FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Act of 1934
For the month of March 2004
Mexico Mining, S.A. de C.V.
(Translation of Registrant's name into English)
Minera Mexico, S.A. DE C.V.
Baja California 200 Col. Roma Sur
06760 Mexico, D.F.
(Address of principal executive offices)
Indicate by check mark whether the registrant files of will file annual reports
under cover of Form 20-F of Form 40-F
Form 20-F X FORM 40-F
Indicate by check mark whether the registrant by furnish the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g-32(b) under the Securities Exchange Act
of 1934
Yes: No X
If "yes" is marked, indicate the file number assigned to the registrant in
connection with Rule 12g3-2(b):
SIGNATURE PAGE
Pursuant to the requirements 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.
MINERA MEXICO, S.A. DE C.V.
Date: Mayo 9, 2003
By:
Name: Hector Nieto Castilla
Title: Managing Director, Finance
MINERA MEXICO, S.A. DE C.V. AND SUBSIDIARIES
(Subsidiary of Americas Mining Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
The Minera Mexico consolidated financial statements are prepared in accordance
with generally accepted accounting principles in United States of America.
MINERA MEXICO, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2004 AND 2003
STATED IN THOUSANDS OF U.S. DOLLARS
A S S E T S
2004 2003
CURRENT:
Cash and marketable securities $ 127,272 $ 85,262
Notes and accounts receivable
Trade, 99,228 60,726
Affiliated companies 48,943 26,942
Recoverable taxes 30,934 48,754
Other 15,518 25,734
---------- ----------
194,622 162,156
Inventories of primary and secondary
metals and byproducts 132,637 129,425
Materials and supplies, 100,293 104,070
Prepaid expenses and other 5,956 5,575
---------- ----------
Total current assets 560,779 486,488
GRUPO MEXICO 6,906 6,906
DEFERRED CHARGES AND OTHER 7,861 10,309
Property, plant and equipment 3,466,211 3,448,435
Accumulated Depreciation and Amortization (1,367,143) (1,306,653)
---------- ----------
PROPERTY AND EQUIPMENT, NET 2,099,068 2,141,782
INVESTMENTS IN ASSOCIATED COMPANIES
AND OTHERS 3,548 2,952
GOODWILL 17,041 13,491
---------- ----------
$ 2,695,203 $ 2,661,928
========== ==========
The accompanying eight notes are an integral part of these consolidated
financial statements.
LIABILITIES AND STOCKHOLDERS'EQUITY
2004 2003
CURRENT LIABILITIES:
Notes and interest payable $ 59,454 $ 194,010
Dividend payable 11,634 13,934
Accounts payable and accrued liabilities 135,624 240,313
Affiliated companies 58,258 83,316
Income tax and asset tax 2,660 20,695
Employee profit sharing 428 940
Deferred taxes 91,260 93,568
---------- ----------
Total current liabilities 359,317 646,776
LONG-TERM DEBT 1,258,403 1,133,273
DEFERRED TAXES 115,010 221,806
LONG-TERM AFFILIATED COMPANIES 59,374 59,374
VOLUNTARY RETIREMENT AND SENIORITY
PREMIUMS RESERVE 25,036 32,314
---------- ----------
Total liabilities 1,817,141 2,093,543
MINORITY INTEREST 77,758 68,793
STOCKHOLDERS' EQUITY:
Capital stock 431,536 423,842
Treasury shares (71,617) (53,738)
Additional paid-in capital by merger 5,369 -
Additional paid-in capital 104,553 727
Other comprensive income (14,713) (23,954)
Retained earnings 248,908 166,810
Profit and (loss) 96,268 (14,095)
---------- ----------
Total stockholders' equity 800,305 499,591
---------- ----------
$ 2,695,203 $ 2,661,928
========== ==========
The accompanying eight notes are an integral part of these consolidated
financial statements.
MINERA MEXICO, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS ENDED MARCH 31, 2004 and 2003
STATED IN THOUSANDS OF U.S. DOLLARS
2004 % 2003 %
NET SALES 328,458 100 147,293 100
COST OF SALES 152,063 46 176,271 73
---------- --------
176,395 54 40,022 27
OPERATING EXPENSES:
Administrative expenses 9,543 3 7,862 5
Depreciation and amortization 28,539 9 29,109 20
---------- --------
OPERATING INCOME (LOSS) 138,313 42 3,050 2
---------- --------
COST OF FINANCING:
Interest expense, net 26,027 8 24,640 17
Exchange (gain) loss, net 3,262 1 (9,082) (6)
---------- --------
29,289 9 15,558 11
OTHER (EXPENSES) INCOME, net 352 - 552 -
Income (Loss) before provisions 109,376 33 (11,956) (8)
PROVISIONS FOR:
Income taxes 216 - 488 -
Deferred tax 1,531 - (4,619) (3)
Asset tax 8,339 3 5,737 4
---------- --------
10,086 3 1,605 1
Consolidated net income (loss) ---------- --------
for the periods 99,289 30 (13,561) (9)
========== ========
ALLOCATION OF CONSOLIDATED NET INCOME (LOSS):
Minority interest 3,021 - 534 1
Majority interest 96,268 29 (14,095) (10)
---------- --------
99,289 30 (13,561) (9)
========== ========
Average realized copper price(cts. Pound) 124.00 78.00
Average realized zinc price (cts. Pound) 51.00 39.00
Exports 57.69% 25.83%
Ratio of EBITDA to interest expense 5.50 1.47
Inflation rate 4.23% 5.64%
Devaluation rate (average) 1.79% 18.46%
Earnings per share 0.13 (0.02)
Number of shares 769,604,346 659,463,779
The accompanying eight notes are an integral part of these consolidated
financial statements.
MINERA MEXICO, S.A. DE C.V. AND SUBSIDIARIES
(Subsidiary of Americas Mining Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2004 AND 2003
(In thousands of U..S. dollars)
NOTE 1- DESCRIPTION OF BUSINESS AND SIGNIFICANT EVENTS:
The operating companies that comprise Minera Mexico, S.A. de C.V. ("MM") and
Subsidiaries (collectively, "the Company") are in the metallurgical mining
industry. They engage in the exploration, mining and processing of metallic and
nonmetallic minerals as well as the mining of coal and the refinement of copper,
gold and silver. The Company is a 98.91% owned indirect subsidiary of Grupo
Mexico, S.A. de C.V. ("GMEXICO") through its holding company Americas Mining
Corporation (AMC).
At General Ordinary Stockholders' Meeting held on May, 28, 2003, the stock-
holders agreed to merge Grupo Minero Mexico, S.A. de C.V. ("GMM") a wholly -
owned subsidiary into MM. The merger became effective as from May 31, 2003, as
a result of which, the MM acquired all the assets, liabilities and capital of
the merged company, which ceased to exist as a legal entity. This operation
generated a Ps50,847 decrease in stockholders' equity.
NOTE 2 BASIS OF PRESENTATION:
a. Consolidation of financial statements -
The consolidated financial statements as of March 31, 2004 and 2003 include
the financial statements of GMM (a 98.91% owned subsidiary of Minera Mexico,
S.A. de C.V.) and those of its subsidiaries that consolidate the financial
statements of their subsidiaries mentioned as follows:
Ownership percentage
As of March
Company 31, 2004
Mexicana de Cobre, S.A. de C.V. (Mexcobre) 96.43%
Mexicana de Cananea, S.A. de C.V. (Mexcananea) 98.49%
Industrial Minera Mexico, S.A. de C.V. (Immsa) 100%
Minerales Metalicos del Norte, S.A. (Mimenosa) 100%
Minera Mexico Internacional, Inc. (MMI) 100%
Others companies 100%
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all under the same management. All significant intercompany
balances and transactions have been eliminated in consolidation.
MM is not a corporation separate from the Grupo Mexico, S.A. de C.V. (GMEX).
It is, however, an entity establishment, registered pursuant to Mexican Law,
through which the Company holds assets, incurs liabilities and conducts ope-
rations in Mexico. MM comprises substantially all the assets and liabilities
of the Company associated with its mining operations in Mexico.
Foreign exchange - The Company's functional currency is the U.S. dollar. MM
maintains its books in Mexican pesos. Foreign currency assets and liabilities
are remeasured into U.S. dollars at current exchange rates except for inven-
tory, property plant and equipment and other assets which are remeasured at
historical exchange rates. Revenues and expenses are generally translated at
average exchange rates in effect during the period, except for those expenses
related to balance sheet amounts that are remeasured at historical exchange
rates. Gains and losses from foreign currency remeasurement are included in
net earnings.
b. Reclassifications -
Certain amounts in the financial statements as of and for the quarter ended
March 31, 2004 and 2003 have been reclassified in order to conform to the
presentation of the consolidated financial statements as of and for the quarter
ended March 31, 2004.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Cash and cash equivalents -
Cash and temporary investments are primarily short-term investment fund, varia-
ble income securities and bank deposits with original maturities of three
months or less, and are valued at market.
b. Impairment of long-lived assets -
The Company, periodically reviews the recoverable value of its long-lived
tangible and intangible assets, including the goodwill, based on estimated
gross future cash flow from its cash-generating units. If the book value of
the assets exceeds the discounted value it recognizes impairment. The procedure
and criteria used by the Company are in line with the provisions of Statement
of Financial Accounting Standards (SFAS) No. 144 "Impairment of the Value of
Long-Lived Assets and their Disposal". Management of the Company considers that
as result of the study made at December 31, 2003 no impairment losses need to
be recognized.
c. Deferred charges -
- - Stripping costs- Stripping costs are costs associated with the removal of
waste materials after production has commenced. Over the life of the mine,
stripping costs are deferred in periods when the actual ratio of waste mate-
rials to mineral ore extracted is above the life-of-mine stripping ratio, which
represents the Company's estimate of the total amount of waste to be incurred
divided by the estimated total proven and probable reserves. In periods when
the actual mine stripping ratio is below the life-of-mine stripping ratio, the
Company reduces the net capitalized mine stripping asset proportionally with a
charge to amortization expense. In addition, deferred mine stripping costs are
amortized using the units of production method based on proven and probable ore
reserves. Copper resources contained in piles of leachable materials that have
been extracted from the mines are not included in the determination of units of
production amortization.
The Company's policy results in the smoothing of stripping costs over the life
of the mine and, in the view of the Company, better facilitates the matching of
mine production costs over the life of the mine with the mine's revenues.
- - Leaching material - Mexcananea capitalizes the cost of materials with low
copper content, extracted during the mining process ("leaching material"),
which are accumulated in areas known as leach dumps. The amortization of the
capitalized costs is determined based on the individual depletion of the leach
dumps, which is approximately from 5 to 8 years.
- - Mine development costs- Exploration costs incurred before operation of a site
begins are expensed as incurred, except for expenditures on specific properties
where proven and probable mineral resources have been confirmed, in which case
the expenditures are capitalized as mine development cost. Capitalized mine
development cost are amortized on a straight-line basis over the estimated use-
ful lives of the corresponding proven metal reserves.
- - Other deferred expenses- Other deferred expenses comprise mainly licenses,
expenses related to the development of software for internal use, and debt
restructuring expenses, which are capitalized and amortized on a straight-line
basis over an average period between three and ten years, beginning in 1999 and
2000.
d. Investment in shares of associated and other unconsolidated companies-
Accounted for using the equity method on the based on the financial statements
of associated and other unconsolidated companies and restated on the same basis
as of the Company.
e. Goodwill -
Beginning in 1998 the woodwill from the acquisition of Mexcananea is being
amortized over 10 years, the terms over which the benefits from this invest-
ment is expected to be realized.
f. Employee benefit obligations -
The Company records the liabilities from seniority premiums, pensions and reti-
rement payments similar to pensions as accrued, using actuarial calculations
based on the projected unit credit method and real interest rates. Accordin-
gly, the liability is being accrued which at present value will cover the obli-
gation for benefits projected to the estimated retirement date of the Company's
employees. Indemnity payments are charged to results in the period in which
they become payable.
Mexcananea provides medical and hospital services to all active employees and
retired unionized employees and the members of their families through a
subsidiary (Hospital del Ronquillo, S. de R.L. de C.V.) and in accordance with
needs to be US GAAP - FAS 112-, Mexcananea records the liability for postre-
tirement medical benefits based on actuarial calculations under the projected
unit credit method and using real interest rates.
When there is a significant reduction in personnel due to the restructuring of
the labor force or the closing of a plant, the corresponding indemnity costs,
net of the corresponding reduction in the projected benefit obligation and the
related items to be amortized, are charged to results.
Accordingly, the Company is accruing that liability, which at present value
will cover the obligation from benefits projected to the estimated retirement
date of the Company's employees. Indemnity payments are charged to results in
the period in which they are made.
g. Income tax, asset tax and employee statutory profit-sharing -
Income tax and employee statutory profit-sharing are recorded in the results of
the year in which they are incurred. Deferred income tax assets and liabilities
are recognized for temporary differences resulting from comparing the book and
tax values of assets and liabilities plus any future benefits from tax loss
carryforwards. Deferred income tax assets are reduced by any benefits that, in
the opinion of management, are not likely of being realized. Deferred emplo-
yees' statutory profit-sharing is derived from temporary differences between
the accounting income and income for employees' statutory profit-sharing pur-
poses.
Asset tax paid that is expected to be recoverable is recorded as an advance
payment of income tax and is presented in the balance sheet together with defe-
rred income tax.
h. Foreign currency balances and transactions -
Monetary assets and liabilities denominated in foreign currency are translated
into US dollars at the applicable exchange rate in effect at the balance sheet
date Foreign currency transactions are recorded at the applicable exchange
rate in effect at the transaction date. Exchange fluctuations are recorded as
a component of net comprehensive financing income (cost) in the consolidated
statements of operations.
i. Revenue recognition -
Most of the Company's copper is sold as refined metal under annual contracts or
on a spot sale basis. The balance of the Company's copper production is sold
in the form of concentrate under contracts of one to three years duration.
Silver and gold are sold under monthly contracts or in spot sales. Revenues are
recorded primarily in the month the product is shipped to customers based on
prices established in sales contracts.
j. Hedging activities -
Derivate instruments may be used to manage exposure to market risk from changes
in comoodity prices (metal and energy products), interest rates or the value of
the Company's assets and liabilities. To qualify for hedge accounting deriva-
tive instruments must be designated as a hedge in writing at acquisition or
inception of the contract. In addition, such instruments must be periodically
evaluated and deemed to be "highly effective" at reducing the risk associated
with the exposure being hedged. Any ineffectiveness of the hedge is reported in
current earnings. Derivative financial instruments that fail to qualify for
hedge accounting are carried at fair value and all unrealized gains or losses
are recognized in earnings.
The Company's derivative transactions during 2004 and 2003 were limited in
volume and restricted to risk management. The Company does not maintain or
issue financial instruments for speculative purposes. Decisions with respect
to each transaction and to the overall hedging policies are made by an Execu-
tive Risk Committee. The objective of the committee, which is currently com-
prised of the Chairman of the Board, the Chief Financial Officer and the
Assistant Director of Risk Management, is to ensure that the risks and benefits
have been appropriately assessed.
The Company enters into swap and option transactions or a combination of both
to reduce or eliminate the risk of purchase or sales price fluctuations. For
instance, for the purpose of reducing the risk of fluctuations in metal prices,
the Company may purchase put options or create synthetic put options to reduce
or eliminate the risk of metal price declines below the option strike price on
a portion of its anticipated future sales. Options and futures contracts are
carried at fair value with unrealized gains or losses recognized in current
earnings. Realized gains or losses from the sale or exercise of options and
from the settlement of futures contracts are recognized in the period in which
the underlying hedged production is sold.
k. Swap agreements -
Swap agreements limit the effect of changes in the price of the underlying
transactions. The Company's swap agreements generally do not meet hedge accoun-
ting criteria and are carried at fair value with unrealized gains or losses
recognized in current earnings. The Company enters into interest rate swap
agreements to limit the effect of increases in interest rates on floating rate
debt. The current differential to be paid or received as interest rates change
under any such agreement is recorded in interest expense. Diesel fuel swap
agreements are entered into to limit the effect of increases in the price of
diesel fuel. The differential to be paid or received as diesel fuel prices
change is recorded as a component of cost of sales. Foreign currency swap
agreements are entered into to limit the effect of exchange rate changes on
future cash flow obligations denominated in foreign currencies. The difference
to be paid or received as exchange rates change is included in the cost of the
input for which it was obtained.
l. Estimates
The accounting policies followed by the Company require that management make
certain estimates and use certain assumptions that affect the amounts reported
in the consolidated financial statements and the accompanying notes. Although
these estimates are based on management's best knowledge of current circums-
tances, actual results may differ.
m. Impact of New Accounting Standards:
Effective January 1, 2003, the Company adopted Statement of Financial Accoun-
ting Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations".
This statement requires the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. The liability
is measured at fair value and is adjusted to its present value in subsequent
periods as accretion expense is recorded. The corresponding asset retirement
costs are capitalized as part of the carrying value of the related long-lived
assets and depreciated over the asset's useful life. The adoption of SFAS No.
143 did not have a material effect on the Company's financial statements.
Effective January 1, 2003, the Company implemented SFAS No. 145, "Rescission of
SFAS Nos. 4,44 and 64, Amendment of SFAS 13, and Technical Corrections", under
which gains and losses from extinguishment of debt are classified as extraor-
dinary items only if they meet criteria outlined in Accounting Principles
Bulletin No. 30.
Effective January 1, 2003, the Company adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" (SFAS 146), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employees Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructu-
ring)". The adoption of SFAS No. 146 did not have a material effect on the
Company's financial statements.
Effective January 1, 2003, the Company adopted SFAS Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that
upon issuance of a guarantee, the Company must disclose and may be required to
recognize a liability for the fair value of the obligation it assumes under
that guarantee. The initial recognition and measurement requirement of FIN 45
is effective for guarantees issued or modified after December 31, 2002. The
adoption of FIN 45 did not have a material effect on the Company's financial
statement.
Effective January 1, 2003, the Company adopted SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" (SFAS 148), SFAS No. 148
des not alter the provisions of SFAS No. 123, nor does it require stock-based
compensation to be measured under the fair-value approach under SFAS No. 123.
The Company uses the disclosure only provisions of SFAS No. 123. The adoption
of SFAS No. 148 did not have a material effect on the Company's financial
statements.
Effective February 1, 2003, the Company adopted FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 addresses
consolidation by business enterprises of variable interest entities. Under this
interpretation, certain entities known as Variable Interest Entities ("VIEs")
must be consolidated by the primary beneficiary of the entity. The primary
beneficiary is generally defined as having the majority of the risks and re-
wards arising from the VIE. For VIEs in which a significant (but not majority)
variable interest is held, certain disclosures are required. The Company has
not entered into any arrangements or made any investments which qualify as a
VIE in the period from January 31, 2003 to March 31, 2004 nor is it party
to any such arrangements. The adoption of FIN 46 did not have a material impact
on our consolidated financial position, results of operations or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". This Statement amends and
clarifies financial accounting and reporting for derivative instruments, inclu-
ding certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities. The Company
adopted the provisions of SFAS No. 149 on July 1, 2003, which did not have a
material effect on the Company's financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". This
State-ment establishes standards of how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
Statement is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective July 1, 2003. The Company
adopted the provisions of SFAS No. 150 on July 1, 2003, which did not have
a material effect on the Company's financial statements. The Company has
no financial instruments during the period June 1 through June 30, 2003,
which would have required adoption of this SFAS prior to July 1, 2003.
NOTE 4 STOCKHOLDERS' EQUITY:
At March 31, 2004, the Company's capital stock amounted to $431,536 represented
by 769,604,346 shares, of which 630,000,000 Class I correspond to the fixed
portion and 139,604,346 Class II shares to the variable portion.
Dividends paid are not subject to income tax if paid from the Net Tax Profit
Account (CUFIN). Any excess over this account is subject to a tax equivalent
to 49.25% and 47.06% depending on whether paid in 2004 and 2005, respectively.
The tax is payable by the company and may be credited against its income tax
in the same year or the following two years. Dividends paid are not subject to
tax withholding. In the event of a capital reduction, any excess of stock-
holders' equity over capital contributions, the latter restated in accordance
with the provisions of the Income Tax Law, is accorded the same tax treatment
as dividends.
NOTE 5 - INCOME TAXES, ASSET TAX AND EMPLOYEE STATUTORY PROFIT SHARING:
In accordance with Mexican tax law, the Company is subject to asset tax and
income tax, which take into consideration the taxable and deductible effects
of inflation. Through December 31, 2001, the Mexican income tax rate was 35%
with the obligation to pay 30% currently and the option of deferring the rema-
inning 5% until profits are distributed. The new tax law enacted January 1,
2002, eliminated the option to defer the portion of the income tax payment and
reduces the 35% tax rate by one percentage point each year until it reaches
32% in 2005. The deduction for employee statutory profit-sharing and the obli-
gation to withhold taxes on dividends paid to individuals and foreign residents
was also eliminated.
Asset tax is calculated by applying 1.8% to the Company's asset position, as
defined in the law, and is payable only to the extent that it exceeds the in-
come tax payable for the same period, If in any year asset tax exceeds the
income tax payable, the asset tax payment for such excess may be reduced by
the amount by which the income tax exceeded asset tax in the three preceding
years and any required payment of asset tax is creditable against the excess
of the income tax over asset tax of the following ten years.
Taxable income- The principal items which affect the determination of taxable
income of Mexican companies are the differences between purchases and cost of
sales, recognition of the effects of inflation on depreciation and on monetary
assets and liabilities through the inflationary component, which differ for
book and tax purposes.
MM and its subsidiaries obtained authorization to file a consolidated income
and asset tax return. The resulting benefit is recognized in MM.
The Company calculates employee statutory profit-sharing using the guidelines
established in the Income Tax Law.
NOTE 6 - FINANCIAL INSTRUMENTS:
a. Fair value of financial instruments -
For certain of the Company's financial instruments, including cash, accounts
receivable, accounts payable and accrued liabilities, the carrying amounts
approximate fair value due to their short maturities.
b. Concentration of risk -
Financial instruments, which potentially subject the Company to a concentration
of credit risk, consist primarily of cash and cash equivalents, short-term
investments and trade accounts receivable.
The Company invests or maintains available cash with various high quality banks
principally in Mexico and US or in commercial paper of highly-rated companies.
As part of its cash management process, the Company regularly monitors the
relative credit standing of these institutions and, by policy, limits the
amount of credit exposure to any one institution. In the normal course of its
activities, the Company grants credit to its customers. Although the accounts
receivable resulting from these transactions are not guaranteed, the Company
has not had any significant portfolio recovery problems.
NOTE 7 - CONTINGENCIES AND COMMITMENTS:
The Company is involved in various legal proceedings derived from its normal
operations. However, according to management, a reasonable amount has been
reserved to cover any individual or collective court decisions in connection
with these proceedings.
NOTE 8 - RELEVANT EVENT:
On February 3, 2004, GMEXICO, the largest stockholder of Southern Peru Copper
Corporation (SPCC), presented a proposal regarding the possible sale to SPCC
of all the shares of GMEXICO's subsidiary, MM, representing 99% of MM's
outstanding shares, in return for the issuance of additional shares of SPCC.
MM holds substantially all of GMEXICO's Mexican mining assets.
SPCC has formed a special committee of Disinterested Directors, comprising of
member of its Board, to evaluate whether the proposal is in the best interests
of the stockholders of the Company. GMEXICO notes that there can be no assu-
rance as to whether agreement can be reached with regard to this transaction.
If consummated, the transaction would result in the Company having a single
class of common stock, listed on the New York and Lima stock exchanges.
OPERATING RESULTS
MINERA MEXICO, S.A. DE C.V.
S A L E S
ACUMULATED AS OF MARCH 31st, 2004 AND 2003
C O N C E P T REAL REAL VARIATION %
2004 2003
V O L U M E
GOLD (Kg) 231 200 31 16
SILVER (Kg) 125,569 111,017 14,552 13
LEAD (TONS) 4,756 5,801 (1,046) (18)
COPER (TONS) 75,501 53,792 21,709 40
ZINC (TONS) 27,210 22,638 4,572 20
ZINC CONTAINED IN CONCENTRATES (TONS) 2,387 4,024 (1,637) (41)
COPPER CONTAINED IN CONCENTRATES (TONS) 13,434 (29) 13,463 100
THOUSAND OF U.S. DOLLARS
GOLD 1% 2,927 2,240 687 31
SILVER 8% 25,580 16,525 9,055 55
LEAD 1% 3,663 2,619 1,044 40
COPPER 63% 206,887 92,594 114,293 123
ZINC 9% 30,487 18,942 11,545 61
ZINC CONTAINED IN CONCENTRATES 1% 1,818 2,126 (308) (14)
COPPER CONAINED IN CONCENTRATES 10% 33,593 (26) 33,619 100
OTHERS 7% 23,503 12,273 11,230 92
--------- --------- -------- ---
T O T A L 100% 328,458 147,293 181,165 123
% OF CONTRIBUTION PER COMPANY
VARIATION IN % OF PARTICIPATION
2004/2003 TOTAL SALES 2004
DOLLARS DOLLARS
------- -------
MEXCOBRE 145% 58%
I.M.M.S.A. 63% 22%
MEXCANANEA 161% 20%
MINERA MEXICO 123% 100%
MINERA MEXICO, S.A. DE C.V.
SALES
ACUMULATED AS OF MARCH 31st, 2004 AND 2003
(THOUSAND OF U.S. DOLLARS)
C O N C E P T VARIATION %
2004 2003
MINERA MEXICO
GOLD 2,927 2,240 687 31
SILVER 25,580 16,525 9,055 55
LEAD 3,663 2,619 1,044 40
COPPER 206,887 92,594 114,293 123
ZINC 30,487 18,942 11,545 61
ZINC CONTAINED IN CONCENTRATES 1,818 2,126 (308) (14)
COPPER CONTAINED IN CONCENTRATES 33,593 (26) 33,619 100
OTHERS 23,503 12,273 11,230 92
--------- --------- --------- ---
T O T A L 328,458 147,293 181,165 123
MEXCOBRE
GOLD 1,277 1,679 (402) (24)
SILVER 3,779 6,593 (2,814) (43)
COPPER 641 5 636 12,720
ELECTROLYTIC CATHODIC COPPER 103,858 38,748 65,110 168
ELECTROWON CATHODIC COPPER 18,633 9,246 9,387 102
COPPER ROD 43,328 22,040 21,288 97
COPPER CONTAINED IN CONCENTRATES 74 - 74 100
MOLYBDENUM 15,945 5,585 10,360 185
OTHERS 3,970 2,102 1,868 89
--------- --------- ------- ---
SUBTOTAL 191,505 85,998 105,507 123
INTERCOMPANY SALES 1,362 8,350 (6,988) (84)
--------- --------- --------- ---
TOTAL 190,143 77,648 112,495 145
========= ========= ========= ===
IMMSA/MIMENOSA(underground mines)
GOLD 1,405 1,698 (293) (17)
SILVER 17,668 13,336 4,332 32
LEAD 3,663 2,619 1,044 40
COPPER 11,237 6,079 5,158 85
ZINC 25,537 19,966 5,571 28
ZINC CONTAINED IN CONCENTRATES 4,875 2,126 2,749 129
COPPER CONTAINED IN CONCENTRATES 15,190 673 14,517 2,157
OTHERS 6,485 5,372 1,113 21
--------- --------- ------- ---
SUBTOTAL 86,060 51,869 34,191 66
INTERCOMPANY SALES 13,989 7,644 6,345 83
--------- --------- ------- ---
TOTAL 72,071 44,225 27,846 63
========= ========= ======= ===
MEXCANANEA
SILVER 2,009 452 1,557 344
COPPER - (136) 136 (100)
COPPER CATHODES 31,996 25,717 6,279 24
COPPER CONTAINED IN CONCENTRATES 83,356 20,568 62,788 305
--------- --------- --------- ---
SUBTOTAL 117,361 46,601 70,760 152
INTERCOMPANY SALES 51,117 21,181 29,936 141
--------- --------- --------- ---
TOTAL 66,244 25,420 40,824 161
========= ========= ========= ===
MINERA MEXICO, S.A. DE C.V.
SALES VOLUME
ACUMULATED AS OF MARCH 31st 2004 AND 2003
METRIC TONS (MT)
C O N C E P T
2004 2003 VARIATION %
MINERA MEXICO
GOLD (Kg) 231 200 31 16
SILVER (Kg) 125,569 111,017 14,552 13
LEAD 4,756 5,801 (1,046) (18)
COPPER 75,501 53,792 21,709 40
ZINC 27,210 22,638 4,572 20
ZINC CONTAINED IN CONCENTRATES 2,387 4,024 (1,637) (41)
COPPER CONTAINED IN CONCENTRATES 13,434 (29) 13,463 -
MEXCOBRE
GOLD (Kg) 95 150 (55) (37)
SILVER (Kg) 16,792 44,089 (27,297) (62)
COPPER 725 66 659 1,002
ELECTROLYTIC CATHODIC COPPER 34,052 22,147 11,905 54
ELECTROWON CATHODIC COPPER 6,572 5,362 1,210 23
COPPER ROD 16,141 12,265 3,876 32
COPPER CONTAINED IN CONCENTRATES 2 0 2 100
MOLYBDENUM 943 687 256 37
IMMSA/MIMENOSA
GOLD (Kg) 103 151 (48) (32)
SILVER (Kg) 82,687 93,426 (10,739) (11)
LEAD 4,756 5,801 (1,046) (18)
COPPER 3,924 4,006 (82) (2)
ZINC 23,404 24,086 (682) (3)
ZINC CONTAINED IN CONCENTRATES 7,579 4,024 3,555 88
COPPER CONTAINED IN CONCENTRATES 6,648 635 6,013 946
MEXCANANEA
SILVER (Kg) 9,381 3,044 6,337 208
COPPER CATHODES 12,330 15,574 (3,244) (21)
COPPER CONTAINED IN CONCENTRATES 33,870 13,973 19,897 142
MEXICANA DE COBRE, S.A. DE C.V.
COMPARATIVE SUMMARY OF PRODUCTION MINES AND PLANTS
ACUMULATED OF MARCH 31st. 2004 AND 2003
C O N C E P T VARIATION %
2004 2003
M I N E
PERFORATION (METERS) 78,608 72,743 5,865 8%
ORE (000MT) 7,532 5,231 2,301 44%
ORE GRADE % 0.500 0.529 (0.029) (5%)
LEACH ORE (000 MT) 7,686 7,486 200 3%
ORE GRADE % 0.269 0.287 (0.018) (6%)
WASTE (000 MT) 4,014 3,562 452 13%
STRIPPING RATIO W/(O+L) 0.26 0.28 (0.02) (7%)
STRIPPING RATIO (L+W)/O 1.55 2.11 (0.56) (27%)
MATERIAL MOVED (000 MT) 19,232 16,278 2,954 18%
CONCENTRATOR RECOVERY 78.63 77.55 1.08 1%
CONCENTRADOR
CONCENTRATES PRODUCED 108,743 81,876 26,867 33%
COPPER CONTAINED RECOVERED 29,374 21,503 7,871 37%
GRADES COPPER IN CONCENTRATES
PRODUCED % 27.01 26.26 0.75 3%
POUNDS OF COPPER PRODUCED 64,757,800 47,406,230 17,351,570 37%
SILVER CONTAINED IN
CONCENTRATES KGS. 14,661 11,531 3,130 27%
GOLD CONTAINED IN
CONCENTRATES KGS. 56 38 18 47%
MOLLY CONTAINED PRODUCED 998 713 285 40%
SX-EW PLANTS
COPPER CATHODES PRODUCED 5,839 5,473 366 7%
POUNDS OF COPPER
PRODUCED LB. 12,872,304 12,066,531 805,773 7%
SMELTER
CONCENTRATES PURCHASED 83,262 54,472 28,790 53%
CONCENTRATES SMELTED 210,392 137,070 73,322 53%
TOTAL SMELTED 276,725 181,412 95,313 53%
COPPER CONTAINED 81,231 56,629 24,602 43%
COPPER RECOVERED % 97.81 97.49 0.32 0%
PRODUCTION IN MT
COPPER ANODES 63,904 43,200 20,704 48%
POUNDS OF COPPER PRODUCED 139,705,303 94,453,950 45,251,353 48%
SULFURIC ACID PRODUCED 205,850 132,700 73,150 55%
SILVER CONTAINED
IN ANODES PRODUCED KGS. 29,929 42,162 (12,233) (29%)
GOLD CONTAINED
IN ANODES PRODUCED GRS. 165,580 173,714 (8,134) (5%)
R E F I N E R Y
COPPER CATHODES PRODUCED 50,041 34,185 15,856 46%
POUNDS OF COPPER PRODUCED LB. 110,320,796 75,365,580 34,955,216 46%
ROD PLANT
COPPER ROD PRODUCED 16,864 11,848 5,016 42%
POUNDS OF COPPER PRODUCED LB. 37,177,929 26,118,887 11,059,042 42%
PRECIOUS METALS PLANT
GOLD REFINED Oz. 3,223 4,836 (1,613) (33%)
SILVER REFINED Oz. 594,250 1,413,443 (819,196) (58%)
TOTAL CONTAINED COPPER
PRODUCT T.M.S TMS 54,856 43,230 11,626 27%
INDUSTRIAL MINERA MEXICO/MINERALES METALICOS DEL NORTE
SUMMARY OF PRODUCTION OF MINES AND PLANTS
ACUMULATED AS OF MARCH 31st, 2004 AND 2003
(METRIC TONS)
C O N C E P T VARIATION %
2004 2003
UNDERGROUND MINES
M I N E S
MILLED TONS 1,090,532 1,062,978 27,554 3
C O N C E N T R A T E S
ZINC 61,408 59,594 1,814 3
LEAD 9,587 9,927 (340) (3)
COPPER 19,156 19,129 27 0
CONTENTS
ZINC 33,404 32,324 1,080 3
LEAD 4,817 5,389 (572) (11)
COPPER 3,968 4,403 (435) (10)
SILVER (KGS) 79,796 82,781 (2,985) (4)
GOLD (KGS) 46.035 66.408 (20.373) (31)
P L A N T S
SAN LUIS COPPER SMELTER
GOLD (KGS) 151 200 (49) (25)
SILVER (KGS) 62,489 74,177 (11,688) (16)
COPPER BLISTER 5,500 6,006 (506) (8)
ARSENIC 438 452 (14) (3)
SAN LUIS ZINC REFINERY
GOLD (KGS) 2 2 0 0
SILVER (KGS) 4,278 3,954 324 8
ZINC REFINED 27,427 24,191 3,236 13
SULFURIC ACID 48,535 43,692 4,843 11
CADMIUM 185 170 15 9
TOLLING
GOLD (KGS) 29 39 (10) (26)
SILVER (KGS) 31,011 37,131 (6,120) (16)
LEAD 5,030 4,110 920 22
COAL PLANT
COKE 9,097 21,361 (12,264) (57)
COAL 82,808 105,962 (23,154) (22)
MEXICANA DE CANANEA S.A. D E C.V.
COMPARATIVE SUMMARY OF PRODUCTION MINES AND PLANTS
ACUMULATED AS OF MARCH 31st, 2004 AND 2003
C O N C E P T VARIATION %
2004 2003
M I N E
PERFORATION (METERS) 173,943 103,165 70,778 69%
ORE (000 MT) 6,738 3,369 3,369 100%
ORE GRADE % 0.623 0.532 0.091 17%
LEACH ORE (000 MT) 6,580 7,321 (741) (10%)
ORE GRADE % 0.288 0.249 0.039 16%
WASTE (000 MT) 9,576 3,077 6,499 211%
STRIPPING RATIO W/(O+L) 0.72 0.29 0.43 148%
STRIPPING RATIO (L+W)/O 2.40 3.09 (0.69) (22%)
MATERIAL MOVED (000 MT) 22,894 13,767 9,127 66%
CONCENTRATOR RECOVERY % 81.23 79.48 1.75 2%
CONCENTRATOR
CONCENTRATES PRODUCED 127,199 50,847 76,352 150%
COPPER CONTAINED RECOVERED 33,899 14,094 19,805 141%
GRADES
COPPER IN CONCENTRATES PRODUCE % 26.65 27.72 (1.07) (4%)
POUNDS OF COPPER PRODUCED 74,735,428 31,071,716 43,663,712 141%
SILVER CONTAINED IN CONCENTRATE KGS 11,155 4,484 6,671 149%
GOLD CONTAINED IN CONCENTRATES KGS 177 44 73 166%
SX-WE PLANTS
COPPER CATHODES PRODUCED 12,109 9,877 2,232 23%
POUNDS OF COPPER PRODUCED LB. 26,695,992 21,774,399 4,921,593 23%
TOTAL CONTAINED COPPER PRODUCED TMS 44,742 23,851 20,891 88%
INDUSTRIAL MINERA MEXICO / MINERALES METALICOS DEL NORTE
COST OF PRODUCTION
ACUMULATED AS OF MARCH 31st, 2004 AND 2003
(US DOLLARS)
C O N C E P T
2004 2003 VARIATION %
COST PER MT MILLED
CHARCAS 13.98 13.37 0.60 5
SAN MARTIN 16.16 15.02 1.14 8
TAXCO 27.96 26.72 1.24 5
SANTA BARBARA 18.32 17.00 1.32 8
AVERAGE COST 17.21 16.17 1.05 6
TOTAL PRODUCTION COST-MINES (000) 19,306 17,679 1,627 9
COST PER MT PROCESSED
SAN LUIS COBRE (BLISTER) 671.91 589.92 81.99 14
SAN LUIS ELECTROLITIC (Refined Zinc) 411.51 388.27 23.23 6
NUEVA ROSITA (COKE)* 221.33 109.23 112.10 103
TOTAL PRODUCTION COST-PLANTS (000) 17,474 14,947 2,527 17
TOTAL PRODUCTION COST-IMM (000) 36,780 32,626 4,154 13
*COST PER MT OF PRODUCED COKE
MINERA MEXICO
METALS INVENTORY
MARCH 31st MARCH 31st VARIATION
2004 2003 %
GOLD (KG)
CONCENTRATE 169 85 99
IN PROCESS 40 431 (91)
FINISHED 33 53 (38)
TOTAL 242 569 (57)
SILVER
(KG)
CONCENTRATE 16,445 19,656 (16)
IN PROCESS 168,549 209,842 (20)
FINISHED 12,371 21,004 (41)
TOTAL 197,365 250,502 (21)
LEAD (MT)
CONCENTRATE 890 682 30
IN PROCESS 17,103 16,713 2
FINISHED 0 9 (100)
TOTAL 17,993 17,404 3
COPPER (MT)
CONCENTRATE 9,600 5,782 66
IN PROCESS 26,038 26,344 (1)
FINISHED 4,280 8,894 (52)
TOTAL 39,918 41,020 (3)
ZINC (MT)
CONCENTRATE 5,506 8,259 (33)
IN PROCESS 9,907 11,116 (11)
FINISHED 5,730 6,775 (15)
TOTAL 21,143 26,150 (19)
TOTAL GROUP (THOUSANDS OF DOLLARS) 132,637 129,425 2
MEXICANA DE COBRE / MEXICANA DE CANANEA
COMPARATIVE SUMMARY OF PRODUCTION COST
ACUMULATED AS OF MARCH 31st. 2004 AN 2003
U S D O L L A R S
MEXICANA DE COBRE
2004 2003 VARIATION %
MINE-CONCENTRATOR
COST PER MT MINED 0.58 0.56 0.02 4%
COST PER MT MILLED 4.12 4.28 (0.16) (4%)
TOTAL PRODUCTION COST (000) 30,752 22,416 8,336 37%
SX-EW PLANTS
COST PER MT OF CATHODES PRODUCED 375.25 419.68 (44.43) (11%)
TOTAL PRODUCTION COST (000) 2,191 2,297 (106) (5%)
S M E L T E R
COST PER MT OF ANODES PRODUCED 245.84 256.93 (11.09) (4%)
TOTAL PRODUCTION COST (000) 15,710 11,100 4,610 42%
R E F I N E R Y
COST PER MT OF ANODES PRODUCED 68.31 81.33 (13.02) (16%)
TOTAL PRODUCTION COST (000) 3,418 2,780 638 23%
ROD PLANT
COST PER MT OF ROD PRODUCED 73.44 91.78 (18.34) (20%)
TOTAL PRODUCTION COST (000) 1,239 1,087 152 14%
PRECIOUS METALS PLANT
COST PER MT OF SLIMES PROCESSED 5,241.36 3,182.79 2,058.57 65%
TOTAL PRODUCTION COST (000) 758 722 36 5%
TOTAL PRODUCTION COST (000) 54,068 40,402 13,666 34%
US CENTS PER POUND OF Cu PRODUCED
MINE CONCENTRATOR 47.5 47.2 0.3 1%
SX-EW PLANTS 17.0 19.0 (2.0) (11%)
SMELTER 11.2 11.8 (0.6) (5%)
REFINERY 3.1 3.7 (0.6) (16%)
ROD PLANT 3.3 4.2 (0.9) (21%)
U S D O L L A R S
2004 2003 VARIATION %
MEXICANA DE CANANEA
MINE CONCENTRATOR
COST PER MT MINED 0.87 0.92 (0.06) (6%)
COST PER MT MILLED 4.28 4.75 (0.47) (10%)
TOTAL PRODUCTION COST (000) 28,638 15,880 12,758 80%
U S D O L L A R S
SX-EW PLANTS
COST PER MT OF CATHODES PRODUCED 507.99 459.14 48.85 11%
TOTAL PRODUCTION COST (000) 6,151 4,535 1,616 36%
TOTAL PRODUCTION COST (000) 34,789 20,415 14,374 70%
US CENTS PER POUND OF Cu PRODUCED
MINE CONCENTRATOR 38.3 51.1 (12.8) (25%)
SX-EW PLANTS 23.0 20.8 2.2 11%