The results of operations for the three months ended March31, 2010 and 2009 are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements at December31, 2009 and notes included in the Companys 2009 annual report on Form10-K.

Adoption of New Accounting Stan

Adoption of New Accounting Standards:
	3 Months Ended Mar. 31, 2010
Adoption of New Accounting Standards:
Adoption of New Accounting Standards:	B. Adoption of New Accounting Standards: In the first quarter of 2010 the Company adopted the following Accounting Standards Updates (ASU) to the FASB Accounting Standards Codification (the ASC) issued by the Financial Accounting Standard Board (FASB) ASU No.2010-09: In February2010 the FASB issued ASU No.2010-09 Amendments to Certain Recognition and Disclosure requirements an amendment of ASC topic 855 Subsequent events. This ASU requires a SEC filer to evaluate subsequent events through the date the financial statements are issued. In addition, public filers are no longer required to disclose the date through which the evaluation of subsequent events was carried out. The Company adopted this ASU on the date it was issued. ASU No.2010-06: In January2010, the FASB issued the ASU No.2010-06 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, an update of ASC Subtopic 820-10 Fair Value Measurements and Disclosures - Overall. This ASU includes the following new disclosure requirements: 1. Significant transfers in and out of Levels 1 and 2 fair value measurements and a description of the reasons for the transfers. 2. The reconciliation of activity in Level 3 fair value measurements should present separately information about purchases, sales, issuances and settlements on a gross basis rather than as one net number. This ASU also clarifies existing disclosures as follows: 1. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities. 2. Disclosures about inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements. These disclosures are required for fair value measurements that fall in either Level 2 or Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December15, 2010, and for interim periods within those fiscal years. Please see disclosures required in Note Q Financial instruments. ASU 2010-02: In January2010, the FASB issued ASU 2010-02 Accounting and Reporting for Decreases in Ownership of a Subsidiarya Scope Clarification an update of Subtopic 810-10 Consolidation-Overall to address implementation issues related to the changes in ownership provisions in Subtopic 810-10, which establishes the accounting and reporting guidance for non-controlling interests and changes in ownership interests of a subsidiary. This ASU provides amendments that clarify the scope of the decrease in ownership provisions of Subtopic 810-10 and related guidance applies to the following: 1. A subsidiary or group of assets that is a business or nonprof

Short-term Investments:

Short-term Investments:
	3 Months Ended Mar. 31, 2010
Short-term Investments:
Short-term Investments:	C. Short-term Investments: Short-term investments were as follows: At Investments March31, 2010 December31, 2009 Short-term investments in securities issued by public companies (in millions) $ 20.1 $ 22.9 Weighted average interest rate 0.65 % 0.63 % Short-term investments consist of securities issued by public companies, which have been classified as available for sale. Each security is independent of the others. As of March31, 2010 and December31, 2009, gross unrealized gains and losses on available for sale securities were not material. Related to these investments the Company earned interest which was recorded as interest income in the condensed consolidated statement of earnings. Also the Company redeemed some of these securities and obtained gains (losses) due to changes in fair value, which were recorded as other income (expense) in the condensed consolidated statement of earnings. The following table summarizes the activity of these investments (in millions): Three months ended March31, 2010 2009 Interest earned $ (* ) $ 0.3 Investment redeemed $ 3.3 $ 12.1 Gain in fair value $ 0.5 $ 0.7 (*) Less than $0.1 million

Inventories:

Inventories:
	3 Months Ended Mar. 31, 2010
Inventories:
Inventories:	D. Inventories: Inventories were as follows: (in millions) March31,2010 December31,2009 Metals at lower of average cost or market: Finished goods $ 58.1 $ 55.5 Work-in-process 165.4 150.8 Supplies at average cost 245.6 249.8 Total inventories $ 469.1 $ 456.1

Income taxes:

Income taxes:
	3 Months Ended Mar. 31, 2010
Income taxes:
Income taxes:	E. Income taxes: The income tax provision and the effective income tax for the first quarter 2010 and 2009 were as follows: 2010 2009 Income tax provision (in millions) $ 203.2 $ 48.0 Effective income tax rate 34.5 % 37.7 % These provisions include income taxes for Peru, Mexico and the United States. The decrease in the effective tax rate for the first quarter of 2010 is largely due to the proportionately higher incremental U.S. income tax provided on dividend distributions made by our Mexican subsidiary to the U.S. parent in the first quarter of 2009. Because the pretax earnings in the first quarter of 2009 were significantly lower than the 2010 pretax earnings, the effect of this incremental tax had a larger than normal impact on the effective rate. For the full year 2009 the final effective tax rate was 33.5%. This dividend distribution is taxable in the U.S. at the difference between the 35.0% U.S. statutory rate and the foreign tax credit rate of 28.0%. As of March27, 2009, Grupo Mexico, through its wholly-owned subsidiary, Americas Mining Corporation (AMC), became the beneficial owner of 80% of SCCs common stock. As a result of this new level of ownership, beginning March27, 2009 SCC will no longer file a separate U.S. federal income tax return and its operating results will be included in the AMC consolidated U.S. federal income tax return. In addition to now holding an 80% interest in SCC, AMC also owns 100% of ASARCO, LLC (Asarco) and its subsidiaries. It is expected that current and deferred taxes will be allocated to members of the AMC group as if each were a separate taxpayer. The Company has initiated discussions with AMC to put in place a tax sharing agreement in order to establish this allocation as well as other procedures and policies necessary for an equitable management of U.S. federal income tax matters. SCC provides current and deferred income taxes, as if it were a separate filer. Accounting for Uncertainty in Income Taxes: There were no material changes in the unrecognized tax benefits in the three months ended March31, 2010.

Provisionally Priced Sales:

Provisionally Priced Sales:
	3 Months Ended Mar. 31, 2010
Provisionally Priced Sales:
Provisionally Priced Sales:	F. Provisionally Priced Sales: At March31, 2010, the Company has recorded provisionally priced sales of copper at average forward prices per pound, and molybdenum at the March31, 2010 market price per pound. These sales are subject to final pricing based on the average monthly LME or COMEX copper prices and Dealer Oxide molybdenum prices in the future month of settlement. Following are the provisionally priced copper and molybdenum sales outstanding at March31, 2010: Copper(million lbs.) Priced at Month of Settlement 6.1 $ 3.53 April2010 Molybdenum(million lbs.) Priced at Month of Settlement 4.1 $ 17.10 April2010 2.4 17.10 May2010 2.5 17.10 June2010 0.1 17.10 July2010 9.1 $ 17.10 Management believes that the final pricing of these sales will not have a material effect on the Companys financial position or results of operations.

Derivative Instruments:

Derivative Instruments:
	3 Months Ended Mar. 31, 2010
Derivative Instruments:
Derivative Instruments:	G. Derivative Instruments The Company occasionally uses derivative instruments to manage its exposure to market risk from changes in commodity prices, interest rate and exchange rate risk exposures and to enhance return on assets. The Company does not enter into derivative contracts unless it anticipates a future activity that is likely to occur that will result in exposing the Company to market risk. The Company did not hold any derivative contracts in the first quarter 2010. Exchange rate derivatives, U.S. dollar/Mexican peso contracts: Because more than 85% of the Companys sales collections in Mexico are in U.S. dollars and many of its costs are in Mexican pesos, in 2009, the Company entered into zero-cost derivative contracts with the purpose of protecting, within a range, against an appreciation of the Mexican peso to the U.S. dollar. Related to the exchange rate derivative contracts the Company recorded a net loss of $2.6 million in the first quarter of 2009. This loss was recorded as loss on derivative instruments in the condensed consolidated statements of earnings. At March31, 2010 the Company did not hold any exchange rate derivative contracts.

Asset Retirement Obligation:

Asset Retirement Obligation:
	3 Months Ended Mar. 31, 2010
Asset Retirement Obligation:
Asset Retirement Obligation:	H. Asset Retirement Obligation: The Company maintains an estimated asset retirement obligation for its mining properties in Peru, as required by the Peruvian Mine Closure Law. In accordance with the requirements of this law the Companys closure plans have been approved by the Peruvian Ministry of Energy and Mines (MINEM). As part of the closure plans, commencing in January2010 the Company is required to provide annual installments of $2.6 million over a 34 year period to guarantee the availability of funds to meet this obligation. Therefore, in January2010 the Company made the first installment of the guarantee, in the form of a lien on its Lima office building. The accepted value of the Lima office building, for this purpose, is $17 million. In 2009, the Company adjusted its original retirement obligation to record the liability established in the mine closure plans. The closure cost recognized for this liability consists of the cost as outlined in its closure plans, which includes the dismantling of the Toquepala and Cuajone concentrators, the smelter and refinery in Ilo, and the shops and auxiliary facilities at the three units. The following table summarizes the asset retirement obligation activity for the three months ended March31, 2010 and 2009 (in millions): 2010 2009 Balance as of January1 $ 48.9 $ 18.0 Changes in estimates Additions Accretion expense 0.8 0.2 Balance as of March31, $ 49.7 $ 18.2

Related Party Transactions:

Related Party Transactions:
	3 Months Ended Mar. 31, 2010
Related Party Transactions:
Related Party Transactions:	I. Related Party Transactions: Receivable and payable balances with affiliated companies are shown below (in millions): As of March31, 2010 December31, 2009 Affiliate receivable: Grupo Mexico S.A.B de C.V. and affiliates $ 1.2 $ 1.5 Ferrocarril Mexicano S.A. de C.V. 0.5 1.4 Mexico Proyectos y Desarrollos S.A. de C.V. and affiliates 3.9 1.6 $ 5.6 $ 4.5 Affiliate payable: Grupo Mexico S.A.B. de C.V. and affiliates $ 1.5 $ $ 1.5 $ The Company has entered into certain transactions in the ordinary course of business with parties that are controlling shareholders or their affiliates. These transactions include the lease of office space, air transportation and construction services and products and services relating to mining and refining. The Company lends and borrows funds among affiliates for acquisitions and other corporate purposes. These financial transactions bear interest and are subject to review and approval by senior management, as are all related party transactions. It is the Companys policy that the Audit Committee of the Board of Directors shall review all related party transactions. The Company is prohibited from entering or continuing a material related party transaction that has not been reviewed and approved or ratified by the Audit Committee. Grupo Mexico, the Companys ultimate parent and the majority indirect stockholder of the Company, and its affiliates provide various services to the Company. These services are primarily related to accounting, legal, tax, financial, treasury, human resources, price risk assessment and hedging, purchasing, procurement and logistics, sales and administrative and other support services. The Company pays Grupo Mexico Servicios S.A de C.V., a subsidiary of Grupo Mexico for these services. The Company expects to continue to pay for these services in the future. The Companys Mexican operations paid fees for freight services provided by Ferrocarril Mexicano S.A de C.V and for construction services provided by Mexico Constructora Industrial and its affiliates; both companies are subsidiaries of Grupo Mexico. The Larrea family controls a majority of the capital stock of Grupo Mexico, and has extensive interests in other businesses, including oil drilling services, construction, aviation, and real estate. The Company engages in certain transactions in the ordinary course of business with other entities controlled by the Larrea family relating to mining and refining services, the lease of office space, sale of vehicles and air transportation and construction services. In connection with this, the Company paid fees for maintenance services and sale of vehicles provided by Mxico Compaa de Productos Automotrices, S.A. de C.V., a company controlled by the Larrea family. Additionally, in 2007, the Companys Mexican subsidiaries provided guaranties for two loans obtained by Mexico Transportes Aereos, S.A. de C.V. (MexTransport), a company controlled by the Larrea family, from Bank of Nova Scotia in Mexico. These loans require semi-annual repayments. Conditions and balance as of March31, 2010 are

Financing:

Financing:
	3 Months Ended Mar. 31, 2010
Financing:
Financing:	J. Financing: New SCC Notes: On April16, 2010 the Company issued $1.5 billion in fixed-rate unsecured notes with an underwriting discount of $10.3 million, which will be amortized using the interest method over the term of the related debt. Net proceeds will be used for general corporate purposes, including the financing of the Companys capital expenditure program. The $1.5 billion fixed-rate senior unsecured notes were issued in two tranches, $400 million due in 2020 at an annual interest rate of 5.375% and $1.1 billion due in 2040 at an annual interest rate of 6.75%. Interest on the notes will be paid semi-annually in arrears. The notes will constitute our general unsecured obligations and the series of notes will rank pari passu with each other and will rank pari passu in right of payment with all of our other existing and future unsecured and unsubordinated indebtedness. The Company will capitalize the costs associated with the issuance of this facility, which will be included in Other assets non-current in the condensed consolidated balance sheet. In connection with the transaction, on April 16, 2010 the Company entered into a base indenture with Wells Fargo Bank, National Association, as trustee, as well as a first supplemental indenture and a second supplemental indenture which provide for the issuance, and set forth the terms of, the two tranches of notes described above. The indentures contains covenants that limit the Company's ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company's assets. The Company may issue additional debt from time to time pursuant to the base indenture. Credit risk rating: On April1, 2010 Moodys investors service upgraded to Baa2 from Baa3 the Companys senior unsecured ratings and the rating on our Yankee bonds. Also on April5, 2010 Fitch and Standard Poors ratings services assigned its BBB and BBB-, respectively, as debt rating on the new notes issued. At the same time, these credit rating agencies confirmed their long-term corporate credit rating on SCC (Baa2, BBB, and BBB-, for Moodys, Fitch and SP, respectively).

Benefit Plans:

Benefit Plans:
	3 Months Ended Mar. 31, 2010
Benefit Plans:
Benefit Plans:	K. Benefit Plans: SCC Defined Benefit Pension Plans The components of the net periodic benefit costs for the three months ended March31, 2010 and 2009 are as follows (in millions): 2010 2009 Interest cost $ 0.2 $ 0.2 Expected return on plan assets (0.2 ) (0.1 ) Amortization of net loss (gain) * * Net periodic benefit costs $ $ 0.1 (*) amount is lower than $0.1 million SCC Post-retirement Health Care Plan The components of the net periodic benefit costs for the post-retirement health care plan for the three months ended March31, 2010 and 2009 are individually, and in total, less than $0.1 million. Minera Mexico Pension Plans The components of the net periodic benefit costs for the three months ended March31, 2010 and 2009 are as follows (in millions): 2010 2009 Interest cost $ 0.4 $ 0.5 Service cost 0.5 0.6 Expected return on plan assets (0.7 ) (0.7 ) Amortization of transition assets, net (* ) (* ) Amortization of net actuarial loss (0.2 ) (0.2 ) Amortization of prior services cost (* ) (* ) Net periodic benefit cost $ $ 0.2 (*) amount is lower than $0.1 million Minera Mexico Post-retirement Health Care Plan The components of the net periodic cost for the three months ended March31, 2010 and 2009 are as follows (in millions): 2010 2009 Interest cost $ 1.1 $ 1.2 Service cost 0.1 0.2 Amortization of net loss (gain) (* ) 0.2 Amortization of transition obligation 0.3 0.4 Net periodic benefit cost $ 1.5 $ 2.0 (*) amount is lower than $0.1 million

Comprehensive Income

Comprehensive Income (in millions):
	3 Months Ended Mar. 31, 2010
Comprehensive Income (in millions):
Comprehensive Income (in millions):	L. Comprehensive Income (in millions): Three months endedMarch31, 2010 2009 Net income $ 385.2 $ 79.3 Other comprehensive income (loss) net of tax: Decrease in liability for employee benefit obligation 1.2 Comprehensive income 385.2 80.5 Comprehensive income attributable to the non-controlling interest 2.0 0.5 Comprehensive income attributable to SCC $ 383.2 $ 80.0

Commitments and Contingencies:

Commitments and Contingencies:
	3 Months Ended Mar. 31, 2010
Commitments and Contingencies:
Commitments and Contingencies:	M. Commitments and Contingencies Environmental matters: The Company has instituted extensive environmental conservation programs at its mining facilities in Peru and Mexico. The Companys environmental programs include, among other features, water recovery systems to conserve water and minimize impact on nearby streams, reforestation programs to stabilize the surface of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions. Peruvian operations The Companys operations are subject to applicable Peruvian environmental laws and regulations. The Peruvian government, through the MINEM conducts annual audits of the Companys Peruvian mining and metallurgical operations. Through these environmental audits, matters related to environmental commitments, compliance with legal requirements, atmospheric emissions, and effluent monitoring are reviewed. The Company believes that it is in material compliance with applicable Peruvian environmental laws and regulations. In 2003 the Peruvian congress published a new law announcing future closure and remediation obligations for the mining industry. In accordance with the requirements of this law the Companys closure plans have been approved by MINEM. As part of the closure plans, the Company is providing guarantees to ensure that sufficient funds will be available for the asset retirement obligation. See Note H, Asset retirement obligation, for further discussion of this matter. Mexican operations The Companys 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 Companys Mexican operations is the Federal General Law of Ecological Balance and Environmental Protection, which is enforced by the Federal Bureau of Environmental Protection (PROFEPA). PROFEPA monitors compliance with environmental legislation and enforces Mexican environmental laws, regulations and official standards. PROFEPA may initiate administrative proceedings against companies that violate environmental laws, which in the most extreme cases may result in the temporary or permanent closing of non-complying facilities, the revocation of operating licenses and/or other sanctions or fines. Also, according to the federal criminal code, PROFEPA must inform corresponding authorities regarding environmental non-compliance. Mexican environmental regulations have become increasingly stringent in recent years, and this trend is likely to continue and has been influenced by the environmental treaty entered into by Mexico, the United States and Canada in connection with NAFTA in 1999. However, the Companys management does not believe that continued compliance with the federal environmental law or Mexican state environmental laws will have a material adverse effect on the Companys business, properties, results of operations, financial condition or prospects or will result in material capital exp

Segment and Related Information

Segment and Related Information:
	3 Months Ended Mar. 31, 2010
Segment and Related Information:
Segment and Related Information:	N. Segment and Related Information: Company management views Southern Copper as having three operating segments and manages on the basis of these segments. The segments identified by the Company are: the Peruvian operations, the Mexican open pit operations and the Mexican underground mining operations segment identified as the IMMSA unit. Financial information is regularly prepared for each of the three segments and the results of the Companys operations are regularly reported to the Chief Operating Officer on the segment basis. The Chief Operating Officer of the Company 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. Financial information relating to Southern Coppers segments is as follows: Three Months Ended March31, 2010 (in millions) Mexican Open Pit Mexican IMMSA Unit Peruvian Operations Corporate, other and eliminations Consolidated Net sales outside of segments $ 378.4 $ 91.2 $ 721.8 $ 28.0 $ 1,219.4 Intersegment sales 21.2 51.7 (72.9 ) Cost of sales (exclusive of depreciation, amortization and depletion) 166.1 91.3 283.4 (41.6 ) 499.2 Selling, general and administrative 7.4 3.2 10.5 0.6 21.7 Depreciation, amortization and depletion 41.6 5.9 32.9 0.8 81.2 Exploration 1.2 3.6 3.7 8.5 Operating income $ 183.3 $ 38.9 $ 391.3 $ (4.7 ) 608.8 Less: Interest, net (21.8 ) Other income (expense) 1.4 Income taxes (203.2 ) Non-controlling interest (2.0 ) Net income attributable to SCC $ 383.2 Capital expenditure $ 12.2 $ 5.9 $ 57.2 $ 0.1 $ 75.4 Property, net $ 1,586.6 $ 275.2 $ 2,050.3 $ 61.5 $ 3,973.6 Total assets $ 2,394.5 $ 696.6 $ 2,873.2 $ 36.3 $ 6,000.6 Three Months Ended March31, 2009 (in millions) Mexican Open Pit Mexican IMMSA Unit Peruvian Operations Corporate, other and eliminations Consolidated Net sales outside of segments $ 172.3 $ 90.3 $ 346.8 $ 12.6 $ 622.0 Intersegment sales 0.8 27.2 (28.0 ) Cost of sales (exclusive of depreciation, amortization and depletion) 98.6 99.4 199.1 (21.6 ) 375.5 Selling, general and administrative 7.5 3.3 6.9 1.1 18.8 Depreciation, amortization and depletion 41.3 6.1 30.2 0.6 78.2 Exploration 0.7 1.2 3.5 5.4 Operating income $ 25.0 $ 7.5 $ 107.1 $ 4.5 144.1 Less: Interest, net (17.6 ) Loss on derivative instruments (2.6 ) Other income (expense) 3.4 Income taxes (48.0 ) Non-controlling interest (0.6 ) Net income attributable to SCC $ 78.7 Capital expend

Impact of New Accounting Standa

Impact of New Accounting Standards:
	3 Months Ended Mar. 31, 2010
Impact of New Accounting Standards:
Impact of New Accounting Standards:	O. Impact of New Accounting Standards: Please see impact of the adoption of new accounting standards on note B Adoption of New Accounting Standards

Stockholders' Equity:

Stockholders' Equity:
	3 Months Ended Mar. 31, 2010
Stockholders' Equity:
Stockholders' Equity:	P. Stockholders Equity: Treasury Stock: Activity in treasury stock in the three-month period ended March31, 2010 and 2009 is as follows (in millions): 2010 2009 Southern Copper common shares Balance as of January1, $ 460.7 $ 388.9 Purchase of shares 71.6 Used for corporate purposes Balance as of March31, 460.7 460.5 Parent Company (Grupo Mexico) common shares Balance as of January1, 142.7 125.5 Other activity, including dividend, interest and currency translation effect 8.7 (0.3 ) Balance as of March31, 151.4 125.2 Treasury stock balance as of March31, $ 612.1 $ 585.7 The following table summarizes share distributions in the first quarter 2010 and 2009: 2010 2009 Southern Copper common shares Directors Stock Award Plan 13,200 Parent Company (Grupo Mexico) common shares Employee stock purchase plan (shares in millions) 11.5 12.1 SCC share repurchase program: In 2008 the Companys Board of Directors authorized a $500 million share repurchase program. Under this program the Company may purchase additional shares from time to time, based on market conditions and other factors. This repurchase program has no expiration date and may be modified or discontinued at any time. These shares will be available for general corporate purposes. As of December31, 2009 the Company repurchased 33.4 million shares of SCC Common Stock at a cost of $456.6 million. As a result of the repurchase of SCC common shares and AMCs purchase of SCC shares, Grupo Mexicos direct and indirect ownership increased to 80% at March31, 2009 and remains at this level to date. There was no activity in the first quarter of 2010. Directors Stock Award Plan: The Company established a stock award compensation plan for certain directors who are not compensated as employees of the Company. Under this plan, participants will receive 1,200 shares of common stock upon election and 1,200 additional shares following each annual meeting of stockholders thereafter. 600,000 shares of Southern Copper common stock have been reserved for this plan. The fair value of the award is measured each year at the date of the grant. The activity of the plan in the three-month period ended March31, 2010 and 2009 is as follows: 2010 2009 Total SCC shares reserved for the plan 600,000 600,000 Total shares granted at January1, (241,200 ) (229,200 ) Granted in the period Total shares granted at March31, (241,200 ) (229,200 ) Remaining shares reserved 358,800 370,800 Employee Stock Purchase Plan: In January2007, the Company offered to eligible employees a stock purchase plan (the Employee Stock Purchase Plan) through a trust that acquires shares of Grupo Mexico stock for sale to its employees, and employees of subsidiaries, and certain affiliated companies. The purchase price is established at the approximate fair market value on the grant date. Every two years employees will be able to acquire title to 50% of the shares paid in the previous two years. The employees

Financial instruments:

Financial instruments:
	3 Months Ended Mar. 31, 2010
Financial instruments:
Financial instruments:	Q. Financial instruments: Subtopic 810-10 of ASC Fair value measurement and disclosures Overall establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under Subtopic 810-10 are described below: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs. (i.e., quoted prices for similar assets or liabilities) Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable (other than accounts receivable associated with provisionally priced sales) and accounts payable approximate fair value due to their short maturities. Consequently, such financial instruments are not included in the following table that provides information about the carrying amounts and estimated fair values of other financial instruments that are not measured at fair value in the condensed consolidated balance sheet as of March31, 2010 and December31, 2009 (in millions): As of March31, 2010 As of December31, 2009 Carrying Value Fair Value Carrying Value Fair Value Liabilities: Long-term debt $ 1,280.3 $ 1,346.1 $ 1,280.3 $ 1,292.3 Fair value for long term debt is based on quoted market prices classified as Level 1 in the fair value hierarchy. The Mitsui loan is based on the present value of the cash flow discounted at 9%, which is the Companys weighted average cost of capital. Fair values of assets and liabilities measured at fair value on a recurring basis were calculated as follows as of March31, 2010 and December31, 2009: FairValueatMeasurementDateUsing: Description FairValueasofMarch31, 2010 Quotedpricesin activemarkets foridentical assets(Level1) Significant other observable inputs (Level2) Significant unobservable inputs(Level3) Assets: Available for sale debt securities: Foreign bonds $ 2.0 $ 2.0 Corporate bonds 2.8 2.2 $ 0.6 Asset backed obligations 5.7 5.7 Mortage backed securities 9.6 9.6 Derivatives: Provisionally priced sales: Copper 3.0 3.0 Molybdenum 26.3 26.3 Total $ 49.4 $ 29.3 $ 19.5 $ 0.6 FairValueatMeasurementDateUsing: Description FairValueasofDecember31, 2009 Quotedpricesin activemarkets foridentical assets(Level1) Significant other observable inputs (Level2) Significant unobservable inputs(Level3) Assets: Available for

Subsequent events:

Subsequent events:
	3 Months Ended Mar. 31, 2010
Subsequent events:
Subsequent events:	R. Subsequent events: Dividends: On April 22, 2010, the Board of Directors authorized a quarterly dividend of 45 cents per share payable on May 25, 2010, to SCC shareholders of record at the close of business on May 12, 2010. Technical review of Tia Maria EIA: On April27, 2010, a Peruvian Ministerial Resolution created a technical agency to analyze and respond to comments on the environmental impact of the Tia Maria project. This technical agency is an alternative to the cancelled public hearing and will, during a period of 90 days, analyze comments on the environmental impact of the Tia Maria project. At the end of the period, a final report will be issued. This technical agency will include representatives of Peruvian national and regional authorities and representatives of the community and the Company. SCC will participate in this process to further inform the local communities of the value of the project and the benefits that it will bring to the region and its people.

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010
Document and Entity Information
Entity Registrant Name	SOUTHERN COPPER CORP/
Entity Central Index Key	0001001838
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		850,000,000
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1