<Page>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
2001
Second Quarter
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2001 Commission file number 1-14066
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SOUTHERN PERU COPPER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3849074
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(State or other jurisdiction of (I.R.S Employer
Incorporation or organization) Identification No.)
1150 North 7th., Avenue, Tucson, Az. 85705-0747
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 520-798-7500
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
As of July 31, 2000, there were outstanding 14,098,562 shares of Southern Peru
Copper Corporation common stock, par value $0.01 per share. There were also
outstanding 65,900,833 shares of Southern Peru Copper Corporation Class A common
stock, par value $0.01 per share.
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Southern Peru Copper Corporation
and Subsidiaries
INDEX TO FORM 10-Q
PAGE NO.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statement of Earnings
Three Months and Six Months
ended June 30, 2001 and 2000 2
Condensed Consolidated Balance Sheet
June 30, 2001 and December 31, 2000 3
Condensed Consolidated Statement of Cash Flows
Three Months and Six Months
ended June 30, 2001 and 2000 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
Report of Independent Public Accountants 13
PART II. OTHER INFORMATION:
Item 6 Exhibits on Form 10-Q 14
Signatures 15
Exhibit 15 - Independent Public Accountants Awareness Letter 16
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Southern Peru Copper Corporation
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<Table>
<Caption>
3 Months Ended 6 Months Ended
June 30, June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
(in thousands, except for per share amounts)
Net sales:
Stockholders and affiliates $ 3,596 $ 17,094 $ 6,013 $ 33,432
Third parties 159,239 139,927 319,242 286,711
--------- --------- --------- ---------
Total net sales 162,835 157,021 325,255 320,143
--------- --------- --------- ---------
Operating costs and expenses:
Cost of sales 115,274 100,852 218,288 210,655
Administrative and other expenses 8,672 6,935 15,786 14,138
Depreciation and depletion 18,760 18,587 39,585 37,225
Exploration expense 281 1,378 3,230 2,109
--------- --------- --------- ---------
Total operating costs and expenses 142,987 127,752 276,889 264,127
--------- --------- --------- ---------
Operating income 19,848 29,269 48,366 56,016
Interest income 6,498 645 9,252 1,073
Other income (expense) (740) 927 (1,113) 1,910
Interest expense 13,344 4,019 20,345 7,935
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Earnings before taxes on income
and minority interest of investment
shares 12,262 26,822 36,160 51,064
Taxes on income 4,612 8,583 12,514 16,194
Minority interest of investment shares in income of
Peruvian Branch 193 225 490 381
--------- --------- --------- ---------
Net earnings $ 7,457 $ 18,014 $ 23,156 $ 34,489
========= ========= ========= =========
Per common share amounts:
Net earnings - basic and diluted $ 0.093 $ 0.225 $ 0.289 $ 0.432
Dividends declared $ 0.098 $ 0.050 $ 0.241 $ 0.110
Dividends paid $ 0.241 $ 0.050 $ 0.241 $ 0.110
Weighted average common shares outstanding:
Basic 80,001 79,999 80,001 80,000
Diluted 80,006 80,017 80,006 80,026
</Table>
The accompanying notes are an integral part of these financial statements.
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Southern Peru Copper Corporation
and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<Table>
<Caption>
June 30, December 31,
2001 2000
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(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 519,644 $ 149,088
Accounts receivable, net 71,827 142,457
Inventories 118,749 114,931
Other assets 36,030 35,371
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Total current assets 746,250 441,847
Net property 1,324,475 1,298,130
Other assets 62,016 30,581
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Total Assets $2,132,741 $1,770,558
========== ==========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 153,000 $ 24,339
Accounts payable 72,258 68,157
Accrued liabilities 37,928 39,884
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Total current liabilities 263,186 132,380
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Long-term debt 546,968 322,914
Deferred income taxes 97,575 94,891
Other liabilities 15,278 14,253
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Total non-current liabilities 659,821 432,058
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Minority interest of investment shares
in the Peruvian Branch 14,202 14,465
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STOCKHOLDERS' EQUITY
Common stock (a) 261,584 261,584
Retained earnings 933,948 930,071
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Total Stockholders' Equity 1,195,532 1,191,655
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Total Liabilities, Minority
Interest and Stockholders' Equity $2,132,741 $1,770,558
========== ==========
(a) Common shares: Authorized 34,099 34,099
Outstanding 14,100 14,100
Class A common shares Authorized
and Outstanding 65,901 65,901
</Table>
The accompanying notes are an integral part of these financial statements.
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Southern Peru Copper Corporation
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<Table>
<Caption>
3 Months Ended 6 Months Ended
June 30, June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
(in thousands) (in thousands)
OPERATING ACTIVITIES
Net earnings $ 7,457 $ 18,014 $ 23,156 $ 34,489
Adjustments to reconcile net earnings to
net cash provided from operating activities:
Depreciation and depletion 18,760 18,587 39,585 37,225
Provision for deferred income taxes 855 5,211 2,980 9,433
Foreign currency transaction losses (gains) 2,018 (145) 3,722 757
Minority interest of investment shares 193 225 490 381
Net changes in operating assets and liabilities:
Accounts receivable (1,565) 6,116 70,404 3,295
Inventories 12,965 (5,211) (3,819) 5,023
Accounts payable and accrued liabilities (1,017) 1,623 2,211 (17,259)
Other operating assets and liabilities 1,946 7,485 2,349 15,827
--------- --------- --------- ---------
Net cash provided by operating activities 41,612 51,905 141,078 89,171
--------- --------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures (40,222) (31,117) (67,745) (64,353)
Sales of property 48 12 61 18
--------- --------- --------- ---------
Net cash used in investing activities (40,174) (31,105) (67,684) (64,335)
--------- --------- --------- ---------
FINANCING ACTIVITIES
Debt repayment (43,039) (8,185) (47,285) (8,185)
Proceeds from borrowings -- 10,000 400,000 20,000
Escrow (deposits) withdrawals on long-term loans (32,063) 940 (32,063) 1,130
Dividends paid to common stockholders (19,279) (4,000) (19,279) (8,800)
Distributions to minority interest (309) (71) (309) (157)
Purchases of investment shares (361) (191) (756) (1,042)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities (95,051) (1,507) 300,308 2,946
--------- --------- --------- ---------
Effect of exchange rate changes on cash (1,244) 126 (3,146) (785)
--------- --------- --------- ---------
Increase (decrease)in cash and cash equivalents (94,857) 19,419 370,556 26,997
Cash and cash equivalents at beginning of period 614,501 18,174 149,088 10,596
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 519,644 $ 37,593 $ 519,644 $ 37,593
========= ========= ========= =========
</Table>
The accompanying notes are an integral part of these financial statements.
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Southern Peru Copper Corporation
and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. In the opinion of Southern Peru Copper Corporation (the "Company" or "SPCC"),
the accompanying unaudited condensed consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the Company's financial position as of June 30,
2001 and the results of operations and cash flows for the three and six
months ended June 30, 2001 and 2000. Certain reclassifications have been made
in the financial statements from amounts previously reported. The condensed
financial statements as of June 30, 2001 and 2000 have been subjected to a
review by Arthur Andersen, the Company's independent public accountants. The
results of operations for the three and six-month periods 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 and notes thereto included in the
Company's 2000 annual report on Form 10-K.
B. Inventories were as follows:
(in millions)
<Table>
<Caption>
June 30, December 31,
2001 2000
Metals at lower of average cost or market:
Finished goods $ 1.8 $ 1.9
Work-in-process 49.4 46.0
Supplies at average cost, net of reserves 67.5 67.0
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Total inventories $118.7 $114.9
</Table>
C. At June 30, 2001, the Company has recorded sales of 23.3 million pounds of
copper, at a provisional price of $0.70 per pound. These sales are subject to
final pricing based on the average monthly LME and COMEX copper prices in the
month of settlement, which will occur in the third quarter of 2001.
D. Financial Instruments:
The Company uses derivative instruments to manage its exposure to market risk
from changes in commodity prices. Derivative instruments, which are
designated as hedges, must be deemed effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge
at the inception of the contract.
Fuel swaps: The Company may enter into fuel swap agreements to limit the
effect of changes in fuel prices on its production costs. A fuel swap
establishes a fixed price for the quantity of fuel covered by the agreement.
The difference between the published price for fuel and the price established
in the contract for the month covered by the swap is recognized in production
costs.
At June 30, 2001, the Company held no fuel swaps.
Foreign currency: The Company selectively uses foreign currency swaps to
limit the effects of exchange rate changes on future cash flow obligations
denominated in foreign currencies. A currency swap establishes a fixed dollar
cost for a fixed amount or foreign currency required at a future date. The
Company had entered into currency swap agreements on a portion of its capital
cost contracted in Euros.
At June 30, 2001, the Company held no foreign currency swaps.
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<Page>
E. Commitments and Contingencies:
Litigation
In April 1996, the Company was served with a complaint filed in Peru by
approximately 800 former employees seeking the delivery of a substantial
number of investment shares (formerly called "labor shares") of its Peruvian
Branch, plus dividends. In October 1997, the Superior Court of Lima nullified
a decision of a court of first instance, which had been adverse to the
Company. The Superior Court remanded the case for a new trial. Plaintiffs
filed an extraordinary appeal before the Peruvian Supreme Court. The Supreme
Court may grant discretionary review in limited cases. In March 1999, the
Company received official notification that the Supreme Court had denied
plaintiffs' extraordinary appeal and affirmed the decision of the Superior
Court of Lima, which remanded the case to the lower court for further
proceedings. In December 1999, the lower court decided against the Company,
ordering the delivery of the investment shares and dividends to the
plaintiffs. The Company appealed this decision in January 2000. On October
10, 2000, the Superior Court of Lima affirmed the lower court's decision,
which had been adverse to the Company. The Company has filed an extraordinary
appeal before the Peruvian Supreme Court. The Supreme Court may grant
discretionary review in limited cases.
There is also pending against the Company a similar lawsuit filed by 127
additional former employees. In the third quarter of 1997, the court of first
instance dismissed their complaint. Upon appeal filed by the plaintiffs, the
Superior Court of Lima, in the third quarter of 1998, nullified the lower
court's decision on technical grounds and remanded the case to the lower
court for further proceedings. In December 1999, the lower court dismissed
the complaint against the Company. Plaintiffs appealed this decision in
January 2000 before the Superior Court. By the end of year 2000 the Superior
Court rejected the appeal. Plaintiffs have filed an extraordinary appeal
before the Supreme Court. The Supreme Court may grant discretionary review in
limited cases.
On December 28, 2000, a lawsuit was filed against the Company in federal
court in New York City. The lawsuit seeks unspecified compensatory and
punitive damages for alleged personal injuries to eight persons resident in
Peru arising from alleged releases into the environment from the Company's
operations in Peru. The lawsuit is similar to a suit filed in 1995 in Texas,
which was dismissed in 1996 by a U. S. district judge. That ruling was
affirmed unanimously by a three-judge federal appeals court. The court made
it clear that the claims of Peruvian residents should be tried in the courts
of Peru, not in the United States.
It is the opinion of management that the outcome of the legal proceedings
mentioned, as well as other miscellaneous litigation and proceedings now
pending, will not materially adversely affect the financial position of the
Company and its consolidated subsidiaries. However, it is possible that
litigation matters could have a material effect on quarterly or annual
operating results, when they are resolved in future periods.
F. Impact of New Accounting Standards:
Effective January 1, 2001, the Company has adopted the SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" and SFAS No.
138 "Accounting for Certain Derivative Instruments and Certain Hedging
Activities". Such adoption did not have a material impact on the condensed
financial statements as of June 30, 2001.
In June 2001, The Financial Accounting Standards Board (FASB) issued SFAS No.
142, "Goodwill and Other Intangible Assets". This statement addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, Intangible Assets. The provisions
of
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<Page>
this statement are required to be applied starting with fiscal years
beginning after December 15, 2001 and are required to be applied at the
beginning of an entity's fiscal year to all goodwill and other intangible
assets recognized in its financial statements at that date. Impairment
losses for goodwill and indefinite-lived intangible assets that arise due to
the initial application of this statement (resulting from a transitional
impairment test) are to be reported as resulting from a change in accounting
principle. Goodwill and intangible assets acquired after June 30, 2001, will
be subject immediately to the nonamortization and amortization provisions of
this statement. The Company will adopt this statement effective January 1,
2002 and its implementation will not materially affect its results of
operations or financial condition.
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<Page>
Part I Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reported net earnings of $7.5 million, or 9 cents per common share,
for the second quarter ended June 30, 2001 compared with net earnings of $18.0
million, or 22 cents per common share, for the second quarter of 2000. For the
first six months of 2001, net earnings were $23.2 million or 29 cents per common
share, compared to $34.5 million or 43 cents per common share, for the same
period of 2000. The decrease in earnings in the second quarter of 2001 is
primarily a result of lower copper prices and decreased production. The average
price for copper on the London Metal Exchange (LME) was 75 cents per pound for
the second quarter of 2001 compared with 79 cents per pound in the second
quarter of 2000. Average price for copper for the six months ended June 30, was
77 cents in 2001 and 80 cents in 2000. The average price for copper on the New
York Commodity Exchange (COMEX) was 75 cents per pound for the second quarter of
2001 compared with 80 cents per pound in the second quarter of 2000. Average
price for copper for the six months ended June 30, was 79 cents in 2001 and 81
cents in 2000.
Mine copper production decreased 7.3% to 170.8 million pounds in the second
quarter of 2001 compared with the second quarter of last year. This decrease
of 13.4 million pounds included 15.8 million pounds from the Cuajone mine, an
increase of 6.1 million pounds from Toquepala mine and a decrease of 3.7
million pounds in solvent extraction/electrowinning (SX/EW) production. The
treated mineral production decreased 7% at the Cuajone mine during the second
quarter of 2001, due to a 4-day stoppage caused by lack of energy and other
damages to the facilities as a consequence of the June 23 earthquake in the
south of Peru. Also, lower ore grades mined contributed to this decrease with
respect to last year. Copper recovery was 3% higher than last year however;
this did not compensate for the loss described above. Toquepala's increase in
production was due to higher throughput at the Toquepala concentrator. The
main reason for the 3.7 million pounds decrease in SX/EW production was a
4-day stoppage at the plant, because of a delay in transport of sulfuric acid
caused by damage to the track lines of the Industrial Railroad occurred in
the earthquake of June 23 and a decrease in the grade of PLS (Pregnant Leach
Solution).
The project to expand and protect the Cuajone mine from maximum flooding of the
Torata river is under construction and reached 97% completion at the end of the
second quarter of 2001, with an investment of $70.7 million out of the $75.5
million budget. The Torata River was diverted on June 30, 2000 to allow the
beginning of the Cuajone pit expansion. Minor damages caused by the earthquake
are being repaired and completion of the project is expected for the first
quarter of 2002.
On March 30, 2001, SPCC received a disbursement of $400 million under a line
of credit contracted with a group of international financial institutions.
This line of credit will be used by SPCC to finance its expansion and
modernization plan that includes, among others, the expansion of the
Toquepala mine and concentrator, an additional leaching section at the
Cuajone mine, and the expansion and modernization of its Ilo smelter.
INFLATION AND DEVALUATION OF THE PERUVIAN NUEVO SOL: A portion of the
Company's operating costs is denominated in Peruvian nuevos soles. Since the
revenues of the Company are primarily denominated in U.S. dollars, when
inflation in Peru is not offset by a corresponding devaluation of the
Peruvian nuevo sol, the financial position, results of operations and cash
flows of the Company could be adversely affected. For the six months ended
June 30, 2001 the inflation and devaluation rates were 0.49% and (0.37)%,
respectively, and for the six month
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periods ended June 30, 2000, the inflation and devaluation rate were 1.69% and
(0.57)%, respectively.
NET SALES: Net sales in the second quarter of 2001 increased $5.8 million to
$162.8 million from the comparable period in 2000. Net sales for the first six
months of 2001 totaled $325.3 million, compared with $320.1 million for the same
period of 2000. The increase in net sales in both three months and six months
periods of 2001 was principally a result of the increase in copper sales of
16.2 million pounds in the second quarter 2001.
At June 30, 2001, the Company has recorded sales of 23.3 million pounds of
copper, at a provisional price of $0.70 per pound. These sales are subject to
final pricing based on the average monthly LME and COMEX copper prices in the
month of settlement, which will occur in the third quarter of 2001.
PRICES: Sales prices for the Company's metals are established principally by
reference to prices quoted on the LME, the COMEX or Published in Platt's Metals
Week for dealer oxide mean prices for molybdenum products.
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
Price/Volume Data: 2001 2000 2001 2000
Average Metal Prices
Copper (per pound-LME) $ 0.75 $ 0.79 $ 0.77 $ 0.80
Copper (per pound-Comex) $ 0.75 $ 0.80 $ 0.79 $ 0.81
Molybdenum (per pound) $ 2.46 $ 2.68 $ 2.35 $ 2.61
Silver (per ounce-COMEX) $ 4.38 $ 5.03 $ 4.45 $ 5.11
Sales Volume (in thousands):
Copper (pounds) 193,996 177,800 371,925 361,300
Molybdenum (pounds) (1) 3,737 3,808 8,197 7,154
Silver (ounces) 890 881 1,810 1,756
</Table>
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(1) The Company's molybdenum production is sold in concentrate form. Volume
represents pounds of molybdenum contained in concentrates.
FINANCIAL INSTRUMENTS:
The Company may use derivative instruments to manage its exposure to market risk
from changes in commodity prices. Derivative instruments which are designated as
hedges must be deemed effective at reducing the risk associated with the
exposure being hedged and must be designated as a hedge at the inception of the
contract.
FUEL SWAPS: The Company may enter into fuel swap agreements to limit the effect
of changes in fuel prices on its production costs. A fuel swap establishes a
fixed price for the quantity of fuel covered by the agreement. The difference
between the published price for fuel and the price established in the contract
for the month covered by the swap is recognized in production costs.
At June 30, 2001 the Company held no fuel swaps agreements.
FOREIGN CURRENCY: The Company selectively uses foreign currency swaps to limit
the effects of exchange rate changes on future cash flow obligations denominated
in foreign currencies. A currency swap establishes a fixed dollar cost for a
fixed amount of foreign currency required at a future date. The Company had
entered into currency swap agreements on a portion of its capital cost
contracted in Euros.
At June 30, 2001 the Company held no foreign currency swap.
OPERATING COSTS AND EXPENSES: Operating costs and expenses were $143.0 million
in the second quarter of 2001 compared with $127.8 million in the second quarter
of
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2000. In the six months ended June 30, operating costs and expenses were $276.9
million in 2001, compared with $264.1 million in the comparable 2000 period.
Cost of sales for the three months ended June 30, 2001 was $115.3 million
compared with $100.9 million in the comparable 2000 period. In the six months
ended June 30, 2001, cost of sales was $218.3 million, compared with $210.7
million in the comparable 2000 period. The increase in the second quarter was
the result of higher copper sales volumes, as well as increased fuel oil and
operating materials costs for both periods presented.
Administrative and other expenses were $8.7 million in the three months ended
June 30, 2001 and $6.9 million in the comparable 2000 period. In the six
months ended June 30, 2001, administrative and other expenses were $15.8
million compared with $14.1 million in the six months ended June 30, 2000.
The increase in the second quarter 2001 compared with the same period of 2000
is mainly due to consulting services booked on a monthly basis this year
instead of in a lump sum as they were charged in October last year.
Depreciation and depletion expense for the three months ended June 30, 2001 was
$18.8 million compared with $18.6 million in the comparable 2000 period. In the
six months ended June 30, 2001 depreciation and depletion expense was $39.6
million, compared with $37.2 million in the comparable 2000 period. The increase
in 2001 is principally due to the depreciation of the new equipment and other
assets acquired to expand and protect the Cuajone mine from maximum flooding of
the Torata River.
NON-OPERATING ITEMS: Interest income was $6.5 million in the second quarter of
2001, compared to $0.6 million in the comparable 2000 period. In the six months
ended June 30, 2001 interest income was $9.3 million compared to $1.1 million
for the same period of 2000. The increase reflects higher amounts of excess cash
invested in year 2001.
Interest expense was $13.3 million in the second quarter of 2001, compared to
$4.0 million in the comparable 2000 period. In the six months ended June 30,
2001 interest expense was $20.3 million compared to $7.9 million for the same
period of 2000. The increase reflects the interest cost of the $400 million
drawdown of March 31, 2001.
TAXES ON INCOME: Taxes on income for the six months ended June 30, 2001 were
$12.5 million, compared with $16.2 million for the same period of 2000. The
decrease was principally due to lower earnings in 2001, resulting from lower
copper prices and lower production.
CASH FLOWS:
SECOND QUARTER: Net cash provided by operating activities was $41.6 million in
the second quarter of 2001, compared with $51.9 million in the comparable 2000
period. The decrease was principally attributable to decreased operating income.
Net cash used in investing activities was $40.2 million of capital expenditures
in the second quarter of 2001. In the second quarter of 2000, net cash used in
investing activities was $31.1 million and was principally due to capital
expenditures.
Net cash used for financing activities in the second quarter of 2001 was $95.1
million, compared with $1.5 million for the second quarter of 2000. The second
quarter of 2001 includes a dividend distribution of $19.3 million, debt
repayments of $ 43.0 million and escrow deposits of $ 32.0 million.
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SIX MONTHS: Net cash provided by operating activities was $141.1 million for the
six month period ended June 30, 2001, compared with $89.2 million in the
comparable 2000 period. The increase was attributable primarily to
reimbursements of pending I.G.V. drawbacks made by the government of $ 45.5
millions.
Net cash used in investing activities was $67.7 million in the six-month period
ended June 30, 2001, and was primarily due to capital expenditures. In the six
month period ended June 30, 2000, net cash used in investing activities was
$64.3 million and was primarily due to capital expenditures.
Cash provided by financing activities for the six months ended June 30, 2001 was
$300.3 million, compared with $2.9 million in the comparable 2000 period. The
six months ended June 30, 2001 includes a disbursement of $ 400.0 million under
a credit line contracted with a group of international financial institutions.
LIQUIDITY AND CAPITAL RESOURCES: The Company expects that it will meet its cash
requirements for 2001 and beyond from internally generated funds, cash on hand,
from borrowings under existing credit facilities and from additional external
financing.
In the first quarter of 2001 the Company received a disbursement of $400.0
million under a line of credit contracted with a group of international
financial institutions. This line of credit will be used by SPCC to finance its
expansion and modernization plan that includes, among others, the expansion of
the Toquepala mine and concentrator, an additional leaching section at the
Cuajone mine, and the expansion and modernization of its smelter in Ilo.
In the second quarter of 2001, the Company paid a dividend to shareholders of
$19.3 million or 24 cents per share, compared with $4.0 million or 5 cents per
share in the same period of 2000. On July 25, 2001, the Company declared a
quarterly dividend of 4.7 cents per share payable August 29, 2001, to
stockholders of record at the close of business on August 9, 2001.
Certain financing agreements contain covenants, which limit the payment of
dividends to stockholders. Under the most restrictive covenant, the Company may
pay dividends to stockholders equal to 50% of the net income of the Company for
any fiscal quarter as long as such dividends are paid by June 30 of the
following year.
IMPACT OF NEW ACCOUNTING STANDARDS: Effective January 1, 2001, the Company has
adopted the SFAS No. 133 "Accounting for Derivate Instruments and Hedging
Activities" and SFAS No. 138 "Accounting for Certain Derivate Instruments and
Certain Hedging Activities". Such adoption did not have a material impact on the
condensed financial statements as of June 30, 2001.
In June 2001, The Financial Accounting Standards Board (FASB) issued SFAS No.
142, "Goodwill and Other Intangible Assets". This statement addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, Intangible Assets. The provisions
of this statement are required to be applied starting with fiscal years
beginning after December 15, 2001 and are required to be applied at the
beginning of an entity's fiscal year to all goodwill and other intangible
assets recognized in its financial statements at that date. Impairment losses
for goodwill and indefinite-lived intangible assets that arise due to the
initial application of this statement (resulting from a transitional
impairment test) are to be reported as resulting from a change in accounting
principle. Goodwill and intangible assets acquired after June 30, 2001, will
be subject immediately to the nonamortization and amortization provisions of
this statement. The Company will adopt this statement effective January 1,
2002 and its implementation will not materially affect its results of
operations or financial condition.
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<Page>
CAUTIONARY STATEMENT: Forward-looking statements in this report and in other
Company statements include statements regarding expected commencement dates of
mining or metal production operations, projected quantities of future metal
production, anticipated production rates, operating efficiencies, costs and
expenditures as well as projected demand or supply for the Company's products.
Actual results could differ materially depending upon factors including the
availability of materials, equipment, required permits or approvals and
financing, the occurrence of unusual weather or operating conditions, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications, labor relations, 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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Arthur Andersen
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Southern Peru Copper Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Southern Peru Copper Corporation and subsidiaries (a Delaware Corporation) as of
June 30, 2001 and the related condensed consolidated statements of income and
cash flows for the three-month and six-month periods ended June 30, 2001 and
2000. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with accounting principles generally accepted in the United States
of America.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
July 16, 2001
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Part II - OTHER INFORMATION
Item 6 - Exhibits on form 10-Q
15 - Independent Public Accountants Awareness Letter.
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<Page>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHERN PERU COPPER CORPORATION
(Registrant)
Date: August 10, 2001 /s/ Oscar Gonzalez Rocha
------------------------
President
Date: August 10, 2001 /s/ Daniel Tellechea Salido
---------------------------
Vice President of Finance
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