UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June 30, 2021~~March 31, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-14066

SOUTHERN COPPER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		13-3849074
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1440 East Missouri Avenue Suite 160 Phoenix, AZ		85014
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (602) 264-1375

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol

Name of each exchange on which registered:

Common stock, par value $0.01 per share

SCCO

New York Stock Exchange

Lima Stock Exchange

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 ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	⌧	Accelerated filer	◻
Non-accelerated filer	◻	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧

As of ~~July 26, 2021~~May 3, 2022 there were outstanding ~~773,081,269~~773,090,069 shares of Southern Copper Corporation common stock, par value $0.01 per share.

Table of Contents

Southern Copper Corporation (“SCC”)

INDEX TO FORM 10-Q


		Page No.
Part I. Financial Information:

Item. 1	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Statements of Earnings for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	3

	Condensed Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

	Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	5

	Condensed Consolidated Statements of Cash Flows for the three and ~~six months~~ ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

	Condensed Consolidated Statements of Changes in Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	7

	Notes to Condensed Consolidated Financial Statements	~~8-38~~8-35

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~39-60~~36-54

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	~~61-62~~55-56

Item 4.	Controls and procedures	6257

	Report of Independent Registered Public Accounting Firm	6358

Part II. Other Information:		64

Item 1.	Legal Proceedings	6459

Item 1A.	Risk Factors	6459

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	6460

Item 4.	Mine Safety Disclosures	6460

Item 6.	List of Exhibits	~~65-66~~61-64

	~~List of Exhibits~~	~~67-69~~

	Signatures	7065

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021

	(in millions, except for per share amounts)
Net sales (including sales to related parties, see note 5)	$	2,897.0	$	1,785.4	$	5,429.5	$	3,505.1	$	2,763.8	$	2,532.5
Operating cost and expenses:
Cost of sales (exclusive of depreciation, amortization and depletion shown separately below)		985.5		976.7		1,929.3		1,932.4		1,057.7		943.8
Selling, general and administrative		31.4		31.4		61.6		60.6		30.3		30.1
Depreciation, amortization and depletion		195.4		193.8		396.0		386.8		196.6		200.6
Exploration		9.5		6.3		15.8		14.9		9.1		6.4
Total operating costs and expenses		1,221.8		1,208.2		2,402.7		2,394.7		1,293.7		1,180.9

Operating income		1,675.2		577.2		3,026.8		1,110.4		1,470.1		1,351.6

Interest expense		(96.6)		(98.1)		(193.4)		(200.0)		(98.4)		(96.8)
Capitalized interest		7.3		6.0		14.5		11.2		10.7		7.2
Other income (expense)		(8.2)		(1.0)		(5.9)		(8.4)		11.7		2.3
Interest income		1.3		4.3		3.7		12.2		4.6		2.4
Income before income taxes		1,579.0		488.4		2,845.7		925.4		1,398.7		1,266.7
Income taxes (including royalty taxes, see Note 4)		647.7		224.4		1,155.2		446.2		612.1		507.5
Net income before equity earnings of affiliate		931.3		264.0		1,690.5		479.2		786.6		759.2
Equity earnings (loss) of affiliate, net of income tax		5.1		(3.1)		13.1		(2.1)		1.2		7.9
Net income		936.4		260.9		1,703.6		477.1		787.8		767.1
Less: Net income attributable to the non-controlling interest		3.7		1.4		7.0		2.8		3.1		3.3
Net income attributable to SCC	$	932.7	$	259.5	$	1,696.6	$	474.3	$	784.7	$	763.8

Per common share amounts attributable to SCC:
Net earnings-basic and diluted	$	1.21	$	0.34	$	2.19	$	0.61	$	1.02	$	0.99
	$
Weighted average shares outstanding-basic and diluted		773.1		773.1		773.1		773.1		773.1		773.1

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021

	(in millions)
COMPREHENSIVE INCOME:
Net income and comprehensive income	$	936.4	$	260.9	$	1,703.6	$	477.1	$	787.8	$	767.1
Other comprehensive income (loss) net of tax:
—Derivative instruments classified as cash flow hedge
- Unrealized gain (loss) of the period (net of income tax of $0.2 million in 2022)										(0.6)		—
Total other comprehensive income (loss)										(0.6)		—
Total comprehensive income										787.2		767.1
Comprehensive income attributable to the non-controlling interest		3.7		1.4		7.0		2.8		3.1		3.3
Comprehensive income attributable to SCC	$	932.7	$	259.5	$	1,696.6	$	474.3	$	784.1	$	763.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Southern Copper Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021

	(in millions)				(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2,394.3	$	2,183.6	$	2,847.2	$	3,002.0
Short-term investments		545.8		410.8		406.5		486.9
Accounts receivable trade		1,435.6		1,068.9		1,185.8		1,358.7
Accounts receivable other (including related parties 2021- $27.6 and 2020 - $23.3)		71.0		67.7
Accounts receivable other (including related parties 2022- $29.9 and 2021 - $49.1)						69.4		87.9
Inventories		893.9		950.2		1,029.9		972.9
Prepaid taxes		126.3		104.8		165.2		197.7
Other current assets		44.6		29.2		64.5		33.5
Total current assets		5,511.5		4,815.2		5,768.5		6,139.6

Property and mine development, net		9,456.1		9,458.7		9,492.9		9,464.4
Ore stockpiles on leach pads		1,180.2		1,125.0		1,082.0		1,097.6
Intangible assets, net		140.1		143.0		136.8		138.1
Right-of-use assets		944.3		979.0		900.8		916.3
Deferred income tax		234.7		230.0		298.6		316.2
Equity method investment		123.4		114.3		116.7		115.4
Other non-current assets		105.1		81.3		102.6		110.0
Total assets	$	17,695.4	$	16,946.5	$	17,898.9	$	18,297.6

LIABILITIES
Current liabilities:
Accounts payable (including related parties 2021- $89.9 and 2020- $104.3)	$	560.8	$	594.6
Current portion of long-term debt					$	299.8	$	299.7
Accounts payable (including related parties 2022- $114.3 and 2021- $103.3)						693.7		591.9
Accrued income taxes		460.8		340.9		237.0		832.6
Accrued workers’ participation		216.3		247.8		243.4		325.7
Accrued interest		98.6		98.6		131.2		98.6
Lease liabilities current		72.0		70.6		74.6		73.9
Other accrued liabilities		43.6		32.3		46.1		27.6
Total current liabilities		1,452.1		1,384.8		1,725.8		2,250.0

Long-term debt		6,545.9		6,544.2		6,248.7		6,247.9
Lease liabilities		872.3		908.4		826.2		842.4
Deferred income taxes		168.7		159.4		144.9		118.3
Non-current taxes payable		—		—		56.0		—
Other liabilities and reserves		128.3		128.7		66.0		68.3
Asset retirement obligation		555.3		545.0		610.7		562.9
Total non-current liabilities		8,270.5		8,285.7		7,952.5		7,839.8

Commitments and contingencies (Note 9)
STOCKHOLDERS’ EQUITY (NOTE 10)
Common stock par value $0.01; shares authorized, 2021 and 2020–2,000; shares issued, 2021 and 2020–884.6		8.8		8.8
Commitments and contingencies (Note 10)
STOCKHOLDERS’ EQUITY (NOTE 11)
Common stock par value $0.01; shares authorized, 2022 and 2021–2,000; shares issued, 2022 and 2021–884.6						8.8		8.8
Additional paid-in capital		3,454.9		3,441.5		3,468.3		3,454.1
Retained earnings		7,538.0		6,846.4		7,781.3		7,769.7
Accumulated other comprehensive income		(8.4)		(8.4)		(10.0)		(9.4)
Treasury stock, at cost, common shares		(3,075.8)		(3,063.5)		(3,087.7)		(3,074.0)
Total Southern Copper Corporation stockholders’ equity		7,917.5		7,224.8		8,160.7		8,149.2
Non-controlling interest		55.3		51.2		59.9		58.6
Total equity		7,972.8		7,276.0		8,220.6		8,207.8
Total liabilities and equity	$	17,695.4	$	16,946.5	$	17,898.9	$	18,297.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021

	(in millions)
OPERATING ACTIVITIES
Net income	$	936.4	$	260.9	$	1,703.6	$	477.1	$	787.8	$	767.1
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation, amortization and depletion		195.4		193.8		396.0		386.8		196.6		200.6
Equity earnings of affiliate, net of dividends received		(5.1)		0.2		(9.1)		(0.8)		(1.3)		(4.0)
Loss (gain) on foreign currency transaction effect		6.3		(0.8)		(13.4)		(28.9)
Provision (benefit) for deferred income taxes		42.1		(18.8)		3.2		(11.3)
Loss on foreign currency transaction effect										55.7		(19.7)
(Benefit) provision for deferred income taxes										43.7		(38.9)
Other, net		5.2		4.1		11.9		11.0		9.6		6.7
Change in operating assets and liabilities:
Increase in accounts receivable		(203.4)		(144.3)		(366.7)		(21.0)
Decrease (increase) in inventories		(37.1)		86.0		1.1		156.4
Increase (decrease) in accounts payable and accrued liabilities		78.5		(66.6)		77.2		(169.0)
(Increase) decrease in other operating assets and liabilities		43.2		104.8		40.4		94.2
Decrease (increase) in accounts receivable										172.9		(163.3)
(Increase) decrease in inventories										(41.5)		38.2
Decrease in accounts payable and accrued liabilities										(525.0)		(1.3)
Decrease (increase) in other operating assets and liabilities										122.2		(2.8)
Net cash provided by operating activities		1,061.5		419.3		1,844.2		894.5		820.7		782.6
INVESTING ACTIVITIES
Capital expenditures		(219.8)		(113.3)		(452.4)		(214.3)		(205.2)		(232.6)
Proceeds from (purchase) sale of short-term investments, net		(129.9)		10.1		(135.0)		50.0		80.4		(5.2)
Other		(10.4)		—		(10.5)		0.4		(0.1)		—
Net cash used in investing activities		(360.1)		(103.2)		(597.9)		(163.9)		(124.9)		(237.8)
FINANCING ACTIVITIES
Repayments of debt		—		(400.0)		—		(400.0)
Capitalization of debt issuance cost		—		—		—		0.1
Cash dividends paid to common stockholders		(541.1)		(154.6)		(1,005.0)		(463.8)		(773.1)		(463.8)
Other, net		(1.4)		(0.2)		(2.7)		(2.5)		(1.7)		(1.3)
Net cash used in financing activities		(542.5)		(554.8)		(1,007.7)		(866.2)		(774.8)		(465.1)
Effect of exchange rate changes on cash and cash equivalents		(31.9)		(4.1)		(27.9)		19.3		(75.8)		4.0
(Decrease) increase in cash and cash equivalents		127.0		(242.8)		210.7		(116.3)
Increase in cash and cash equivalents										(154.8)		83.7
Cash and cash equivalents, at beginning of period		2,267.3		2,051.6		2,183.6		1,925.1		3,002.0		2,183.6
Cash and cash equivalents, at end of period	$	2,394.3	$	1,808.8	$	2,394.3	$	1,808.8	$	2,847.2	$	2,267.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Southern Copper Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020

(in millions)									2022		2021
	(in millions)
TOTAL EQUITY, beginning of period	$	7,578.3	$	6,763.2	$	7,276.0	$	6,858.2	$	8,207.8	$	7,276.0
STOCKHOLDERS’ EQUITY, beginning of period		7,525.1		6,716.2		7,224.8		6,810.3		8,149.1		7,224.8
CAPITAL STOCK:
Balance at beginning and end of period:		8.8		8.8		8.8		8.8		8.8		8.8
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period		3,439.5		3,410.5		3,441.5		3,424.9		3,454.1		3,441.5
Other activity of the period		15.4		7.7		13.4		(6.7)		14.2		(2.0)
Balance at end of period		3,454.9		3,418.2		3,454.9		3,418.2		3,468.3		3,439.5
TREASURY STOCK:
Southern Copper common shares
Balance at beginning of the period		(2,767.5)		(2,767.9)		(2,767.5)		(2,767.9)
Balance at beginning and end of the period										(2,767.2)		(2,767.5)
Used for corporate purposes		0.1		—		0.1		—		0.1		—
Balance at end of period		(2,767.4)		(2,767.9)		(2,767.4)		(2,767.9)		(2,767.1)		(2,767.5)
Parent Company common shares
Balance at beginning of period		(293.7)		(266.3)		(296.0)		(281.0)		(306.8)		(296.0)
Other activity, including dividend, interest and foreign currency transaction effect		(14.7)		(7.3)		(12.4)		7.4
Other activity, including dividend, interest and foreign currency translation effect										(13.8)		2.3
Balance at end of period		(308.4)		(273.6)		(308.4)		(273.6)		(320.6)		(293.7)
Treasury stock balance at end of period		(3,075.8)		(3,041.5)		(3,075.8)		(3,041.5)		(3,087.7)		(3,061.2)
RETAINED EARNINGS:
Balance at beginning of period		7,146.4		6,341.2		6,846.4		6,435.6		7,769.7		6,846.4
Net earnings		932.7		259.5		1,696.6		474.3		784.7		763.8
Dividends declared and paid, common stock, per share, 2021- '$1.30, 2020– '$0.60		(541.1)		(154.6)		(1,005.0)		(463.8)
Dividends declared and paid, common stock, per share, 2022- $1, 2021– $0.6										(773.1)		(463.8)
Balance at end of period		7,538.0		6,446.1		7,538.0		6,446.1		7,781.3		7,146.4
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning and end of period		(8.4)		(10.1)		(8.4)		(10.1)
Balance at beginning of period										(9.4)		(8.4)
Other comprehensive income (loss)										(0.6)		—
Balance at end of year										(10.0)		(8.4)
STOCKHOLDERS’ EQUITY, end of period		7,917.5		6,821.5		7,917.5		6,821.5		8,160.7		7,525.1
NON-CONTROLLING INTEREST, beginning of period		53.2		47.0		51.2		47.9		58.6		51.2
Net earnings		3.7		1.4		7.0		2.8		3.1		3.3
Distributions paid		(1.6)		(0.3)		(2.9)		(2.6)		(1.8)		(1.3)
NON-CONTROLLING INTEREST, end of period		55.3		48.1		55.3		48.1		59.9		53.2
TOTAL EQUITY, end of period	$	7,972.8	$	6,869.6	$	7,972.8	$	6,869.6	$	8,220.6	$	7,578.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Southern Copper Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1— DESCRIPTION OF THE BUSINESS:

The Company is a majority-owned, indirect subsidiary of Grupo Mexico S.A.B. de C.V. (“Grupo Mexico”). As of ~~June 30, 2021,~~March 31, 2022, Grupo Mexico, through its wholly-owned subsidiary Americas Mining Corporation (“AMC”) owned 88.9% of the Company’s capital stock. The condensed consolidated financial statements presented herein consist of the accounts of Southern Copper Corporation (“Southern Copper”, "SCC" or the “Company”), a Delaware corporation, and its subsidiaries. The Company is an integrated producer of copper and other minerals, and operates mining, smelting and refining facilities in Peru and Mexico. The Company conducts its primary operations in Peru through a registered branch (the "Peruvian Branch" or “Branch” or “SPCC Peru Branch”). The Peruvian Branch is not a corporation separate from the Company. The Company's Mexican operations are conducted through subsidiaries. The Company also conducts exploration activities in Argentina, Chile, Ecuador, Mexico and Peru.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the Company’s financial position as of ~~June 30, 2021~~March 31, 2022 and the results of operations, comprehensive income, cash flows and changes in equity for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. The results of operations for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results to be expected for the full year. The December 31, ~~2020~~2021 balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements at December 31, ~~2020~~2021 and notes included in the Company’s ~~2020~~2021 annual report on Form 10-K.

~~COVID – 19 PANDEMIC~~CUAJONE STOPPAGE OF OPERATIONS

~~Since~~On February 28, 2022 a small group of protesters from the ~~World Health Organization (“WHO”) declared~~community of Tumilaca, Pocata, Coscore and Tala, which have 472 residents in total, seized the ~~COVID-19 virus outbreak as~~ facilities at the Viña ~~global pandemic, all~~Blanca water reservoir and cut off the ~~countries where~~water supply to the homes of the approximately 5,000 people who live in Cuajone. Prior to this illegal action, on February 18, 2022, the railway between Cuajone and Ilo was also blocked by a group of community members. They claim the Company ~~operates~~usurped their land and ~~conducts exploration activities, as well as~~demand compensation of $5.0 billion, in addition to the ~~countries where its main customers and suppliers are located, have published health and safety rules and restrictions on individuals and business activities.~~permanent payment of 5% of net profits.

As of ~~June 30, 2021,~~March 31, 2022, the ~~Company‘s~~Cuajone operations remained closed with an estimate production ~~facilities~~loss of 12,869 tonnes of copper content and 296 tonnes of molybdenum, which translates into a reduction in ~~Mexico and Peru were working at approximately 95%~~sales of ~~their production capacity.~~$117 million. The Company ~~has developed a rigorous COVID-19 emergency protocol and~~also recorded $7.9 million of unabsorbed fixed costs, which directly impacted the ~~workforce is gradually returning to work at all~~cost of our facilities. As of June 30, 2021, approximately 96% of the workforce in Mexico was working on site or at home under strict safety measures; the remaining 4% of the workforce was not working, including all individuals at high risk due to age and/or preexisting medical conditions. At our Peruvian operations, approximately 67% of the workforce was working on site or at home under strict safety measures, while the remaining 33% was not working, including all individuals at high risk due to age and/or preexisting medical conditions.sales.

The ~~Company has restarted exploration activities at all~~effect on the Company´s net income and financial position was not material as of ~~its locations. Activities resumed~~March 31, 2022. Sales contracts were not significantly affected and measures were taken to acquire concentrates from the Company´s Mexican Operations and third parties to maintain and adequate supply to the smelter. This prevented a force majeure event from delays in ~~Ecuador in September 2020; at~~fulfilling the ~~end of the second quarter of 2020 in Argentina; and in February 2021 in Chile.~~Company´s sales commitments.

~~The financial reporting process~~As of March 31, 2022, the Company was expecting to enter into a dialogue with the protesters and the ~~information required~~Peruvian authorities to ~~prepare~~secure an agreement to address reasonable social demands; restore the ~~Company’s financial statements suffered no interruption~~water supply to workers and their families, and resume operations at the ~~financial statements were prepared without restrictions~~Company Cuajone facilities. However, if this situation continues indefinitely, the Company may be forced to consider cost reduction measures, including the relocation or ~~difficulties.~~

~~SCC´s Corporate Crisis Committee as well as its Crisis Committees in Mexico and Peru continue to closely monitor the impact~~furlough of the pandemic and to analyze and quickly resolve any issues that may arise. As of June 30, 2021, there were no major delays in the supply of materials and services critical for the operations and sales. Also, shipments and collections have registered no known major delays.

workers.

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~~After having completed the first stage of its capital programs at Buenavista in Mexico and Toquepala in Peru, the Company currently has no pending major capital expenditure~~s commitments (see Note 9 - Commitments and Contingencies). The Company paid the first tranche of its 2010 bonds of $400 million on April 15, 2020. The Company has no other major debt maturity scheduled until 2022.

The Company performed a qualitative analysis and as of June 30, 2021, identified no indicators of impairment. As the Company reported in its 2020 Annual report on Form 10-K, the results of its impairment sensitivity analysis showed projected discounted cash flows in excess of the carrying amounts of long-lived assets by margins ranging from 1.3 to 4.3 times such carrying amount. This analysis included a stress test using a copper price assumption of $2.00 per pound and a molybdenum price assumption of $4.00 per pound. (Please see, Management´s Discussion and Analysis, Critical Policies and Estimates, Asset Impairments on the 2020 Form 10-K).

NOTE 2 — SHORT-TERM INVESTMENTS:

Short-term investments were as follows (in millions):


	At June 30,			At December 31,			At March 31,			At December 31,
	2021			2020			2022			2021
Trading securities	$	545.3		$	410.2		$	406.1		$	486.5
Weighted average interest rate		0.3	%		0.4	%		0.4	%		0.3	%

Available-for-sale	$	0.5		$	0.6		$	0.4		$	0.4
Weighted average interest rate		0.7	%		0.7	%		0.7	%		0.7	%
Total	$	545.8		$	410.8		$	406.5		$	486.9

Trading securities consist of bonds issued by public companies and are publicly traded. Each financial instrument is independent of the others. The Company has the intention to sell these bonds in the short-term.

Available-for-sale investments consist of securities issued by public companies. Each security is independent of the others and as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, included ~~corporate bonds and~~ asset and mortgage backed obligations. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, gross unrealized gains and losses on available-for-sale securities were not material.

The Company earned interest related to these investments, which was recorded as interest income in the condensed consolidated statement of earnings. Also, the Company redeemed some of these securities and recognized 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 by category (in millions):


	Three months ended				Six months ended				Three months ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021
Trading:
Interest earned	$	0.2	$	(*)	$	0.7	$	0.4	$	0.8	$	0.4
Unrealized gain (loss) at the end of the period	$	(*)	$	(*)	$	(*)	$	(*)	$	(0.1)	$	0.1

Available-for-sale:
Interest earned	$	(*)	$	(*)	$	(*)	$	(*)		(*)		(*)
Investment redeemed	$	—	$	—	$	0.1	$	0.1	$	(*)	$	0.1

(*) Less than $0.1 million.

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NOTE 3 — INVENTORIES:

Inventories were as follows:


	At June 30,		At December 31,		At March 31,		At December 31,
(in millions)	2021		2020		2022		2021
Inventory, current:
Metals at average cost:
Finished goods	$	57.5	$	50.8	$	79.1	$	58.6
Work-in-process		263.3		248.9		381.8		340.7
Ore stockpiles on leach pads		228.3		298.5		260.7		259.7
Supplies at average cost		344.8		352.0		308.3		313.9
Total current inventory	$	893.9	$	950.2	$	1,029.9	$	972.9
Inventory, long-term:
Ore stockpiles on leach pads	$	1,180.2	$	1,125.0	$	1,082.0	$	1,097.6

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During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ total leaching costs capitalized as non-current inventory of ore stockpiles on leach pads amounted to ~~$118.8~~$61.5 million and ~~$94.3~~$54.8 million, respectively. Leaching inventories recognized in cost of sales amounted to ~~$133.8~~$76.0 million and ~~$209.5~~$71.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

NOTE 4 — INCOME TAXES:

The income tax provision and the effective income tax rate for the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 consisted of (in millions):


	2021			2020			2022			2021
Statutory income tax provision	$	956.4		$	406.8		$	511.6		$	427.3
Peruvian royalty		38.9			4.3			17.0			11.6
Mexican royalty		107.9			21.4			58.0			47.4
Peruvian special mining tax		52.0			13.7			25.5			21.2
Total income tax provision	$	1,155.2		$	446.2		$	612.1		$	507.5

Effective income tax rate		40.6	%		48.2	%		43.8	%		40.1	%

These provisions include income taxes for Peru, Mexico and the United States. The Mexican royalty, the Peruvian royalty and the Peruvian special mining tax are included in the income tax provision. The ~~decrease~~increase in the effective income tax rate in ~~2021~~2022 compared to the same period in ~~2020~~2021 was primarily attributable to ~~a movement~~the fact that the Company registered uncertain tax provisions in ~~exchange gains and losses from~~ the ~~strong depreciation of the Mexican peso against the U.S. dollar in 2020.~~Peruvian jurisdiction.

Peruvian royalty and special mining tax: The Company has accrued ~~$65.4~~$42.5 million and ~~$16.7~~$32.8 million of royalty charge ~~in the first six months of 2021~~ and ~~2020, respectively, of which $38.9 million and $4.3 million were included in income taxes in 2021 and 2020, respectively.~~

~~The Company has accrued $52.0 million and $13.7 million of~~ special mining tax as part of the income tax provision ~~for~~in the first ~~six months~~quarter of ~~2021~~2022 and ~~2020,~~2021, respectively.

Mexican mining royalty: The Company has accrued ~~$107.9~~$58 million and ~~$21.4~~$47.4 million of royalty taxes as part of the income tax provision for the first ~~six months~~quarter of 2022 and 2021, ~~and 2020,~~ respectively.

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Accounting for uncertainty in income taxes: In the first three months of 2022, the company recorded a receivable, current liability and non-current liability for the Peruvian jurisdiction that increased tax expense by approximately $33.8 million. The ~~Company effectively settled~~Company’s current asset and current liability for uncertain tax positions net to $22.1 million and represent the ~~2014 through 2016~~anticipated cash refunds or payments within 12 months.

Tax Law Changes:

On December 28, 2021, the U.S. Treasury and the IRS ~~audit on April 14, 2021.~~released final regulations addressing various aspects of the foreign tax credit regime. The ~~decrease in unrecognized tax benefits from the audit settlement had no~~regulations apply to years beginning after December 28, 2021 and they are not expected to have a material ~~effect~~impact on the Company’s financial statements.

NOTE 5 — RELATED PARTY TRANSACTIONS:

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 and railroad transportation, construction services, energy supply, and other products and services related 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. Article Nine of the Amended and Restated Certificate of Incorporation of the Company prohibits the Company from engaging in a Material Affiliate Transaction that was not the subject of prior review by a committee of the Board of Directors with at least three members, each of whom is independent, and defines a Material Affiliate Transaction as a transaction or series of related transactions between Grupo Mexico or one of its affiliates (other than the Company or its subsidiaries), on the one hand, and the Company or one of its subsidiaries, on the other hand, that involves consideration of more than $10.0 million in the aggregate. It is the Company’s policy that (i) a Material Affiliate Transaction not be entered into or

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continued without the review and approval by the Audit Committee or its subcommittee of related party transactions comprised of independent directors,(ii) any potential related party transaction process with aggregate consideration between $8.0 million and $10.0 million be authorized by the General Counsel and Chief Financial Officer of the Company and (iii) that all related party transactions, including any Material Affiliate Transaction, be reported to the Audit Committee of the Board of Directors or to its subcommittee of related party transactions.

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Receivable and payable balances with related parties are shown below (in millions):


	At June 30,		At December 31,		At March 31,		At December 31,
	2021		2020		2022		2021
Related parties receivable current:
Grupo Mexico and affiliates:
Asarco LLC	$	6.4	$	5.3	$	7.0	$	10.0
Americas Mining Corporation (“AMC”)						0.1		0.1
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates		0.3		0.3		0.3		0.3
Grupo Mexico		2.7		2.7
Mexico Generadora de Energia S. de R.L. ("MGE")		17.6		14.4		21.8		38.4
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.		0.2		0.2		0.2		0.2
Related to the controlling group:
Boutique Bowling de Mexico, S.A. de C.V.		0.1		0.2		0.1		0.1
Mexico Transportes Aereos, S.A. de C.V. ("Mextransport")		0.3		—		0.4		—
Operadora de Cinemas, S.A. de C.V.		—		0.2		(*)		(*)
	$	27.6	$	23.3	$	29.9	$	49.1

Related parties payable:
Grupo Mexico and affiliates:
AMMINCO Apoyo Administrativo, S.A. de C.V. (“AMMINCO”)					$	4.2	$	9.5
Asarco LLC	$	12.5	$	13.9		29.6		14.9
Eolica El Retiro, S.A.P.I. de C.V.		0.3		0.3		0.4		2.7
Ferrocarril Mexicano, S.A. de C.V.		2.7		4.7		9.3		4.0
Grupo Mexico		—		0.9
Grupo Mexico Servicios		10.2		19.6		13.6		11.1
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.		1.2		0.7
MGE		45.0		40.8		51.3		57.2
Mexico Compania Constructora S.A de C.V.		17.4		22.9		3.5		2.0
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.						1.1		0.9
Controladora de Infraestructura Energética México S.A. de C.V.						0.9		—
Related to the controlling group:
Boutique Bowling de Mexico, S.A. de C.V.		0.2		0.3		0.1		0.3
Mexico Transportes Aereos, S.A. de C.V. (“Mextransport”)		0.3		0.1		0.3		0.5
Operadora de Cinemas, S.A. de C.V.		0.1		0.1		(*)		0.2
	$	89.9	$	104.3	$	114.3	$	103.3

(*) Less than $0.1 million.

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Purchase and sale activity:

Grupo Mexico and affiliates:

The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 (in millions):


	2021		2020		2022		2021
Purchase activity
Asarco LLC	$	10.2	$	168.4	$	14.6	$	3.7
Eolica El Retiro, S.A.P.I. de C.V.		0.6		0.5		0.9		0.2
Ferrocarril Mexicano, S.A. de C.V.		21.6		22.2		5.2		10.9
Grupo Mexico		—		5.0
Grupo Mexico Servicios		14.3		8.9		5.0		2.5
Intermodal Mexico S.A. de C.V.		0.5		—
AMMINCO						2.2		4.6
MGE		140.9		105.2		70.1		77.7
Mexico Proyectos y Desarrollos S.A. de C.V. and affiliates		31.4		25.8
Peru Mining Exploration & Development Company		0.4		—
Mexico Compania Constructora S.A. de C.V.						5.1		13.0
Controladora de Infraestructura energética S.A. de C.V.						0.8		—
Grupo Mexico Servicios de Ingenieria S. A. de C.V.						1.3		1.4
Total purchases	$	219.9	$	336.0	$	105.2	$	114.0
Sales activity
Asarco LLC	$	14.7	$	11.0	$	11.4	$	6.9
MGE		61.1		21.2		34.5		37.9
Total sales	$	75.8	$	32.2	$	45.9	$	44.8

Grupo Mexico, the 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, AMMINCO and Grupo Mexico Servicios, ~~a subsidiary~~subsidiaries of Grupo Mexico, for these services and expects to continue requiring these services in the future.

In the first ~~six months~~quarter of ~~2021,~~2022, the Company ~~made~~did 0t make donations ~~of $0.8 million~~ to Fundacion Grupo Mexico, A.C., an organization dedicated to promoting the social and economic development of the communities close to the Company’s Mexican operations. In the same period of ~~2020,~~2021, the Company made donations of ~~$3.0~~$0.5 million to this organization.

The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano, S.A de C.V., which is a subsidiary of Grupo Mexico. Additionally, the Company´s Mexican operations paid fees for specialized technical and environmental services to obtain the energy license for ~~construction services~~El Arco project provided by Controladora de Infraestructura energetica S.A. de C.V., a subsidiary of Infraestructura y transportes Mexico ~~Compania Constructora~~ S.A. de C.V., which ~~are all subsidiaries~~is a subsidiary of Grupo Mexico. ~~Additionally, the~~

The Company´s Peruvian and Mexican operations paid fees for engineering services provided by Grupo Mexico Servicios de Ingenieria, S.A. de C.V., ~~a subsidiary of Grupo Mexico. The~~and the Company’s Mexican operations ~~also~~ paid fees for construction services provided by ~~Intermodal~~ Mexico Compania Constructora S.A. de C.V. Both companies are subsidiaries of Mexico Proyectos y Desarrollos, S.A. de C.V., ~~a subsidiary of Grupo Mexico. In addition, the Company purchased 3 mining concessions from Peru Mining Exploration & Development Company,~~which is a subsidiary of Grupo Mexico.

The Company’s Mexican operations purchased copper concentrates and rod from Asarco LLC and also paid fees for tolling services. Additionally, the Company´s Mexican operations purchased power from MGE. Both companies are subsidiaries of Grupo Mexico.

In 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply some of the Company’s Mexican operations with power through 2032. MGE has 2 natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts and has been supplying power to the Company since December 2013. Currently, MGE is supplying ~~2.5%~~0.2% of its power output to third-party energy users, compared to ~~1.0%~~2.7% as of ~~June 30, 2020.~~March 31, 2021.

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In 2014, Mexico Generadora de Energia Eolica, S. de R.L. de C.V, an indirect subsidiary of Grupo Mexico, located in Oaxaca, Mexico, acquired Eolica el Retiro. Eolica el Retiro is a windfarm with 37 wind turbines. This company started operations in January 2014 and began to sell power to Industrial Minera Mexico, S.A. de C.V. and subsidiaries

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(IMMSA) and other subsidiaries of Grupo Mexico in the third quarter of 2014. Currently, Eolica el Retiro supplies ~~16.6%~~approximately 46.6% of its power output to IMMSA and Mexcobre, compared to ~~9.1%~~9.3% as of ~~June 30, 2020.~~March 31, 2021.

The Company sold starter sheets, copper concentrate, sulfuric acid, silver and gold to Asarco LLC. ~~In addition, the Company received rental fees from Grupo Mexico Servicios.~~

In September 2019, Asarco LLC signed a promissory agreement to pay to the Company´s Mexican operations $62.0 million plus interest no later than October 31, 2021, with quarterly payments of $0.5 million. The annual interest rate of the note was Libor plus 200 basis points, which would be reviewed annually. In November 2020, Asarco repaid this agreement. Related to this agreement, the Company recorded interest income of $1.3 million in the first six months of 2020.

The Company also received fees for natural gas and services provided to MGE, a subsidiary of Grupo Mexico. In May 2020, MGE signed a promissory note to pay to the Company´s Mexican operations 97.2 million Mexican pesos (approximately $5.1 million) plus interest no later than November 30, 2020. The annual interest rate of the note was 8.28% with monthly payments. MGE repaid this note in December 2020.

Companies with relationships to the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 (in millions):


	2021		2020		2022		2021
Purchase activity
Boutique Bowling de Mexico S.A. de C.V.	$	0.2	$	0.2	$	0.1	$	0.1
Mextransport		0.7		2.3		0.4		0.4
Operadora de Cinemas S.A. de C.V.		0.1		0.1		(*)		0.1
Total purchases	$	1.0	$	2.6	$	0.5	$	0.6

Sales activity
Boutique Bowling de Mexico S.A. de C.V.	$	(*)	$	0.1	$	(*)	$	(*)
Mextransport		0.9		0.8		0.5		0.4
Operadora de Cinemas S.A. de C.V.		(*)		0.1		(*)		(*)
Total sales	$	0.9	$	1.0	$	0.5	$	0.4

(*) amount is lower than $0.1 million

The Larrea family controls a majority of the capital stock of Grupo Mexico and has extensive interests in other businesses, including transportation, real estate and entertainment. The Company engages in certain transactions in the ordinary course of business with other entities controlled by the Larrea family relating to the lease of office space, air transportation and entertainment.

The Company’s Mexican operations paid fees for entertainment services provided by Boutique Bowling de Mexico, S.A de C.V. and Operadora de Cinemas, S.A. de C.V. Both companies are controlled by the Larrea family.

Mextransport provides aviation services to the Company´s Mexican operations. This is a company controlled by the Larrea family.

In addition, the Company received fees for building rental and maintenance provided to Boutique Bowling de Mexico, S.A. de C.V. and Operadora de Cinemas, S.A. de C.V. The Company´s Mexican operations received fees from Mextransport for reimbursement of maintenance expenses and for rental services.

Equity Investment in Affiliate: The Company has a 44.2% participation in Compania Minera Coimolache S.A. (“Coimolache”), which it accounts for on the equity method. Coimolache owns Tantahuatay, a gold mine located in the northern part of Peru.

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In addition, the Company has a 30.0% participation in Apu Coropuna S.R.L. (“Apu Coropuna”), which it accounts for on the equity method. Apu Coropuna is a company that performs exploration activities in the Pucay prospect, located in Arequipa, Peru.

It is anticipated that in the future the Company will enter into similar transactions with these same parties.

~~In the first six months~~Table of ~~2021, the Company engaged in no purchase or sales activities with companies that have relationships with SCC executive officers.~~Contents

NOTE 6 — DERIVATIVE INSTRUMENTS:

From time to time, the Company uses derivative instruments to manage its cash flows exposure to changes in commodity prices. The Company does not enter into derivative contracts unless it anticipates that the possibility exists that future activity will expose the Company’s future cash flows to deterioration. Derivative contracts for commodities are entered into to manage the price risk associated with forecasted purchases of the commodities that the Company uses in its manufacturing process.

Cash Flow Hedges of Natural Gas

The Company’s objective in using natural gas derivatives is to protect the stability of natural gas costs and manage exposure to natural gas price increases. To protect natural gas costs from estimated price increases in the past winter season, the Company acquired 2 derivative instruments that began in November 2021 and ended in March 2022.

Derivative instruments and its effects as of March 31, 2022, were as follows:



Derivatives designated as hedging instruments under ASC 815	Call Option		Financial Swap Cash Settlement
Commodity contracts	Natural gas		Natural gas
Gas volume (MMBTUs)	5,285,000		5,285,000
Hedge premium ($per MMBTU)	0.55		-
Reference price (swap: $per MMBTU))	Prior month average IFREC price		3.75
Hedge	Daily fluctuation range		Monthly average price
	1Q 2022	November 2021 - March 2022	1Q 2022	November 2021 - March 2022
Cost (million $)	(1.7)	(2.9)	-	-
Profit (million $)	0.5	0.5	1.7	4.7
Net favorable/unfavorable effect (million $)	(1.2)	(2.4)	1.7	4.7
	1Q 2022		November 2021 - March 2022
Combined profit (million $)	0.5		2.3

The Company assessed these derivative instruments as Cash Flow Hedges. As such, the effective portions of said hedges were initially reported in Other Comprehensive Income (OCI) and were reclassified as earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affected earnings. The Company did not identify any ineffective portions of these derivatives.

As of March 31, 2022 and the same period of 2021, the Company did 0t hold any derivative instruments.

NOTE 7 — LEASES:

The Company has operating leases for power generating facilities, vehicles and properties. The Company recognizes ~~lease expense~~leasing expenses for these leases on a straight-line basis over the lease term. Some of the Company’s leases include both lease and non-lease components which are accounted for separately. The Company’s leases have remaining lease terms of ~~two years~~one year to 1211 years, and do not include options to extend the leases. The Company’s lease agreements do not contain options to purchase the leased assets or to terminate the leases before the expiration date. In addition, the Company’s lease contracts have no material residual value guarantees or material restrictive covenants. As none of the Company’s leases stipulates an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

~~The weighted average remaining lease term for the Company’s leases is nine years, and the weighted average discount rate for these leases is 3.69%.~~

~~The operating lease expense recognized in the first six months of 2021 and 2020 was classified as follows (in millions):~~

Classification

2021

2020
Cost of sales (exclusive of depreciation, amortization and depletion)

$
57.2

$
57.5
Selling, general and administrative

0.1

0.1
Exploration

0.1

0.1
Total lease expense

$
57.4

$
57.7

~~The Company’s short-term lease costs for the first six months of 2021 were $0.1 million.~~

~~Maturities of lease liabilities are as follows:~~

Lease liabilities
Year

(in millions)
2021

$
57.3
2022

113.7
2023

112.2
2024

104.8
2025

103.7
After 2025

723.0
Total lease payments

$
1,214.7
Less: interest on lease liabilities

(270.4)
Present value of lease payments

$
944.3

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The weighted average remaining lease term for the Company’s leases is eight years, and the weighted average discount rate for these leases is 3.71%.

The operating lease expense recognized in the first three months of 2022 and 2021 was classified as follows (in millions):


Classification	2022		2021
Cost of sales (exclusive of depreciation, amortization and depletion)	$	28.8	$	28.6
Selling, general and administrative		(*)		(*)
Exploration		(*)		(*)
Total lease expense	$	28.8	$	28.6

Maturities of lease liabilities are as follows:


	Lease liabilities
Year	(in millions)
2022	$	86.1
2023		113.9
2024		106.3
2025		105.3
2026		105.1
After 2026		624.2
Total lease payments	$	1,140.9
Less: interest on lease liabilities		(240.1)
Present value of lease payments	$	900.8

NOTE 78 — ASSET RETIREMENT OBLIGATION:

Peruvian operations:

The Company maintains an 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 Company’s closure plans were approved by the Peruvian Ministry of Energy and Mines (“MINEM”). As part of the closure plans, the Company is required to provide annual guarantees over the estimated life of the mines, based on a present value approach, and to furnish the funds for the asset retirement obligation. This law requires a review of closing plans every five years.

On June 24, 2019, MINEM approved a change to the guarantees required for the mining closure plans. The new regulation specifies that annual guarantees can be secured with real estate up to a maximum of 50% ~~of the total required~~ and the remaining amount ~~can be covered by~~with credit instruments. Currently, the Company has pledged the value of its Lima office complex ~~to back~~for the 50% of the guarantee and ~~has~~with a stand-by letter of credit for the other 50% as a security for this obligation.Through January ~~2021,~~2022, the Company has provided total guarantees of ~~$56.5~~$66.3 million.

The closure cost recognized for this liability includes the cost, as outlined in its closure plans, of dismantling the Toquepala and Cuajone concentrators, the Ilo smelter and refinery, and the shops and auxiliary facilities at the 3 units. In March 2016, MINEM approved the Mining Closure Plan for the Toquepala expansion project and the revised closure plans for the Cuajone mine and the Ilo facilities were approved in January and October 2019 respectively. Based on these new estimates, the Company increased the asset retirement obligation by $28.1 million in 2019. The closure plan for the Tia Maria project was approved in February 2017. However, the Company has not recorded a retirement obligation for the Tia Maria project because work on the project is still on hold. The Company believes that under these circumstances, the recording of a retirement obligation is not appropriate.

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Mexican operations:

The Company has recognized an estimated asset retirement obligation for its mining properties in Mexico as part of its environmental commitment. Even though there is currently no enacted law, statute, ordinance, written or oral contract requiring the Company to carry out mine closure and environmental remediation activities, the Company believes that a constructive obligation presently exists based on the remediation requirements caused by the closure of any facility. The overall cost recognized for mining closure in Mexico includes the estimated costs of dismantling concentrators, smelter and refinery plants, shops and other facilities.

In ~~2020,~~the first quarter of 2022, the Company ~~made a change in the~~adjusted its estimate for the asset retirement obligation for its Mexican operations ~~mainly due to~~following a detailed review of the closing activities ~~required for each facility.~~required. The effect ~~of this change~~ was an increase in the asset retirement obligation to the order of ~~$269.3 million, which was recorded in December 2020.~~$43.3 million.

The following table summarizes the asset retirement obligation activity for the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 (in millions):


	2021		2020		2022		2021
Balance as of January 1	$	545.0	$	262.3	$	562.9	$	545.0
Changes in estimates						43.3		—
Closure payments		(1.9)		(0.8)		(2.0)		(0.2)
Accretion expense		12.2		7.4		6.5		6.1
Balance as of June 30,	$	555.3	$	268.9
Balance as of March 31,					$	610.7	$	550.9

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NOTE 89 — BENEFIT PLANS:

Post retirement defined benefit plans:

The Company has 2 non-contributory defined benefit pension plans to cover former salaried employees in the United States and certain former expatriate employees in Peru. Effective October 31, 2000, the Board of Directors amended the qualified pension plan to suspend the accrual of benefits.

In addition, the Company’s Mexican subsidiaries have a defined contribution pension plan for salaried employees and a non-contributory defined benefit pension plan for union employees.

The components of net periodic benefit costs for the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 are as follows (in millions):


(in millions)	2021		2020		2022		2021
Service cost	$	0.7	$	0.7	$	0.4	$	0.4
Interest cost		0.7		0.9		0.5		0.3
Expected return on plan assets		(1.7)		(1.4)		(1.0)		(0.8)
Amortization of prior service cost / (credit)		0.1		0.1
Amortization of net loss/(gain)		0.1		0.1		0.1		0.1
Net periodic benefit cost	$	(0.1)	$	0.4	$	—	$	—

Post-retirement health care plans:

United States: The Company adopted a post-retirement health care plan for retired salaried employees eligible for Medicare in 1996. The Company manages the plan and is currently providing health benefits to retirees. The plan is accounted for in accordance with ASC 715 “Compensation retirement benefits”. As of December 31, 2021, because there has been a significant reduction in participants and in the amount of liability, the Company considered that this plan was not material enough to run a valuation.

In Mexico, health services are provided by the Mexican Social Security Institute.

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The components of net periodic benefit cost for the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 are as follows (in millions):

(in millions)

2021

2020
Interest cost

$
0.8

$
0.6
Amortization of net loss (gain)

0.1

(*)
Amortization of prior service cost/ (credit)

(*)

(*)
Net periodic benefit cost

$
0.9

$
0.6


(in millions)	2022		2021
Interest cost	$	0.4	$	0.4
Amortization of net loss (gain)		(*)		(*)
Amortization of prior service cost/ (credit)		(*)		0.1
Net periodic benefit cost	$	0.4	$	0.5

~~(*) amount is lower than $0.1 million~~

NOTE 910 — COMMITMENTS AND CONTINGENCIES:

Environmental matters:

The Company has ~~instituted extensive~~established comprehensive environmental conservation programs at its mining facilities in Peru and Mexico. The Company’s environmental programs include, ~~among others,~~ water recovery systems to conserve water and minimize the impact on nearby streams, reforestation programs to stabilize the surface of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust ~~emissions.~~emissions, among others.

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Environmental capital investments in the first ~~six months~~quarter of ~~2021~~2022 and ~~2020~~2021 were as follows (in millions):

2021

2020
Peruvian operations

$
0.7

$
(5.5)
Mexican operations

21.8

19.4

$
22.5

$
13.9

~~(*)~~ ~~The activity in 2020 for the Peruvian operations includes prepayment settlements classified to expenses.~~


	2022		2021
Peruvian operations	$	1.4	$	0.1
Mexican operations		12.6		5.4
	$	14.0	$	5.5

Peruvian operations: The Company’s operations are subject to applicable Peruvian environmental laws and regulations. The Peruvian government, through the Ministry of Environment (“MINAM”) conducts annual audits of the Company’s Peruvian mining and metallurgical operations. Through these environmental audits, matters related to environmental obligations, compliance with legal requirements, atmospheric emissions, effluent monitoring and waste management are reviewed. The Company believes that it is in material compliance with applicable Peruvian environmental laws and regulations. Peruvian law requires that companies in the mining industry provide assurances for future mine closure and remediation. In accordance with the requirements of this law, the Company’s closure plans were approved by MINEM. See Note 78 “Asset retirement obligation” for further discussion of this matter.

Air Quality Standards (“AQS”): In June 2017, MINAM enacted a supreme decree that defined new AQS for daily sulfur dioxide in the ~~air (250 µg/m3).~~air. As of ~~June 30, 2021,~~March 31, 2022, the Company maintains a ~~lower~~ daily average level of µg/m3 ~~(micrograms per cubic meter)~~ of SO2, lower than those required by the new AQS.

Soil Environmental Quality Standards (“SQS”): In 2013, the Peruvian government enacted Soil Quality Standards. In accordance with the regulatory requirements of the law, the Company prepared Soil ~~Descontamination~~Decontamination Plans (“SDP”) for environmentally impacted sites at each of its operation units (Toquepala, Cuajone and Ilo) with the assistance of consulting companies. The ~~cost~~costs of these SDPs are not material, either individually or in aggregated form, for the financial statements of the Company.

Climate change: On April 17, 2018, the Peruvian government enacted Law N. 30754, establishing a Climate Change

Framework. This law establishes that ~~promoting~~it is in the national interest to promote public and private investments in climate change ~~management is of national interest.~~management. The law proposes creating an institutional framework to address climate change in Peru, and outlines new measures, particularly with respect to climate change mitigation. ItFor example, it includes ~~for example,~~ provisions ~~dealing with: increasing~~addressing an increase in carbon capture and use of carbon ~~sinks;~~sinks, afforestation and reforestation practices; land use changes; and sustainable systems of transportation, solid waste management, and energy systems. This is the first Latin American climate change framework law to incorporate obligations from the Paris Agreement. Regulations to this law were enacted by Supreme Decree 013-2019 published on December 31, 2019, and are applicable to all Peruvian institutions and agencies. It is expected that further Peruvian regulations will be applicable to non-governmental entities. The Company anticipates initiating a multi-year process to adopt applicable reporting recommendations of the Task-Force on Climate Related Financial Disclosures (TCFD) once new Peruvian climate change regulationsHowever, no carbon pricing mechanism is currently applicable to non-governmental entities are implemented. The Company is committed to the environment and to managing climate-related impacts. The Company’s focus is to seek continuous improvement in the responsible use of natural resources while complying with strict applicable legal standards for prevention, mitigation, control and remediation of environmental impacts. Implementing continuous improvement in the Company’s ~~processes improves efficiency~~operations in ~~the use and consumption~~Peru.

Table of ~~energy, water, and other natural resources.~~Contents

Mexican operations: The Company’s operations are subject to applicable Mexican federal, state and municipal environmental laws, to Mexican official standards, and to regulations for the protection of the environment, including regulations relating to water supply, water quality, air quality, noise levels and hazardous and solid waste.

The principal legislation applicable to the Company’s Mexican operations is the Federal General Law of Ecological Balance and Environmental Protection (the “General Law”), which is enforced by the Federal Bureau of Environmental Protection (“PROFEPA”). PROFEPA monitors compliance with environmental legislation and enforces Mexican environmental laws, regulations and official standards. It may also initiate administrative proceedings against companies

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that violate environmental laws, which in the most extreme cases may result in the temporary or permanent shutdown of non-complying facilities, the revocation of operating licenses and/or other sanctions or fines.

In 2011, the General Law was amended to provide an individual or entity the ability to ~~contest~~challenge administrative acts, including environmental authorizations, permits or concessions granted, without the need to demonstrate the actual existence of harm to the environment as long as it can be argued that the harm may be caused. ~~In addition, in 2011,~~Additionally, amendments to the Civil Federal Procedures Code (“CFPC”) were enacted ~~which~~in 2011, and established 3 categories of collective actions under which a group of 30 or more individuals ~~can~~may be considered sufficient to prove a “legitimate interest” to file civil actions for injuries ~~derived from~~arising out of alleged violations of environmental, consumer protection, financial services and economic competition ~~laws and to~~laws. The group can seek restitution or economic compensation for the alleged injuries or ~~the~~ suspension of the activities which allegedly ~~generated~~caused the injuries in question. The amendments to the CFPC may result in more litigation, with plaintiffs seeking remedies, including suspension of the activities alleged to cause harm.

In 2013, the Environmental Liability Federal Law was enacted. ~~The~~This law establishes general guidelines for actions to be considered likely to cause environmental harm. If a possible determination regarding harm occurs, environmental clean-up and remedial actions sufficient to restore environment to a pre-existing condition should be taken. ~~Under this law, if~~If restoration is not possible, compensation measures ~~should~~must be provided. Criminal penalties and monetary fines ~~can~~may be imposed under this law.

~~Guaymas sulfuric acid spill~~:On February 2019, the Mexican Supreme Court confirmed the constitutionality of an ecological tax on extractive activities conducted in the state of Zacatecas, which taxes environmental remediation actions, emissions of certain gases to the atmosphere, emissions of polluting substances to the soil or water, and waste storage within the state. The Company has determined that this new environmental regulation will have no impact on its financial position.

Guaymas sulfuric acid spill: On July 9, 2019, there was an incident at the Company´s Marine Terminal in Guaymas, Sonora, that caused the discharge of approximately 3 cubic meters of sulfuric acid into the sea in the industrial port area.

The Guaymas bay has an estimated water volume of 340 million cubic meters. The spill, upon entering in contact with the sea’s alkaline conditions, led to quick dilution of the ~~discharge and~~discharge. Thus, the sulfuric acid was naturally and immediately neutralized. As a result, the discharge was considered harmless; the report from the Ministry of Navy found that neither the flora nor fauna of the port area were affected.

On July 10, 2019, PROFEPA made a first inspection of the area, concluding that the Company executed all the appropiate procedures in order to contain the discharge, and no reference was made to the existence of negative impacts on the environment resulting from the incident.

On Friday, July 19, 2019, PROFEPA revisited the facilities to carry out a second inspection ~~declaring~~and declared a partial temporary shutdown that only affected ~~only~~ the storage process and transportation of sulfuric acid at the terminal, arguing the absence of an authorization of environmental impact. It is important to note that these facilities have been ~~operating~~in operation since 1979, prior to the 1988 Mexican General Law of Ecological Balance and the Protection of the Environment. Companies that were operating before the aforementioned law are exempt from the permit requirement. In addition, in 2009, PROFEPA awarded a certification of “Clean Industry and Environmental Quality” to the facility which was subsequently renewed 4 times (for a two-year period each time).

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The Company filed a lawsuit against the closure, which was dismissed by a ruling on August 25, 2021. This ruling has been challenged through a motion to reopen the case, which was submitted on September 28, 2021. On January 4, 2022, the challenge was resolved. The authority imposed two fines and ruled that the temporary closure would remain in place until the environmental impact statement is obtained. The Company intends to appeal this ruling

The Company is not aware of the reasons or causes for this partial and temporary closure, but will continue working with the environmental authorities to provide ~~certainty~~assurance that the operation is in strict compliance with environmental regulations. The Company expects the environmental authorities to suspend the partial temporary shutdown, once ~~they resolve~~ their ~~concerns.~~concerns are resolved. Currently, the Company does not expect any impact on its operations. As of ~~June 30, 2021,~~March 31, 2022, the matter is pending resolution.

Climate change: Several taxes are applicable to the Company’s mining operations in Mexico, including federal and state fossil fuel taxes, and the requirements associated with Mexico’s emission trading scheme. These taxes range from $2.5/tCO2 to $12.5/tCO2, approximately. These refer to regional taxes applicable in the States of Baja California and Zacatecas, as well as a federal tax linked to Mexico’s carbon market system which is currently in its pilot phase. The requirements associated with this scheme are currently applicable only to 2 business units, the metallurgic and lime plants in Sonora, which generate annual GHG emissions levels above the threshold of 100,000 tCO2e per year contemplated by the scheme. These business units are required to report and verify their emissions once a year with average costs of less than $6,000 per unit. Units that emit more than 25,000 tonnes CO2 equivalent per year (all our Mexican units) are required to report their emissions to the National Emissions Registry (RENE) every year and to verify the reported emissions every three years. As a result, the Company’s total annual compliance costs related to climate change: regulations in Mexico were not material to the Company.

~~Grupo Mexico, the indirect parent of SCC~~The Company has ~~issued sustainability reports under the Global Reporting Initiative (GRI) for more than 10 years. Grupo Mexico~~ also ~~participates~~been participating in ~~different Mexican and international reporting programs such as the Greenhouse Gases (GHG) Mexico Program and the Carbon Disclosure Program (CDP). In 2013, GHG and CDP have signed~~Mexico’s “GHG Program” since its inception in 2005, which is a memorandum of understanding to work on aligning their reporting frameworks. Grupo Mexico’s 2018 CDP questionnaire included responses to the Task Force on Climate-Related Disclosure or TCFD concerns. In

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compliance with the 2012 Mexican Climate Change Law, Grupo Mexico’s GHG emissions are reported and verified independently. On October 18, 2017, Grupo Mexico was selected to join the S&P Sustainability Indices MILA Pacific Alliance (DJSI MILA). In 2017, this regional sustainability index included 42 leading companies in sustainability from the countries that form part of the Pacific Alliance: Mexico, Chile, Colombia and Peru. As indicated above, the Grupo Mexico 2020 report is aligned with the reporting standards of the Global Reporting Initiative (GRI) and,voluntary initiative for the ~~first time, also adheres to the frameworks~~registry and reporting of ~~the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures.~~greenhouse gases emissions.

The Company believes that all of its facilities in Peru and Mexico are in material compliance with ~~applicable~~ environmental, mining and other applicable laws and regulations. The Company also believes that continued compliance with environmental laws of Mexico and Peru will have no material adverse effects on the Company’s business, properties, or operating results.

Litigation matters:

Peruvian ~~operations~~operations:

The Tia Maria Mining Project

There are 5 lawsuits filed against the Peruvian Branch of the Company related to the Tia Maria project. The lawsuits seek (i) to declare null and void the resolution that approved the Environmental Impact Assessment of the project; (ii) the cancellation of the project and the withdrawal of mining activities in the area; (iii) to declare null and void the mining concession application for the Tia Maria project; and (iv) to declare null and void the resolution that approved the construction license. The lawsuits were filed by Messrs. Jorge Isaac del Carpio Lazo (filed May 22, 2015), Ernesto Mendoza Padilla (filed May 26, 2015), Juan Alberto Guillen Lopez (filed June 18, 2015), Junta de Usuarios del Valle del Tambo (filed April 30, 2015), and Gobierno Regional de Arequipa (filed December 16, 2019).

The del Carpio ~~Lazio~~Lazo case was rejected by the court of first instance on November 14, 2016. The plaintiff filed an appeal before the Superior Court on January 3, 2017. On January 9, 2018, the lawyers of both parties presented their respective positions before the Appellate Court. On March 8, 2018, the Appellate Court issued its final decision, which upheld the first instance court´s ruling. On April 27, 2018, the plaintiff filed an extraordinary appeal before the Supreme Court. ~~As of June 30, 2021,~~On January 21, 2022, the Supreme Court rejected the extraordinary appeal filed by the plaintiff. Therefore, the case ~~remains pending resolution.~~has concluded in favor of SCC’s Peruvian Branch.

The Mendoza Padilla case was initially rejected by the lower court on July 8, 2015. This ruling was confirmed by the Superior Court on June 14, 2016. On July 12, 2016, the case was appealed before the Constitutional Court. On

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November 20, 2018, the Constitutional Court reversed the previous decisions and remanded the case to the lower court for further action. In the third quarter of 2020, the Company was notified that the complaint had been reinstated. The Company answered the complaint on September 15, 2020. On December 2, 2020, the lower court issued a resolution, considering the complaint answered. On September 27, 2021, the Court ordered to temporarily archive the case. As of ~~June 30, 2021,~~March 31, 2022, the case remains pending resolution.

The Guillen Lopez case is currently before the lower court. OnOral arguments took place on July 19, 2019, ~~the oral arguments took place.~~. On January 7, 2020, the Judge decided to suspend the proceeding until the del Carpio ~~Lazio~~Lazo case is concluded. ~~Therefore, as~~On March 3, 2022, SCC’s Peruvian Branch informed the Court that the del Carpio Lazo case had concluded. As of ~~June 30, 2021,~~March 31, 2022, the case remains pending resolution.

The Junta de Usuarios del Valle del Tambo case is currently before the lower court. On May 2016, the Company was included in the process, after the Ministry of Energy and Mines filed a civil complaint. On March 6, 2019, the Company was formally notified of the lawsuit and answered the complaint on March 20, 2019. On July 8, 2019, the Company requested the suspension of the proceeding until the del Carpio ~~Lazio~~Lazo case is concluded. On March 3, 2022, SCC’s Peruvian Branch informed the Court that the del Carpio Lazo case had concluded. As of ~~June 30, 2021,~~March 31, 2022, the case remains pending resolution.

The Gobierno Regional de Arequipa case is currently before the lower ~~court and the~~court. The Company answered the complaint on September 15, 2020. On February 8, 2021, the Judge decided to suspend the proceeding until the del Carpio Lazo case is concluded. On March 24, 2022, SCC’s Peruvian Branch informed the Court that the del Carpio Lazo case had concluded. As of ~~June 30, 2021,~~March 31, 2022, the case remains pending resolution.

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The Company asserts that these lawsuits are without merit and is vigorously defending against them. The potential contingency amount for these cases cannot be reasonably estimated by management at this time.

Special Regional Pasto Grande Project (“Pasto Grande Project”)

In 2012, the Pasto Grande Project, an entity of the Regional Government of Moquegua, filed a lawsuit against SCC’s Peruvian Branch alleging property rights over a certain area used by the Peruvian Branch and seeking the demolition of the tailings dam where SCC’s Peruvian Branch has deposited its tailings from the Toquepala and Cuajone operations since 1995. The Peruvian Branch has had title to use the area in question since 1960 and has, since 1995, constructed and operated the tailings dams with proper governmental authorization. Following a motion filed by the Peruvian Branch, the lower court ~~has~~included MINEM as a defendant in this lawsuit. MINEM has answered the complaint and denied the validity of the claim. As ~~June 30, 2021,~~of March 31, 2022, the case was pending resolution without further developments.

SCC’s Peruvian Branch asserts that the lawsuit is without merit and is vigorously defending against it. The amount of this contingency cannot be reasonably estimated by management at this time.

Mexican ~~operations~~operations:

The Accidental Spill at Buenavista Mine of 2014

In relation to the 2014 accidental spill of copper sulfate solution ~~that occurred~~ at a leaching pond in the Buenavista mine, the following legal procedures are pending against the Company:

On August 19, 2014, PROFEPA, as part of the administrative proceeding initiated after the spill, announced the filing of a criminal complaint against Buenavista del Cobre S.A. de C.V. (“BVC”), a subsidiary of the Company, in order to determine those responsible for environmental damages. During the second quarter of 2018, the criminal complaint was dismissed. This decision was appealed and was pending resolution as of ~~June 30, 2021.~~March 31, 2022.

Through the first half of 2015, 6 collective action lawsuits were filed in federal courts in Mexico City and Sonora against 2 subsidiaries of the Company seeking economic compensation, clean up and remedial activities in order to restore the environment to its pre-existing conditions. NaN of the collective action lawsuits have been dismissed by the

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court. As of ~~June 30, 2021,~~ March 31, 2022, 3 lawsuits ~~were in process:~~are still pending: 2 were filed by Acciones Colectivas de Sinaloa, A.C. and 1 by Defensa Colectiva, A.C., requesting precautionary measures ~~about~~in the construction of facilities to ~~monitor~~monitoring public health services and prohibiting the closure of the Rio Sonora Trust.

Similarly, induring 2015, 8 civil action lawsuits were filed against BVC in the state courts of Sonora seeking damages for alleged injuries and for moral damages as a consequence of the spill. The plaintiffs in the state court lawsuits are: Jose Vicente Arriola Nunez et al; Santana Ruiz Molina et al; Andres Nogales Romero et al; Teodoro Javier Robles et al; Gildardo Vasquez Carvajal et al; Rafael Noriega Souffle et al; Grupo Banamichi Unido de Sonora El Dorado, S.C. de R.L. de C.V; and Marcelino Mercado Cruz. In 2016, 3 additional civil action lawsuits, claiming similar damages, were filed by Juan Melquicedec Lebaron; Blanca Lidia Valenzuela Rivera et al and Ramona Franco Quijada et al. In 2017, BVC was served with NaN additional civil action lawsuits, claiming similar damages. The lawsuits were filed by Francisco Javier Molina Peralta et al; Anacleto Cohen Machini et al; Francisco Rafael Alvarez Ruiz et al; Jose Alberto Martinez Bracamonte et al; Gloria del Carmen Ramirez Duarte et al; Flor Margarita Sabori et al; Blanca Esthela Ruiz Toledo et al; Julio Alfonso Corral ~~Domínguez~~Dominguez et al; Maria Eduwiges Bracamonte Villa et al; Francisca Marquez Dominguez et al; Jose Juan Romo Bravo et al; Jose Alfredo Garcia Leyva et al; Gloria Irma Dominguez Perez et al; Maria del Refugio Romero et al; Miguel Rivas Medina et al; Yolanda Valenzuela Garrobo et al; Maria Elena Garcia Leyva et al; Manuel Alfonso Ortiz Valenzuela et al; Francisco Alberto Arvayo Romero et al; Maria del Carmen Villanueva Lopez et al; Manuel Martin Garcia Salazar; Miguel Garcia Arguelles et al; Dora Elena Rodriguez Ochoa et al; Honora Eduwiges Ortiz Rodriguez et al; Francisco Jose Martinez Lopez et al; Maria Eduwiges Lopez Bustamante; Rodolfo Barron Villa et al, Jose Carlos Martinez Fernandez et al, Maria de los Angeles Fabela et al; Rafaela Edith Haro et al; Luz Mercedes Cruz et al; Juan Pedro Montaño et al; and Juana Irma Alday Villa. ~~During~~In the first quarter of 2018, BVC was served with another civil action lawsuit, claiming similar damages. The lawsuit was filed by Alma Angelina Del Cid Rivera et al. In the last quarter of 2018, BVC was served with other 3 civil action lawsuits, claiming similar damages. These lawsuits were filed by Los Corrales de la Estancia, S.C. de R.L.; Jose Antonio Navarro; Jesus Maria

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Peña Molina, et al; these actions were dismissed by the court, because they have expired. As of ~~June 30, 2021,~~March 31, 2022, NaN cases ~~were~~remain pending resolution.

In 2015, 4 constitutional lawsuits (juicios de amparo) were filed before Federal Courts against various authorities and against a subsidiary of the Company, arguing; (i) the alleged lack of a waste management program approved by SEMARNAT; (ii) the alleged lack of a remediation plan approved by SEMARNAT with regard to the August 2014 spill; (iii) the alleged lack of community approval regarding the environmental impact authorizations granted by SEMARNAT to 1 subsidiary of the Company; and (iv) the alleged inactivity of the authorities with regard to the spill in August 2014. The plaintiffs ofin these lawsuits are: Francisca Garcia Enriquez, et al filed 2 lawsuits, Francisco Ramon Miranda, et al and Jesus David Lopez Peralta et al. In the third quarter of 2016, 4 additional constitutional lawsuits, claiming similar damages were filed by Mario Alberto Salcido et al; Maria Elena Heredia Bustamante et al; Martin Eligio Ortiz Gamez et al; and Maria de los Angeles Enriquez Bacame et al. In the third quarter of 2017, BVC was served with another constitutional lawsuit filed by Francisca García Enriquez et al. In 2018, BVC was served with 2 additional constitutional lawsuits that were filed against SEMARNAT by Norberto Bustamante et al. ~~Regarding~~With regard to the constitutional lawsuit filed by Maria Elena Heredia Bustamante et al; in which it was claimed the lack of community approval ~~for~~regarding the authorization granted by SEMARNAT to build the new BVC tailings dam, on September 5, 2018, the Supreme Court of Justice issued a resolution establishing that such authorization was granted to BVC in compliance with the applicable legislation. However, SEMARNAT must ~~hold~~carry out a public meeting to inform the community of the technical aspects required to build the dam, potential impacts and prevention ~~measures, with~~measures. This public meeting will have no material effects to ~~for~~ BVC’s operations. SEMARNAT has carried out the consultation ordered by the Supreme Court. As a result, it has informed the corresponding Judge ~~in the case has been informed about~~its compliance with the resolution, in which BVC was required ~~BVC~~ to ~~take~~implement additional measures of environmental impact prevention, such as: (i) the building of at least 3 monitoring wells downstream from the curtain of the contingency dam in a period of six months; (ii) monitoring of the groundwater level and water quality every six months; (iii) carrying out rain collection work in order to restore water to the Sonora River basin, ~~for which~~with six months ~~are~~ granted to present the execution program; (iv) ~~determining~~determine the location of wildlife conservation and protection areas and ~~defining if biological corridors~~define the need to ~~be established;~~establish biological corridors; (v) ~~obtaining~~obtain photographic or videographic evidence every six months; (vi) submitting to SEMARNAT two years before the closure and abandonment of the site, or earlier if necessary, the closure program that includes the cleaning and restoration of the soil including Mexican regulation NOM-141; (vii) ~~including~~include the measures in the Environmental Monitoring Program ~~that are aligned with~~according to the environmental components impacted; and (viii) hiring an external environmental consultant to validate compliance

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with the current and new conditions ~~that are~~ imposed. The foregoing does not impact BVC’s operations. Additionally, the lawsuits filed by Maria de los Angeles Enriquez Bacame and Norberto Bustamante have been dismissed and closed without prejudice to the Company. As of ~~June 30, 2021,~~March 31, 2022, the remaining cases were still pending resolution.

It is currently not possible to determine the extent of the damages sought in these state and federal lawsuits but the Company believes that these lawsuits are without merit. Accordingly, the Company is vigorously defending against them. Nevertheless, the Company believes that none of the legal proceedings resulting from the spill, individually or in the aggregate, would have a material effect on its financial position or results of operations.

Corporate ~~operations~~operations:

Carla Lacey, on behalf of herself and all other similarly situated stockholders of Southern Copper Corporation, and derivatively on behalf of Southern Copper Corporation

In April 2019, a derivative lawsuit was filed against the Company, certain current and former Directors, and Grupo Mexico in the Delaware Court of Chancery relating to certain construction contracts, contracts for the purchase and sale of minerals, and transportation contracts entered into between the Company’s subsidiaries and subsidiaries of Grupo Mexico.

In October 2019, the plaintiff amended the complaint to include claims related to certain administrative services contracts between the Company’s subsidiaries and Grupo Mexico. The amended complaint alleges, among other things, that the construction, ~~contracts, the~~ mineral, ~~contracts, the~~ transportation, ~~contracts,~~ and ~~the~~ administrative services contracts were unfair as a result of breaches of fiduciary duties and the Company’s charter. The amended complaint also added Americas Mining Corporation (“AMC”) as a defendant, alleging that AMC breached its fiduciary duties as a

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controlling stockholder of the Company. The amended complaint seeks, among other things, unspecified monetary damages. In January 2020, the Company, the current and former Directors, and Grupo Mexico responded to the complaint by filing motions to dismiss. The Plaintiff filed a brief in response to the motions on March 13, 2020. On July 16, 2020, the Court denied the motions to dismiss the breach of fiduciary duty claims against the Directors. On October 6, 2020, the Court dismissed the Plaintiff’s claims against Grupo Mexico for lack of personal jurisdiction. On February 11, 2021, the Court granted the Directors’ motion to dismiss plaintiff’s breach of contract claim. The Court also granted AMC’s motion to dismiss all claims against AMC other than those related to the mineral contracts.

AsOn July 12, 2021, the parties reached an agreement-in-principle to settle the lawsuit, subject to Court approval. On September 29, 2021, the parties filed a Stipulation and Agreement of ~~June 30, 2021, because~~Compromise, Settlement and Release with the ~~Company has not reached a conclusion as to whether an unfavorable outcome is either probable or remote,~~Court. On February 1, 2022, the ~~Company expresses no opinion as~~Judge approved the settlement and awarded certain fees to the ~~likelihood of an unfavorable outcome or~~plaintiff’s attorneys. The Judge’s order for this decision was registered on February 2, 2022. Under applicable law, there was a 30-day period for parties to appeal the ~~amount or range of any possible loss to~~Judge's order. This period expired on March 4, 2022, and therefore the ~~Company.~~Judge's order is considered final.

Labor matters:

Peruvian operations: ~~68%~~72.8% of the ~~Company’s 4,666~~Company's 4,675 Peruvian employees were unionized ~~as of June 30, 2021.~~at March 31, 2022. Currently, there are 6 separate unions, ~~1 large union and 5 small unions.~~NaN of which represents the majority of workers, as defined by current Peruvian labor legislation.

~~The~~During 2021, the Company decided to hold talks with the 6 unions to sign collective agreements prior to their effective dates. As a result, inbetween June and December 2021, the Company signed acollective agreements with the 6 unions with durations between ~~four-year collective~~three to six years. All of them granted annual salary increases of 5%. Additionally, each agreement ~~with one of the unions and~~ granted, among other things, ~~annual salary increases of 5% for each year from December 2021 and~~ a signing bonus of between S/ ~~60,000~~45,000 (approximately ~~$ 15,520)~~$12,159) and S/90,000 (approximately $22,318), depending on the duration of the agreement. A long-term agreement bonus of S/10,000

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(approximately $2,702) was granted to the union that ~~will be~~signed a six-year extension of the collective bargaining agreement. All these concepts were recorded as labor expense.

~~We are in~~As of March 31, 2022, the ~~process of negotiating similar agreements~~Company has no pending negotiations with ~~the 5 remaining~~Peruvian unions.

Mexican operations: In recent years, the Mexican operations have experienced a positive improvement in their labor environment, as workers opted to change their affiliation from the Sindicato Nacional de Trabajadores Mineros, Metalurgicos y Similares de la Republica Mexicana (the “National Mining Union”) to other less politicized unions.

The workers of the San Martin mine ~~began a~~were on strike insince July 2007. On February 28, 2018, the striking workers of the San Martín mine of IMMSA held an election to vote on the union that would hold the collective bargaining agreement at the San Martín mine. The Federacion Nacional de Sindicatos Independientes (the National Federation of Independent Unions) won the vote by a majority. Nevertheless, the vote was challenged by the National Mining Union. On June 26, 2018, the Federal Mediation and Arbitration Board issued a ruling recognizing the election results. Due to the agreement between workers and the Company to end the protracted strike, on August 22, 2018, the Federal Mediation and Arbitration Board authorized the restart of operations of the San Martín mine. Such authorization was challenged by the National Mining Union. On April 4, 2019, the Federal Mediation and Arbitration Board recognized, once again, the election results from February 28, 2018, by which the National Federation of Independent Unions won by a majority. In the last quarter of 2019, a Federal Court issued a resolution that established that the Labor Court should analyze the list of workers with the right to vote in the union election. The Company and the National Federation of Independent Unions challenged such determination before the Supreme Court of ~~Justice~~Justice. Such challenges were dismissed by the Supreme Court. As a consequence, on September 6, 2021, the Federal Mediation and Arbitration Board issued a new resolution determining that, based on the documents submitted by the National Federation of Independent Unions and given the status of the strike until 2018, it was not possible to create a registry of workers holding a right to vote. Therefore, in case ~~was still pending resolution as~~of a strike, any economic collective proceedings shall remain suspended. The Federal Mediation and Arbitration Board shall decide on the request of the majority of workers to end the strike, despite the opposition of the National Mining Union. The Company expects that the conflict will be solved in accordance with the legal framework set by labor authorities and that any actions taken will respect the workers’ will.

As of March 31, ~~2020. As of June 30, 2021,~~2022, the Company had ~~virtually~~ completed most of the rehabilitation plan to restore operations at the San Martin mine, ~~with~~at a total expense of approximately ~~$89.1 million and~~$90.5 million; the mine has since reached full operating capacity.

In the case of the Taxco mine, its workers have been on strike since July 2007. After several legal procedures, in August 2015, the Supreme Court decided to assert jurisdiction over the case and to rule on it directly. As of ~~June 30, 2021,~~March 31, 2022, the case was pending resolution without further developments.

It is expected that operations at the Taxco mine will remain suspended until the labor issues are resolved. In view of the lengthy strike, the Company has reviewed the carrying value of the Taxco mine to ascertain whether impairment exists. The Company concluded that there is a non-material impairment of the assets located at this mine.

In 2020, a small group of workers at the Charcas mine claimed an additional workers’ participation payment and a minor incident was reported. This claim lacked legal basis given that the Company had already completely fulfilled said

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obligation with the workers in question. Consequently, the Company took legal action and through conciliation and mediation with labor authorities, the incident concluded with no further repercussions for the Company.

Other legal matters:

The Company is involved in various other legal proceedings incidental to its operations, but the Company does not believe that decisions adverse to it in any such proceedings, individually or in the aggregate, would have a material effect on its financial position or results of operations.

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Other commitments:

Peruvian ~~Operations~~Operations:

Tia ~~Maria:~~Maria

On August 1, 2014, the Company received final approval for Tia Maria´s Environmental Impact Assessment (“EIA”). On July 8, 2019, the Company received the construction permit for this 120,000 ton annual SX-EW copper greenfield project with a total capital budget of $1,400 million. This permit was obtained after completing an exhaustive review process, complying with all established regulatory requirements and addressing all observations raised.

On July 15, 2019, anti-mining groups staged a violent demonstration affecting economic as well as other activities in the Islay province. These actions were followed by the filing of 3 complaints, sponsored by groups opposing the Tia Maria project, with the Mining Council, which is the Peruvian administrative authority responsible for ruling on these complaints. The Mining Council temporarily suspended the construction permit on August 8, 2019. On October 7, 2019, as part of the process, the Mining Council conducted a hearing to hear the complaints and the Company´s position. On October 30, 2019, the Mining Council of the Peruvian Ministry of Energy and Mines ratified the construction permit for the Tia Maria project.

The Company has been working to promote the welfare of the Islay province population. As part of these efforts, the Company has implemented social programs in education, healthcare and productive development to improve the quality-of-life in the region. The Company also has promoted agricultural and livestock activities in the Tambo Valley and supported growth in manufacturing, fishing and tourism in Islay.

During the construction and operation phase, the Company will make it a priority to hire local labor to fill the 9,000 jobs (3,600 direct and 5,400 indirect) that the Company expects to generate during Tia Maria’s construction phase. When operating, the Company expects Tia Maria to directly employ 600 workers and indirectly provide jobs for another 4,200. Additionally, from day one of its operations, the Company will generate significant contributions to revenues in the Arequipa region via royalties and taxes.

Tia Maria´s project budget is approximately $1.4 billion, of which ~~$340.4~~$332.3 million ~~has~~had been invested ~~through June 30, 2021.~~as of March 31, 2022. This project will use state-of-the-art SX-EW technology with the highest international environmental standards. SX-EW facilities are the most environmentally friendly in the industry as they do not require a smelting process and therefore, do not release any emissions into the atmosphere.

~~Michiquillay:~~Michiquillay

In June 2018, the Company signed a contract for the acquisition of the Michiquillay copper project in Cajamarca, Peru, at a purchase price of $400 million. Michiquillay is a world-class mining project with estimated ~~mineralized material~~inferred mineral resources of ~~1,150~~2,288 million ~~tons and a~~tonnes with an estimated copper grade of ~~0.63%~~0.43%. It is expected to produce 225,000 ~~tons~~tonnes of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years.

On September 3, 2021, the Company signed a social agreement with the Michiquillay community. On October 1, 2021, the Peruvian Ministry of Energy and Mines approved the semi-detailed environmental impact study for the project. Additionally, on November 12, 2021, the Company signed a Social Agreement with the Encañada Community. These events will allow the Company to initiate an in-depth exploration program in the second quarter of 2022.

The main commitments signed by the Company in the social agreements with the Michiquillay project communities are related to providing support for agricultural and livestock activities, economic development of local initiatives, and social programs in favor of education, water management, waste disposal, and healthcare for vulnerable groups.

The Company paid $12.5 million at the signing of the contract. In June 2021, the Company made an additional payment of $12.5 million. The balance of $375.0 million will be paid if the Company decides to develop the project, which is not a present obligation.

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Corporate Social ~~Responsibility:~~Responsibility

The Company has a corporate social responsibility policy to maintain and promote the continuity of its mining operations and obtain the best results. The main objective of this policy is to integrate the Company´s operations with local communities in the areas of influence of its operations by creating permanent positive relationships to develop optimum social conditions and promote sustainable development in the area. Accordingly, the Company has made the following commitments:

Tacna Region: In connection with the Toquepala concentrator expansion, the Company has committed to funding various social and infrastructure improvement projects in Toquepala’s neighboring communities. The total amount committed for these purposes is S/445.0 million (approximately ~~$115.1~~$120.2 million). In relation to this commitment, the Company has recently completed the construction of a school with an investment of S/18.8 million (approximately $5.1 million), has co-financed the construction of the Cularjahuira dam for S/15.6 million (approximately $4.2 million) and is preparing the study of engineering for the Callazas dam for S/2.6 million (approximately $0.7 million).

As the Toquepala expansion project has been completed, the Company considers that these commitments constitute present obligations of the Company and consequently has recorded a liability of ~~$35.9~~$34.6 million in its condensed consolidated financial statements as of ~~June 30, 2021.~~March 31 2022.

In addition, the Company has committed S/~~70.2~~70.3 million (approximately ~~$18.2~~$19.0 million) for the construction of a high-performance school in the Tacna region under the “social investment for taxes” (obras por impuestos) program, which allows the Company to use these amounts as an advance payment of taxes.

Moquegua Region: In the Moquegua region, the Company participates in a “development roundtable” with local municipal authorities and community representatives to discuss social needs and to determine the ways that the Company can contribute to sustainable development in the region. Currently, the roundtable is discussing the creation of a Moquegua Region Development Fund, for which the Company has offered a contribution of S/1,000 million (approximately ~~$258.7~~$270.2 million). While final funding is not yet settled, the Company has committed to contribute S/108.4 million (approximately ~~$28.0~~$29.3 million) as an advance, which is being utilized to fund an educational project. In addition, there is a commitment to finance the construction of a residual water treatment plant in Ilo for S/~~78.7~~79.9 million (approximately ~~$20.4~~$21.6 million), to build 3 schools in Moquegua for S/15.9 million (approximately $4.3 million) and to build ~~three schools~~tracks and sidewalks in ~~Moquegua~~Pacocha for S/ ~~15.3~~6.4 million (approximately ~~$4.0~~$1.7 million).

In addition, the Company has committed S/~~88.8~~100.4 million (approximately ~~$23.0~~$27.1 million) to build ~~two~~2 infrastructure projects in the Moquegua region under the “social investment for taxes” (obras por impuestos) program, which allows the Company to use these amounts as an advance payment of taxes.

Power purchase ~~agreements:~~agreements

●	Electroperu S.A.: In June 2014, the Company entered into a power purchase agreement for 120 megawatts (“MW”) with the state power company Electroperu S.A., under which Electroperu S.A. began supplying energy for the Peruvian operations for twenty years starting on April 17, 2017.

●

Kallpa Generacion S.A. (“Kallpa”): In July 2014, the Company entered into a power purchase agreement for 120MW with Kallpa, an independent Israeli owned power company, under which Kallpa will supply energy for the Peruvian operations for ten years starting on April 17, 2017 and ending on April 30, 2027. In May 2016, the Company signed an additional power purchase agreement for a maximum of 80MW with Kallpa, under which Kallpa began supplying energy for the Peruvian operations related to the Toquepala Expansion and other minor projects starting on May 1, 2017 and ending on October 31, 2029.

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Mexican ~~operations~~operations:

Power purchase ~~agreements:~~agreements

●	MGE: In 2012, the Company signed a power purchase agreement with MGE, an indirect subsidiary of Grupo Mexico, to supply power to some of the Company’s Mexican operations through 2032. For further information, please see Note 5 “Related party transactions”.

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●

Eolica el Retiro, S.A.P.I. de C.V.: In 2013, the Company signed a power purchase agreement with Eolica el Retiro, S.A.P.I. de C.V. a windfarm energy producer that is an indirect subsidiary of Grupo Mexico, to supply power to some of the Company´s Mexican operations. For further information, please see Note 5 “Related party transactions”.

●

Parque Eolico de Fenicias, S. de R.L. de C.V.: On February 20, 2020, the Company signed a power purchase agreement with Parque Eolico de Fenicias, S. de R.L. de C.V., and indirect subsidiary of Grupo Mexico, to supply 611,400 MWh of power per year to some of the Company´s Mexican operations for 20 years. This agreement is expected to ~~start~~begin in ~~October 2021.~~July 2022.

Corporate ~~operations~~operations:

Commitment for capital ~~projects:~~projects

As of ~~June 30, 2021,~~March 31, 2022, the Company had committed approximately ~~$253.4~~$369.2 million to the development of its capital investment projects at its operations.

Tax contingency matters:

Tax contingencies are provided for under ASC 740-10-50-15 Uncertain tax position (see Note 4 “Income taxes”).

NOTE 1011 — STOCKHOLDERS’EQUITY:

Treasury Stock:

Activity in treasury stock in the ~~six-month~~three-month period ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows (in millions):

2021

2020
Southern Copper common shares

Balance as of January 1,

$
2,767.5

$
2,767.9
Used for corporate purposes

(0.1)

—
Balance as of June 30,

2,767.4

2,767.9

Parent Company (Grupo Mexico) common shares

Balance as of January 1,

296.0

281.0
Other activity, including dividend, interest and foreign currency transaction effect

12.4

(7.4)
Balance as of June 30,

308.4

273.6
Treasury stock balance as of June 30,

$
3,075.8

$
3,041.5


	2022		2021
Southern Copper common shares
Balance as of January 1,	$	2,767.2	$	2,767.5
Used for corporate purposes		(0.1)		—
Balance as of March 31,		2,767.1		2,767.5

Parent Company (Grupo Mexico) common shares
Balance as of January 1,		306.8		296.0
Other activity, including dividend, interest and foreign currency translation effect		13.8		(2.3)
Balance as of March 31,		320.6		293.7
Treasury stock balance as of March 31,	$	3,087.7	$	3,061.2

Southern Copper Common Shares:

At ~~June 30, 2021~~March 31, 2022 and at December 31, ~~2020,~~2021, there were in treasury ~~111,514,817~~111,506,017 and ~~111,522,817~~111,509,217 shares of SCC’s common stock, respectively.

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SCC share repurchase program:

In 2008, the Company’s Board of Directors (“BOD”) authorized a $500 million share repurchase program that has since been increased by the BOD and is currently authorized to $3 billion. Pursuant to this program, the Company has purchased 119.5 million shares of common stock at a cost of $2.9 billion. These shares are available for general corporate purposes. The Company may purchase additional shares of its common stock from time to time, based on

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market conditions and other factors. This repurchase program has no expiration date and may be modified or discontinued at any time.

There has been no activity in the SCC share repurchase program since the third quarter of 2016. The NYSE closing price offor SCC common shares as of ~~June 30, 2021~~March 31, 2022 was ~~$64.32~~$75.90 and the maximum number of shares that the Company could purchase at that price was ~~1.3 million shares.~~1.1 million.

As a result of the repurchase of shares of SCC’s common stock, Grupo Mexico’s direct and indirect ownership was 88.9% as of ~~June 30, 2021. There has been no activity in the SCC share repurchase program since the third quarter of 2016.~~March 31, 2022.

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 ~~currently receive 1,600~~received 1,200 shares of common stock upon election and ~~1,600~~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. On April 26, 2018, the Company's stockholders approved a five-year extension of the Plan until January 29, 2023 and an increase of the shares award from 1,200 to 1,600. The fair value of the award is measured each year at the date of the grant. Commencing with the 2021 grant, the 1,600 shares shall be granted quarterly and conditioned upon the attendance of each director to each Board meeting. The award is not subject to vesting requirements.


	2022	2021
Total SCC shares reserved for the plan	600,000	600,000
Total shares granted at January 1,	(405,200)	(391,600)
Granted in the period	(3,200)	—
Total shares granted at March 31,	(408,400)	(391,600)
Remaining shares reserved	191,600	208,400

Parent Company common shares:

At ~~June 30, 2021~~March 31, 2022 and at December 31, ~~2020~~2021 there were in treasury ~~85,548,509~~79,728,356 and ~~87,598,097~~79,800,655 of Grupo Mexico’s common shares, respectively.

Employee Stock Purchase Plan:

2015 Plan: In January 2015, the Company offered to eligible employees a new stock purchase plan through a trust that acquires series B shares of Grupo Mexico stock for sale to its employees, and employees of subsidiaries, and certain affiliated companies. The purchase price was set at 38.44 Mexican pesos (approximately $2.63) for the initial subscription, which expires in January 2023. Every two years employees will be able to acquire title to 50% of the shares paid in the previous two years. The employees will pay for shares purchased through monthly payroll deductions over the eight year period of the plan. At the end of the eight year period, the Company will grant the participant a bonus of 1 share for every 10 shares purchased by the employee. Any future subscription will be at the average market price at the date of acquisition or the grant date.

If Grupo Mexico pays dividends on shares during the eight year period, the participants will be entitled to receive the dividend in cash for all shares that have been fully purchased and paid as of the date that the dividend is paid. If the participant has only partially paid for shares, the entitled dividends will be used to reduce the remaining liability owed for purchased shares.

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In the case of voluntary or involuntary resignation/termination of the employee, the Company will pay to the employee the fair market sales price at the date of resignation of the fully paid shares, net of costs and taxes. When the fair market sales value of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the employee based on a decreasing schedule specified in the plan.

In case of retirement or death of the employee, the Company will render the buyer or his legal beneficiary, the fair market sales value as of the date of retirement or death of the shares effectively paid, net of costs and taxes.

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The stock based compensation expense for the first ~~semester~~three months of ~~2021~~2022 and ~~2020~~2021 and the unrecognized compensation expense under this plan were as follows (in millions):


	2021		2020		2022		2021
Stock based compensation expense	$	0.3	$	0.3	$	0.2	$	0.2
Unrecognized compensation expense	$	1.1	$	1.7	$	0.6	$	1.2

The following table presents the activity of this plan for the ~~six~~three months ended ~~June~~March 30, ~~2021~~2022 and ~~2020:~~2021:


		Unit Weighted Average			Unit Weighted Average
	Shares	Grant Date Fair Value		Shares	Grant Date Fair Value
Outstanding shares at January 1, 2022				867,234	$	2.63
Granted						—
Exercised				(16,394)	$	2.63
Forfeited						—
Outstanding shares at March 31, 2022				850,840	$	2.63
Outstanding shares at January 1, 2021	1,264,410	$	2.63	1,264,410	$	2.63
Granted	—		—	—		—
Exercised	(370,959)	$	2.63	(293,041)	$	2.63
Forfeited	—		—	—		—
Outstanding shares at June 30, 2021	893,451	$	2.63
Outstanding shares at January 1, 2020	1,379,734	$	2.63
Granted	—		—
Exercised	(54,221)	$	2.63
Forfeited	—		—
Outstanding shares at June 30, 2020	1,325,513	$	2.63
Outstanding shares at March 31, 2021				971,369	$	2.63

2018 Plan: In November 2018, the Company offered a new stock purchase plan (the “New Employee Stock Purchase Plan”) to eligible employees through a trust that acquires series B shares of Grupo Mexico stock for sale to its employees, and employees of subsidiaries, and certain affiliated companies. The purchase price was established at 37.89 Mexican pesos (approximately $1.86) for the initial subscription, which expires in October 2026. Every two years employees will be able to acquire title to 50% of the shares paid in the previous two years. The employees will pay for shares purchased through monthly payroll deductions over the eight-year period of the plan. At the end of the eight-year period, the Company will grant the participant a bonus of 1 share for every 10 shares purchased by the employee. Any future subscription will be at the average market price at the date of acquisition or the grant date.

If Grupo Mexico pays dividends on shares during the eight-year period, the participants will be entitled to receive the dividend in cash for all shares that have been fully purchased and paid as of the date that the dividend is paid. If the participant has only partially paid for shares, the entitled dividends will be used to reduce the remaining liability owed for purchased shares.

In the case of voluntary or involuntary resignation/termination of the employee, the Company will pay to the employee the fair market sales price on the date of resignation of the fully paid shares, net of costs and taxes. When the fair market sales value of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the employee based on a decreasing schedule specified in the plan.

The stock based compensation expense for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ and the unrecognized compensation expense under this plan were as follows (in millions):

2021

2020
Stock based compensation expense

$
0.3

$
0.3
Unrecognized compensation expense

$
3.6

$
4.2


	2022		2021
Stock based compensation expense	$	0.2	$	0.2
Unrecognized compensation expense	$	2.9	$	3.6

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The following table presents the stock award activity of this plan for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


			Unit Weighted Average			Unit Weighted Average
	Shares		Grant Date Fair Value	Shares		Grant Date Fair Value
Outstanding shares at January 1, 2022				3,173,924	$	1.86
Granted					$	—
Exercised				(115,903)		1.86
Forfeited						—
Outstanding shares at March 31, 2022				3,058,021	$	1.86
Outstanding shares at January 1, 2021	3,918,458	$	1.86	3,918,458	$	1.86
Granted	—		—	—		—
Exercised	(625,742)	$	1.86	(592,768)		—
Forfeited	—		—	—		—
Outstanding shares at June 30, 2021	3,292,716	$	1.86
Outstanding shares at January 1, 2020	4,002,898	$	1.86
Granted	—		—
Exercised	(37,940)		1.86
Forfeited	—		—
Outstanding shares at June 30, 2020	3,964,958	$	1.86
Outstanding shares at March 31, 2021				3,325,690	$	1.86

Non-controlling interest:

The following table presents the non-controlling interest activity for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in millions):


	2021		2020		2022		2021
Balance as of January 1,	$	51.2	$	47.9	$	58.6	$	51.2
Net earnings		7.0		2.8		3.1		3.3
Dividend paid		(2.9)		(2.6)		(1.8)		(1.3)
Balance as of June 30,	$	55.3	$	48.1
Balance as of March 31,					$	59.9	$	53.2

NOTE 1112 — FAIR VALUE MEASUREMENT:

Subtopic 820-10 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 820-10 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, which provides

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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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in millions):


	At June 30, 2021				At December 31, 2020				At March 31, 2022				At December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Long-term debt level 1		6,195.1		8,345.9		6,193.6		8,692.1		6,497.3		7,657.2		6,496.4	$	8,506.0
Long-term debt level 2		350.8		379.8		350.6		385.7		51.2		64.4		51.2		67.2
Total long-term debt	$	6,545.9	$	8,725.7	$	6,544.2	$	9,077.8	$	6,548.5	$	7,721.6	$	6,547.6	$	8,573.2

Long-term debt is carried at amortized cost and its estimated fair value is based on quoted market prices classified as Level 1 in the fair value hierarchy except for the ~~cases~~case of the Yankee bonds, ~~and the notes due 2022,~~ which qualify as Level 2 in the fair value hierarchy as they are based on quoted prices in markets that are not active.

Fair values of assets and liabilities measured at fair value on a recurring basis were calculated as follows as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in millions):


	Fair Value at Measurement Date Using:								Fair Value at Measurement Date Using:
					Significant								Significant
	Fair Value		Quoted prices in		other		Significant		Fair Value		Quoted prices in		other		Significant
	as of		active markets for		observable		unobservable		as of		active markets for		observable		unobservable
	June 30,		identical assets		inputs		inputs		March 31,		identical assets		inputs		inputs
Description	2021		(Level 1)		(Level 2)		(Level 3)		2022		(Level 1)		(Level 2)		(Level 3)
Assets:
Short term investment:
—Trading securities	$	545.3	$	545.3	$	—	$	—	$	406.1	$	406.1	$	—	$	—
—Available-for-sale debt securities:
Corporate bonds		—		—		—		—		—		—		—		—
Asset backed securities		0.3		—		0.3		—		0.2		—		0.2		—
Mortgage backed securities		0.2		—		0.2		—		0.2		—		0.2		—
Accounts receivable:
—Embedded derivatives—Not classified as hedges:
Provisionally priced sales:
Copper		837.7		837.7		—		—		950.6		950.6		—		—
Molybdenum		221.8		221.8		—		—		268.2		268.2		—		—
Total	$	1,605.3	$	1,604.8	$	0.5	$	—	$	1,625.3	$	1,624.9	$	0.4	$	—


	Fair Value at Measurement Date Using:								Fair Value at Measurement Date Using:
					Significant								Significant
	Fair Value		Quoted prices in		other		Significant		Fair Value		Quoted prices in		other		Significant
	as of		active markets for		observable		unobservable		as of		active markets for		observable		unobservable
	December 31,		identical assets		inputs		inputs		December 31,		identical assets		inputs		inputs
Description	2020		(Level 1)		(Level 2)		(Level 3)		2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Short term investment:
—Trading securities	$	410.2	$	410.2	$	—	$	—	$	486.5	$	486.5	$	—	$	—
—Available-for-sale debt securities:
Corporate bonds		—		—		—		—		—		—		—		—
Asset backed securities		0.3		—		0.3		—		0.2		—		0.2		—
Mortgage backed securities		0.3		—		0.3		—		0.2		—		0.2		—
Accounts receivable:
—Embedded derivatives-Not classified as hedges:
Provisionally priced sales:
Copper		491.9		491.9		—		—		876.2		876.2		—		—
Molybdenum		129.2		129.2		—		—		288.3		288.3		—		—
Total	$	1,031.9	$	1,031.3	$	0.6	$	—	$	1,651.4	$	1,651.0	$	0.4	$	—

Table of Contents

The Company’s short-term trading securities investments are classified as Level 1 because they are valued using quoted prices of the same securities as they consist of bonds issued by public companies and are publicly traded. The Company’s short-term available-for-sale investments are classified as Level 2 because they are valued using quoted prices for similar investments.

The Company’s accounts receivables associated with provisionally priced copper sales are valued using quoted market prices based on the forward price on the LME or on the COMEX. Such value is classified within Level 1 of the fair value hierarchy. Molybdenum prices are established by reference to the publication Platts Metals Week and are considered Level 1 in the fair value hierarchy.

In addition, in the third quarter of 2021 the Company acquired two derivative instruments to protect natural gas costs from estimated price increases in the coming winter season. These derivative instruments will cover the period from November 2021 through March 2022. For further information please refer to Note 6 “Derivative instruments.”

NOTE 1213 — REVENUE:

The Company’s net sales were ~~$5,429.5~~$2,763.8 million in the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~$3,505.1~~$2,532.5 million in the same period of ~~2020.~~2021. The geographic breakdown of the Company’s sales is as follows (in millions):


	Three Months Ended June 30, 2021										Three Months Ended March 31, 2022
			Mexican										Mexican
	Mexican		IMMSA		Peruvian		Corporate &				Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated		Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	494.9	$	109.6	$	—	$	(38.8)	$	565.7	$	533.8	$	130.8	$	—	$	(40.0)	$	624.6
United States		393.2		14.7		61.8		—		469.7		455.6		15.7		90.8		—		562.1
Peru		—		0.1		143.2		—		143.3		115.0		—		177.5		(114.7)		177.8
Brazil		—		5.6		120.6		—		126.2		—		5.2		119.1		—		124.3
Chile		1.0		—		95.2		—		96.2		—		—		103.5				103.5
Other American countries		7.7		—		1.0		—		8.7		6.5		—		5.4		—		11.9
Europe:
Switzerland		318.2		18.7		103.2		—		440.1		227.4		8.3		191.1				426.8
Italy		0.2		1.1		108.7		—		110.0		0.5		4.0		67.5				72.0
Spain		102.2		—		23.5		—		125.7		93.2		—		1.7				94.9
Other European countries		74.7		6.7		118.9		—		200.3		30.8		8.4		86.1				125.3
Asia:
China												112.4		—		—		—		112.4
Singapore		163.4		4.8		108.9		—		277.1		4.7		4.9		52.2				61.8
Japan		2.9		—		147.7		—		150.6		22.0		—		161.4		—		183.4
Other Asian countries		73.8		0.1		109.5		—		183.4		44.3		0.2		38.5	0			83.0
Total	$	1,632.2	$	161.4	$	1,142.2	$	(38.8)	$	2,897.0	$	1,646.2	$	177.5	$	1,094.8	$	(154.7)	$	2,763.8

~~Table of Contents~~

Six Months Ended June 30, 2021

Mexican

Mexican

IMMSA

Peruvian

Corporate &


Open-Pit

Unit

Operations

Elimination

Consolidated
The Americas:

Mexico

$
948.4

$
176.1

$
—

$
(65.0)

$
1,059.5
United States

782.6

31.7

81.0

—

895.3
Peru

—

0.1

290.6

—

290.7
Brazil

—

7.6

217.6

—

225.2
Chile

2.9

—

151.3

—

154.2
Other American countries

18.0

0.7

2.8

—

21.5
Europe:

Switzerland

612.6

25.8

195.5

—

833.9
Italy

0.2

1.9

181.9

—

184.0
Spain

193.2

—

43.4

—

236.6
Other European countries

148.1

33.2

199.9

—

381.2
Asia:

Singapore

235.0

8.4

236.0

—

479.4
Japan

24.4

—

310.3

—

334.7
Other Asian countries

145.3

0.2

187.8

—

333.3
Total

$
3,110.7

$
285.7

$
2,098.1

$
(65.0)

$
5,429.5

Three Months Ended June 30, 2020

Mexican

Mexican

IMMSA

Peruvian

Corporate &


Open-Pit

Unit

Operations

Elimination

Consolidated
The Americas:

Mexico

$
207.2

$
70.5

$
—

$
(21.5)

$
256.2
United States

298.7

4.0

19.5

—

322.2
Peru

—

2.6

40.1

—

42.7
Brazil

—

1.3

20.9

—

22.2
Chile

17.6

—

41.0

—

58.6
Other American countries

0.7

0.6

0.2

—

1.5
Europe:

Switzerland

236.2

15.9

147.8

—

399.9
Italy

—

1.0

52.1

—

53.1
Spain

18.2

—

—

—

18.2
Other European countries

56.1

3.6

66.9

—

126.6
Asia:

Singapore

116.2

1.9

111.1

—

229.2
Japan

2.3

—

138.1

—

140.4
Other Asian countries

63.5

0.2

50.9

—

114.6
Total

$
1,016.7

$
101.6

$
688.6

$
(21.5)

$
1,785.4

Table of Contents

Six Months Ended June 30, 2020

Mexican

Mexican

IMMSA

Peruvian

Corporate &


Open-Pit

Unit

Operations

Elimination

Consolidated
The Americas:

Mexico

$
570.9

$
169.7

$
—

$
(48.3)

$
692.3
United States

556.9

4.2

60.4

—

621.5
Peru

—

5.6

113.1

—

118.7
Brazil

—

4.8

75.4

—

80.2
Chile

19.5

—

89.2

—

108.7
Other American countries

9.0

1.4

0.4

—

10.8
Europe:

Switzerland

408.6

30.9

214.3

—

653.8
Italy

—

4.4

118.9

—

123.3
Spain

64.8

—

—

—

64.8
Other European countries

76.4

9.7

119.9

—

206.0
Asia:

Singapore

177.9

5.1

246.9

—

429.9
Japan

11.7

—

236.8

—

248.5
Other Asian countries

74.7

0.3

71.6

—

146.6
Total

$
1,970.4

$
236.1

$
1,346.9

$
(48.3)

$
3,505.1


	Three Months Ended March 31, 2021
			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	453.4	$	66.6	$	—	$	(26.1)	$	493.9
United States		389.4		17.0		19.1		—		425.5
Peru		—		—		147.4		—		147.4
Brazil		—		2.0		97.0		—		99.0
Chile		1.9		—		56.1		—		58.0
Other American countries		10.3		0.7		1.8		—		12.8
Europe:
Switzerland		294.5		7.0		92.3		—		393.8
Italy		—		0.9		73.2		—		74.1
Spain		91.0		—		19.9		—		110.9
Other European countries		73.4		26.5		81.0		—		180.9
Asia:
China		55		—		1.9		—		56.6
Singapore		71.6		3.6		127.1		—		202.3
Japan		21.4		—		162.6		—		184.0
Other Asian countries		16.9		—		76.4		—		93.3
Total	$	1,478.5	$	124.3	$	955.8	$	(26.1)	$	2,532.5

The following table presents information regarding the sales value by reporting segment of the Company’s significant products for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in millions):


	Three Months Ended June 30, 2021										Three Months Ended March 31, 2022
			Mexican										Mexican
	Mexican		IMMSA		Peruvian		Corporate, Other &		Total		Mexican		IMMSA		Peruvian		Corporate, Other &		Total
	Open-pit		Unit		Operations		Eliminations		Consolidated		Open-pit		Unit		Operations		Eliminations		Consolidated
Copper	$	1,382.6	$	27.4	$	957.4	$	(19.2)	$	2,348.2	$	1,368.4	$	22.4	$	893.9	$	(129.8)	$	2,154.9
Molybdenum		149.6		—		132.6		—		282.2		150.4		—		125.4		—		275.8
Silver		68.0		36.9		32.7		(17.4)		120.2		66.7		37.0		23.1		(21.6)		105.2
Zinc		—		81.3		—		—		81.3		—		98.6		—		(0.3)		98.3
Other		32.0		15.8		19.5		(2.2)		65.1		60.7		19.5		52.4		(3.0)		129.6
Total	$	1,632.2	$	161.4	$	1,142.2	$	(38.8)	$	2,897.0	$	1,646.2	$	177.5	$	1,094.8	$	(154.7)	$	2,763.8

Six Months Ended June 30, 2021



Mexican

Mexican

IMMSA

Peruvian

Corporate, Other &

Total

Open-pit

Unit

Operations

Eliminations

Consolidated
Copper

$
2,663.1

$
51.2

$
1,784.2

$
(32.9)

$
4,465.6
Molybdenum

240.7

—

211.1

—

451.8
Silver

140.7

85.4

62.2

(29.1)

259.2
Zinc

—

116.5

—

0.5

117.0
Other

66.2

32.6

40.6

(3.5)

135.9
Total

$
3,110.7

$
285.7

$
2,098.1

$
(65.0)

$
5,429.5


	Three Months Ended March 31, 2021
			Mexican
	Mexican		IMMSA		Peruvian		Corporate, Other &		Total
	Open-pit		Unit		Operations		Eliminations		Consolidated
Copper	$	1,280.5	$	23.8	$	826.8	$	(13.7)	$	2,117.4
Molybdenum		91.1		—		78.5		—		169.6
Zinc		72.7		48.5		29.5		(11.7)		139.0
Silver		—		35.2		—		0.5		35.7
Other		34.2		16.8		21.0		(1.2)		70.8
Total	$	1,478.5	$	124.3	$	955.8	$	(26.1)	$	2,532.5

3332

Table of Contents

Three Months Ended June 30, 2020



Mexican

Mexican

IMMSA

Peruvian

Corporate, Other &

Total

Open-pit

Unit

Operations

Eliminations

Consolidated
Copper

$
866.0

$
11.7

$
599.7

$
(7.7)

$
1,469.7
Molybdenum

58.1

—

48.9

—

107.0
Zinc

59.0

27.2

22.5

(9.5)

99.2
Silver

—

51.2

—

(2.8)

48.4
Other

33.6

11.5

17.5

(1.5)

61.1
Total

$
1,016.7

$
101.6

$
688.6

$
(21.5)

$
1,785.4

Six Months Ended June 30, 2020



Mexican

Mexican

IMMSA

Peruvian

Corporate, Other &

Total

Open-pit

Unit

Operations

Eliminations

Consolidated
Copper

$
1,665.7

$
29.7

$
1,160.7

$
(20.6)

$
2,835.5
Molybdenum

130.1

—

102.9

—

233.0
Zinc

103.6

62.7

42.5

(21.4)

187.4
Silver

—

116.5

—

(3.3)

113.2
Other

71.0

27.2

40.8

(3.0)

136.0
Total

$
1,970.4

$
236.1

$
1,346.9

$
(48.3)

$
3,505.1

The opening and closing balances of receivables by reporting segment of the Company were as follows (in millions):


			Mexican										Mexican
	Mexican		IMMSA		Peruvian		Corporate &				Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated		Open-Pit		Unit		Operations		Elimination		Consolidated

As of June 30, 2021:
As of March 31, 2022:
Trade receivables	$	655.5	$	66.9	$	713.2	$	—	$	1,435.6	$	728.6	$	60.5	$	510.3	$	(113.6)	$	1,185.8
Related parties, current		18.9		—		0.9		7.8		27.6		27.4		0.2		0.1		2.2		29.9

As of December 31, 2020:
As of December 31, 2021:
Trade receivables	$	566.0	$	57.8	$	445.1	$	—	$	1,068.9	$	656.0	$	51.2	$	651.5	$	—	$	1,358.7
Related parties, current		15.4		—		0.8		7.1		23.3		46.9		0.2		—		2.0		49.1

As of ~~June 30, 2021,~~March 31, 2022, the Company has long-term contracts with promises to deliver the following products in ~~2021:~~2022:


Copper concentrates (in ~~tons)~~tonnes)		~~188,000~~118,000
Copper cathodes (in ~~tons)~~tonnes)		48,000
Molybdenum concentrates (in ~~tons)~~tonnes)		~~41,414~~37,000
Sulfuric acid (in ~~tons)~~tonnes)		~~322,415~~354,851

Provisionally priced sales: At ~~June 30, 2021,~~March 31, 2022, the Company has recorded provisionally priced sales of copper at average forward prices per pound, and molybdenum at the ~~June 30, 2021~~March 31, 2022 market price per pound. These sales are subject to final pricing based on the average monthly London Metal Exchange (“LME”), or New York Commodities Exchange (“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 ~~June 30, 2021:~~March 31, 2022:

Sales volume

Priced at

Sales volume

Priced at

(million lbs.)

(per pound)

Month of settlement

(million lbs.)

(per pound)

Month of settlement

Copper

196.6

4.26

July 2021 through November 2021

201.9

4.71

April 2022 through July 2022

Molybdenum

11.7

18.95

July 2021 through September 2021

13.9

19.30

April 2022 through June 2022

~~Table of Contents~~

The provisional sales price adjustment included in accounts receivable and net sales as of ~~June 30, 2021~~March 31, 2022 includes ~~a negative adjustment~~positive adjustments of ~~$16.8~~$29.4 million for copper and ~~a positive adjustment of $79.9~~$3.3 million for molybdenum.

Management believes that the final pricing of these sales will not have a material effect on the Company’s financial position or on operating results.

NOTE 1314 — SEGMENT AND RELATED INFORMATION:

Company management views Southern Copper as having 3 reportable segments and manages it on the basis of these segments. The reportable 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.

The 3 reportable segments identified are groups of mines, each of which constitute an operating segment, with similar economic characteristics, types of products, processes and support facilities, similar regulatory environments, similar employee bargaining contracts and similar currency risks. In addition, each mine within the individual group earns revenues from similar types of customers for their products and services and each group incurs expenses independently, including commercial transactions between groups.

Financial information is regularly prepared for each of the 3 segments and the results of the Company’s operations are regularly reported to the Chief Operating Decision Maker (“CODM”) on the segment basis. The CODM 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.

3533

Table of Contents

Financial information relating to Southern Copper’s segments is as follows:


	Three Months Ended June 30, 2021										Three Months Ended March 31, 2022
	(in millions)										(in millions)
			Mexican				Corporate, other						Mexican				Corporate, other
	Mexican		IMMSA		Peruvian		and				Mexican		IMMSA		Peruvian		and
	Open-pit		Unit		Operations		eliminations		Consolidated		Open-pit		Unit		Operations		eliminations		Consolidated
Net sales outside of segments	$	1,632.2	$	122.6	$	1,142.2	$	—	$	2,897.0	$	1,646.2	$	137.5	$	1,094.8	$	(114.6)	$	2,763.8
Intersegment sales		—		38.8		—		(38.8)		—		—		40.0		—		(40.0)		—
Cost of sales (exclusive of depreciation, amortization and depletion)		498.3		112.6		417.4		(42.8)		985.5		548.3		131.7		469.1		(91.4)		1,057.7
Selling, general and administrative		16.4		2.8		9.5		2.7		31.4		15.5		2.4		8.5		3.9		30.3
Depreciation, amortization and depletion		95.6		12.8		77.7		9.3		195.4		98.0		11.3		77.6		9.7		196.6
Exploration		0.7		0.9		3.2		4.7		9.5		0.5		1.1		6.8		0.7		9.1
Operating income	$	1,021.2	$	32.3	$	634.4	$	(12.7)		1,675.2	$	983.8	$	31.0	$	532.8	$	(77.5)		1,470.1
Less:
Interest, net										(88.0)										(83.1)
Other income (expense)										(8.2)										11.7
Income taxes										(647.7)										(612.1)
Equity earnings of affiliate										5.1										1.2
Non-controlling interest										(3.7)										(3.1)
Net income attributable to SCC									$	932.7						��			$	784.7
Capital investment	$	125.4	$	18.2	$	73.9	$	2.3	$	219.8	$	89.3	$	31.7	$	81.2	$	3.0	$	205.2
Property and mine development, net	$	4,609.8	$	546.0	$	3,695.8	$	604.5	$	9,456.1	$	4,662.5	$	593.5	$	3,685.8	$	551.1	$	9,492.9
Total assets	$	7,874.8	$	994.5	$	4,812.2	$	4,013.9	$	17,695.4	$	8,611.5	$	1,080.9	$	4,792.3	$	3,414.2	$	17,898.9

Six Months Ended June 30, 2021

(in millions)




Mexican



Corporate, other


Mexican

IMMSA

Peruvian

and

Open-pit

Unit

Operations

eliminations

Consolidated
Net sales outside of segments

$
3,110.7

220.7

2,098.1

—

$
5,429.5
Intersegment sales

—

65.0

—

(65.0)

—
Cost of sales (exclusive of depreciation, amortization and depletion)

1,008.2

193.0

802.3

(74.2)

1,929.3
Selling, general and administrative

32.3

4.9

18.9

5.5

61.6
Depreciation, amortization and depletion

191.2

26.7

159.1

19.0

396.0
Exploration

1.2

2.1

7.2

5.3

15.8
Operating income

$
1,877.8

$
59.0

$
1,110.6

$
(20.6)

3,026.8
Less:

Interest, net

(175.2)
Other income (expense)

(5.9)
Income taxes

(1,155.2)
Equity earnings of affiliate

13.1
Non-controlling interest

(7.0)
Net income attributable to SCC

$
1,696.6
Capital investment

$
275.0

$
32.5

$
140.4

$
4.5

$
452.4
Property and mine development, net

$
4,609.8

$
546.0

$
3,695.8

$
604.5

$
9,456.1
Total assets

$
7,874.8

$
994.5

$
4,812.2

$
4,013.9

$
17,695.4


	Three Months Ended March 31, 2021
	(in millions)
			Mexican				Corporate, other
	Mexican		IMMSA		Peruvian		and
	Open-pit		Unit		Operations		eliminations		Consolidated
Net sales outside of segments	$	1,478.5	$	98.2	$	955.8	$	—	$	2,532.5
Intersegment sales		—		26.1		—		(26.1)		—
Cost of sales (exclusive of depreciation, amortization and depletion)		509.9		80.4		385.0		(31.5)		943.8
Selling, general and administrative		15.9		2.1		9.4		2.7		30.1
Depreciation, amortization and depletion		95.6		13.9		81.4		9.7		200.6
Exploration		0.5		1.3		4.0		0.6		6.4
Operating income	$	856.6	$	26.6	$	476.0	$	(7.6)		1,351.6
Less:
Interest, net										(87.2)
Other income (expense)										2.3
Income taxes										(507.5)
Equity earnings of affiliate										7.9
Non-controlling interest										(3.3)
Net income attributable to SCC									$	763.8
Capital investment	$	149.6	$	14.3	$	66.5	$	2.2	$	232.6
Property and mine development, net	$	4,653.8	$	548.4	$	3,707.3	$	544.9	$	9,454.4
Total assets	$	7,698.0	$	965.1	$	4,915.5	$	3,639.2	$	17,217.8

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Three Months Ended June 30, 2020

(in millions)




Mexican



Corporate, other


Mexican

IMMSA

Peruvian

and

Open-pit

Unit

Operations

eliminations

Consolidated
Net sales outside of segments

$
1,016.7

$
80.1

$
688.6

$
—

$
1,785.4
Intersegment sales

—

21.5

—

(21.5)

—
Cost of sales (exclusive of depreciation, amortization and depletion)

526.4

81.9

395.9

(27.5)

976.7
Selling, general and administrative

19.2

1.8

8.3

2.1

31.4
Depreciation, amortization and depletion

93.6

10.3

80.3

9.6

193.8
Exploration

0.8

2.2

2.5

0.8

6.3
Operating income

$
376.7

$
5.4

$
201.6

$
(6.5)

577.2
Less:

Interest, net

(87.8)
Other income (expense)

(1.0)
Income taxes

(224.4)
Equity earnings of affiliate

(3.1)
Non-controlling interest

(1.4)
Net income attributable to SCC

$
259.5
Capital investment

$
65.5

$
14.4

$
30.8

$
2.6

$
113.3
Property and mine development, net

$
4,400.1

$
506.7

$
3,775.9

$
514.3

$
9,197.0
Total assets

$
7,150.2

$
824.1

$
4,749.4

$
3,081.3

$
15,805.0

Six Months Ended June 30, 2020

(in millions)




Mexican



Corporate, other


Mexican

IMMSA

Peruvian

and

Open-pit

Unit

Operations

eliminations

Consolidated
Net sales outside of segments

$
1,970.4

$
187.8

$
1,346.9

$
—

$
3,505.1
Intersegment sales

—

48.3

—

(48.3)

—
Cost of sales (exclusive of depreciation, amortization and depletion)

991.4

194.1

806.9

(60.0)

1,932.4
Selling, general and administrative

35.9

4.2

17.4

3.1

60.6
Depreciation, amortization and depletion

185.0

20.9

161.6

19.3

386.8
Exploration

1.5

5.1

4.1

4.2

14.9
Operating income

$
756.6

$
11.8

$
356.9

$
(14.9)

1,110.4
Less:

Interest, net

(176.6)
Other income (expense)

(8.4)
Income taxes

(446.2)
Equity earnings of affiliate

(2.1)
Non-controlling interest

(2.8)
Net income attributable to SCC

$
474.3
Capital investment

$
103.7

$
39.7

$
66.0

$
4.9

$
214.3
Property and mine development, net

$
4,400.1

$
506.7

$
3,775.9

$
514.3

$
9,197.0
Total assets

$
7,150.2

$
824.1

$
4,749.4

$
3,081.3

$
15,805.0

~~Table of Contents~~

NOTE 1415 — SUBSEQUENT EVENTS:

Dividends:

On ~~July 22, 2021,~~April 28, 2022, the Board of Directors authorized a dividend of ~~$0.90~~$1.25 per share payable on ~~August 26, 2021~~May 31, 2022 to shareholders of record at the close of business on ~~August 12, 2021.~~May 17, 2022.

Peruvian income tax refund:

On April 12, 2022, the Peruvian branch of the Company received a tax refund of S/124.8 million (approximately $33.6 million) from SUNAT as a reimbursement of a 2015 claim of taxes related to the exchange difference of a loan with Southern Copper Corporation at that year.

Cuajone mine restore of operations:

After several unsuccessful attempts by the authorities to restore order through dialogue, on April 20, 2022, the Peruvian government declared a state of emergency in the Moquegua region. On April 21, 2022, the protesters returned the installations of the Viña Blanca water reservoir and the railway to the Company. The Company’s personnel immediately evaluated the damage caused to the facilities by acts of vandalism and took the necessary steps to resume production at the Cuajone mining unit. As of today, the industrial railroad and the Cuajone mine, concentrator and related facilities are operating at full capacity.

On April 30, 2022, the Peruvian government issued a Ministerial Resolution to set up a three-party-round-table for dialogue with members of the community, government and Company officers to better understand all parties’ concerns.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information that management believes is relevant to an assessment and understanding of the condensed consolidated financial condition and results of operations of Southern Copper Corporation and its subsidiaries (collectively, “SCC”, “the Company”, “our”, and “we”). This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report. Additionally, the following discussion and analysis should be read in conjunction with the Management Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements included in Part II of our annual report on Form 10-K for the year ended December 31, ~~2020~~2021.

EXECUTIVE OVERVIEW

Business: Our business is primarily the production and sale of copper. In the process of producing copper, a number of valuable metallurgical by-products are recovered, which we also produce and sell. Market forces outside of our control largely determine the sale prices for our products. Our management, therefore, focuses on value creation through copper production, cost control, production enhancement and maintaining a prudent capital structure to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our aim is to remain profitable during periods of low copper prices and to maximize financial performance in periods of high copper prices.

We are one of the world’s largest copper mining companies in terms of production and sales and our principal operations are in Peru and Mexico. We also have exploration programs in Chile, Argentina and Ecuador. In addition to copper, we produce significant amounts of other metals, either as a by-product of the copper process or through a number of dedicated mining facilities in Mexico.

Outlook: Various key factors will affect our outcome. These include, but are not limited to, the following:

●

Sales structure: In the ~~second~~first quarter of ~~2021,~~2022, approximately ~~81.1%~~78.0% of our revenue came from the sale of copper; ~~9.7%~~10.0% from molybdenum; ~~4.1%~~3.8% from silver; ~~2.8%~~3.6% from zinc; and ~~2.3%~~4.6% from various other products, including gold, sulfuric acid and other materials.

●

~~Copper:~~Copper: In the ~~second~~first quarter of ~~2021,~~2022, the LME copper price increased from an average of $3.85 per pound in the first quarter of 2021 to ~~$4.40~~$4.53 (+~~14.3%~~17.7%). Currently, we are seeing prices ~~at about $4.25~~in the range of $4.40 to $4.50, which remains higher than the 2021 average of $4.23 per pound ~~which~~and bodes a positive outlook for the Company. We believe the following factors are influencing the market:

~~positive outlook for the Company. We believe the following factors are influencing the market:~~

●

The ~~strong demand that we are seeing in the U.S. and Europe, particularly in terms of cathode consumption.~~

●

~~The combined inventories of the LME, Comex, Shanghai and Bonded warehouses remain at relatively low levels, particularly given the number days of consumption considered.~~

●

~~The uncertainty regarding future production from Chile and Peru, which together represent about 40% of the world supply.~~

●

~~The~~ most ~~important~~relevant market intelligence houses for the copper market are expecting a market deficit for 2022 of about ~~250,000 tons this year~~100,000 tonnes.

●

This assumes growth in demand of 2.0 -2.5% in 2022, particularly in terms of cathode consumption in the U.S. An economic slowdown is expected in China due to the recent COVID-19 outbreak.

●

Uncertainty regarding future production growth in Chile and Peru, which together represent about 40% of the global supply. Chile registered a ~~recovery~~production drop of 7.0% in ~~demand, which should grow between 2.0% and 3.5%.~~the first quarter of 2022, while 20% of Peru’s production is currently at risk due to social conflicts.

●

Russia’s copper supply (about 400,000 tonnes per year) has been shut out of the market due to the invasion of Ukraine.

●

Molybdenum: Represented ~~9.7%~~10.0% of our sales in the ~~second~~first quarter of ~~2021~~2022 and is currently our most ~~significant~~important by-product. Molybdenum prices averaged ~~$13.89~~$18.99 per pound in the ~~second~~first quarter of ~~2021,~~2022, compared to ~~$8.24~~$11.19 in the same period of ~~2020.~~2021. This represented a ~~68.6%~~69.7% increase.

Regarding this by-product, we believe that prices will be supported by lower exports from China; an uptick in delivery times; and port congestion. We expect these factors will help maintain prices at good levels.

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Molybdenum is mainly used in the production of special alloys for stainless steel that require significant hardness and corrosion and heat resistance. ~~A new use~~New uses for this metal ~~is in~~are associated with lubricants, ~~and~~ sulfur filtering of heavy oils and shale gas production.

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●	Silver: Represented ~~4.1%~~3.8% of our sales in the ~~second~~first quarter of ~~2021.~~2022. We believe that the prices for silver will be supported by its intensive level of industrial use and the fact that, like gold, it represents value shelter in times of economic turmoil.

●	Zinc: Represented ~~2.8%~~3.6% of our sales in the ~~second~~first quarter of ~~2021.~~2022. We consider zinc has very good long term fundamentals due to high levels of industrial consumption and expected production.

●

Production: ~~In 2021 and~~For 2022, we expect to produce ~~958,000~~895,800 tons of copper, ~~given that production during these periods~~which represents a decrease of 6.5% compared to 2021. Production will continue to be affected by athe stoppage at Cuajone and by the temporary reduction in ore ~~grade~~grades and ~~recovery~~recoveries at ~~our~~the Peruvian operations.

We expect our copper production to ~~recover by~~bounce back in 2023 and reach ~~1,030,000 tons of production~~971,200 tonnes as we get Peruvian

production back on track and generate new production onthrough our projects at Pilares ~~El Pilar~~ and Buenavista-Zinc ~~Concentrator~~

~~projects.~~Concentrator.

We also expect to produce ~~20.6 million ounces~~25,300 tonnes of ~~silver in 2021,~~molybdenum, which represents a decrease of ~~4.3% with regard to~~16.4% over our ~~2020~~2021 production ~~level.~~levels. In ~~2021,~~2022, we expect to produce ~~72,800 tons~~18.7 million ounces of ~~zinc from~~silver, which represents a slight decrease of 2.4% over our ~~mines, up 5.6% from 2020~~2021 production level. Additionally, we expect to produce ~~28,300 tons~~69,700 tonnes of ~~molybdenum, which represents a decrease of 6.5% compared to 2020 production levels.~~zinc from our mines, up 4.1% from 2021 production.

●

Capital Investments: In the first ~~semester~~quarter of ~~2021,~~2022, we spent ~~$452.4~~$205.2 million on capital investments; this represented 25.6% of net income and an ~~increase~~decrease of ~~111.1% with regard~~11.8% compared to the ~~figure~~amount registered for the same period in ~~2020, and represented 26.7% of net income.~~2021.

CYBERSECURITY ~~EVENT~~

~~As previously reported, on~~Our operations depend upon information technology systems that may be subject to disruption, damage or failure from different sources, including, without limitation, installation of malicious software, computer viruses, security breaches, cyber-attacks and defects in design. In recent years, cybersecurity incidents have increased in frequency and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. We have implemented appropriate preventative measures to mitigate potential risks by implementing an information security management system, which ensures application of controls that are frequently reviewed and tested.

In March 1, 2021, ~~at approximately 02:00 hours Mexico City time,~~ we experienced a Ransomware cyber-attack, which was ~~operated~~conducted by ~~humans.~~individual hackers. This cyber-attack encrypted a total of ~~479~~420 servers and ~~303 pieces~~units of personal equipment. However, due to the quick response of our IT team, our Enterprise Resource Planning software was not affected by the aforementioned attack.

After the attack, we immediately began a remediation and recovery process and completely restored the affected servers. ~~So far, the~~The forensic investigation ~~has~~did not ~~identified any~~identify concrete evidence ofthat any information was stolen during the attack. However, we maintain active lines of ~~work in~~ cyberintelligence and ~~forensic investigation~~continue to ~~continue monitoring~~monitor the DarkWeb/DeepWeb and social networks to identify any publication or activity related to the ~~Company; ensure that our systems infrastructure is safe and~~Company to validate the technological controls affected during the ~~attack.~~attack and ensure that our systems infrastructure remains secure.

In March 2021, we appointed a new ~~Head~~head of the Information Technology Department, who ~~is implementing~~implemented a new information security strategy to ensure business continuity based on processes (controls and corporate governance framework), technology and human capital (organizational culture). In July 2021, Grupo Mexico appointed a Chief Information Security Officer, who has been actively involved in the development and implementation of this information security strategy. In addition, from July to September of 2021, we performed a cybernetic forensic

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analysis with the assistance of a professional consulting firm with international experience in this area. The ~~areas~~recommendations received were integrated in current information security programs.

Additionally, AMC set up a task force to oversee ongoing initiatives and ensure that targets are met. We are actively following this matter with the task force, our internal audit team and; will also require the expertise of third parties.

Our new information security strategy is being executed on a continuous basis. The compliance, internal control, information technology and internal audit departments are all working together to integrate reference frameworks, risk management models and the necessary controls to ~~implement the information security~~continue executing this strategy and corresponding programs. To support our commitment to the strategy, we are working under the international framework for reference and standard, such as ISO, COBIT and NIST, to certify the Company´s security systems. The Company has also established an information security culture with the purpose of training, communicating and maintaining permanent awareness among the workforce. On the governance framework side, the Company has created a Committee of Information Security and set up security policies and standards, among other actions.

For 2022 we have a non-material special budget to continue improvements in this area.

CUAJONE STOPPAGE OF OPERATIONS

On February 28, 2022, a small group of protesters from the community of Tumilaca, Pocata, Coscore and Tala, which have of 472 residents in total, seized the facilities at the Viña Blanca water reservoir and cut off the water supply to the homes of the approximately 5,000 people who live in Cuajone. Prior to this illegal action, on February 18, 2022, the railway between Cuajone and Ilo was also blocked by a group of community members. They claim, the Company usurped their land and demand compensation of $5.0 billion, in addition to the permanent payment of 5% of net profits.

As of ~~June 30, 2021, we~~March 31, 2022, the Cuajone operations remained closed with an estimated production loss of 12,869 tonnes of copper content and 296 tonnes of molybdenum, which translates into a reduction in sales for $117. We also recorded ~~$0.3~~$7.9 million inof unabsorbed fixed costs, ~~related to this incident, but may, nonetheless, incur additional costs derived from~~which directly impacted the ~~strategy and controls being implemented.~~cost of sales.

~~COVID-19~~The impact to our results and financial position is not material as of March 31, 2022. Sales contracts were not significantly affected and measures were taken to acquire concentrates from our Mexican Operations and third parties to maintain and adequate supply to the smelter. This prevented a force majeure event from delays in fulfilling our sales sales commitments.

~~In March 2020,~~After several unsuccessful attempts by the ~~WHO classified~~authorities to restore order through dialogue efforts, on April 20, 2022, the Peruvian government declared a state of emergency in the Moquegua region. On April 21, 2022, the protesters returned the installations of the Viña Blanca water reservoir and the railway to the Company. Our personnel immediately evaluated the damage caused to the facilities by acts of vandalism and took the necessary steps to resume production at the Cuajone mining unit. As of today, the industrial railroad and the Cuajone mine, concentrator and related facilities are operating at full capacity.

ECONOMIC CONSEQUENCES OF RUSSIA´S INVASION OF UKRAINE

The Ukraine-Russia war that broke out in February of 2022, has generated a series of impacts in the global economy and on international trade. This has forced companies to adjust their supply and commercial plans to deal with shipping delays for goods and higher prices for the same. The increase in the cost of oil and energy, coupled with saturation at ports, which was already high due to a surge in global economic activity after the COVID-19 ~~outbreak as a~~ pandemic ~~based on a rapid increase in global transmission rates. The full impact~~ebbed, has driven up the prices of the ~~COVID-19 outbreak will continue~~vast majority of products and the magnitude of the impact on the Company’s financial condition, liquidity and future operating results is uncertain. Senior Management is actively monitoring the global situation´s effect on the Company´s financial condition, liquidity, operations, suppliers, industry and workforce and is focusing principally on the health, safety and well-being of our employees, their families and the communities where we have operations. As of June 30, 2021, there were no major delaysgenerated uncertainty in ~~the~~economies. This

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~~supply~~situation is also affecting the countries in which we operate and in which our clients and suppliers operate, although the extent of the materials and services critical for operations and sales. In addition, the supply of non-critical materials and services for the operations is gradually being restored. Additionally, shipments of products and collections experienced no known major delays in the second quarter of 2021.impact varies.

As of ~~June 30, 2021, a positive trend was observed~~March 31, 2022, the impact of these events were not material for the Company due to our continuing cost efficiency programs. We are monitoring and adjusting our supply schedules to reflect the delay in the ~~copper price, which closed at $4.26 per pound (LME) after having dropped to $2.18 per pound at the end~~delivery of ~~the first quarter of 2020. Considering the market outlook previously described, we have a positive view for the 2021 copper market.~~our critical supplies. Currently, our sales program has suffered no impacts.

The Company maintains a solid financial position and performance level. We believe this has allowed and will continue to allow us to deal with the effects of the pandemic in a way that prevents adverse material effects on our operations and financial results. The table below compares some of our financial information as follows:

Jun-21
Dec-20
Jun-20
($ in millions, except ratios)
Cash and cash equivalents
2,394.3
2,183.6
1,808.8
Accounts receivable
1,506.6
1,136.6
937.7
Total assets
17,695.4
16,946.5
15,805.0
Long term debt
6,545.9
6,544.2
6,542.6
Sales
5,429.5
7,984.9
3,505.1

RATIOS

Current assets to current liabilities
3.80
3.49
4.33
Accounts receivable turnover (1)
3.60
7.03
3.74
Total debt ratio (2)
0.37
0.39
0.41
Net income margin (3)
31.2%
19.7%
13.5%

~~(1)~~

~~Represents net sales divided by accounts receivable.~~

~~(2)~~

~~Represents total debt divided by total assets.~~

~~(3)~~

~~Represents net income divided by net sales, as a percentage.~~

Governmental authorities in Mexico and Peru have declared that essential economic activities must continue during the COVID-19 health emergency. These activities include industrial mining and/or any other activity necessary to ensure the provision of essential services such as electricity; provide elements to install medical and hospital infrastructure; and manufacture health-related supplies and technological equipment. We believe that industrial mining stands as the most efficient and timely supplier of inputs that are critical to the productive chain to fight the pandemic.

Given the nature of mining operations, which are highly automated, conducted in remote locations and with mandatory use of personal safety equipment at all the mines, it is easier to implement and comply with COVID-19 protective measures, such as physical isolation and control of access to facilities. Industrial mining uses advanced and reliable machinery and does not require high physical concentration of employees. In many cases, workers fulfill their duties maintaining distances of more than 100 meters from their closest coworkers.

At the present time, our operations are in compliance with all sanitary and government regulations and maintain proper environmental safeguards. Our COVID-19 emergency protocol has reinforced preventive measures such as disinfecting, clinical monitoring before work, cleaning and sanitizing of work areas and respect for social distancing. We have also restricted the access of contractors, suppliers and personnel to our facilities if visits are not indispensable and enforced multiple actions to limit workforce exposure to COVID-19 by imposing travel restrictions, prohibiting face-to-face meetings and urging frequent hand washing, as well as adhering to all other health, safety and social distancing measures required by governmental authorities. As of June 30, 2021, approximately 96% of the workforce in Mexico was working on site or at home under strict safety measures; the remaining 4% of the workforce was not working, including all individuals at high risk due to age and/or preexisting medical conditions. At our Peruvian operations, approximately 67% of the workforce was working onsite or at home

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~~under strict safety measures while the remaining 33% was not working, including all individuals at high risk due to age and/or preexisting medical conditions.~~

KEY MATTERS

Below, we discuss several matters that we believe are important to understand the results of our operations and financial condition. These matters include, (i) our earnings, (ii) our production, (iii) our “operating cash costs” as a measure of our performance, (iv) metal prices, (v) business segments, (vi) the effect of inflation and other local currency issues, and (vii) our capital investment and exploration program.

Earnings: The table below highlights key financial and operational data of our Company for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in millions, except copper price, percentages and per share amounts):


		Three months ended June 30,								Six months ended June 30,								Three months ended March 31,
	2021		2020		Variance		% Change		2021		2020		Variance		% Change		2022		2021		Variance		% Change
Copper price LME		4.40		2.42		1.98	81.8	%		4.13		2.49		1.64	65.9	%		4.53		3.85		0.68	17.7	%
Pounds of copper sold		514.9		595.9		(81.0)	(13.6)	%		1,044.4		1,150.4		(106.0)	(9.2)	%		458.4		529.6		(71.2)	(13.4)	%
Net sales	$	2,897.0	$	1,785.4	$	1,111.6	62.3	%	$	5,429.5	$	3,505.1	$	1,924.4	54.9	%	$	2,763.8	$	2,532.5	$	231.3	9.1	%
Operating income	$	1,675.2	$	577.2	$	1,098.0	190.2	%	$	3,026.8	$	1,110.4	$	1,916.4	172.6	%	$	1,470.1	$	1,351.6	$	118.5	8.8	%
Net income attributable to SCC	$	932.7	$	259.5	$	673.2	259.4	%	$	1,696.6	$	474.3	$	1,222.3	257.7	%	$	784.7	$	763.8	$	20.9	2.7	%
Earnings per share	$	1.21	$	0.34	$	0.87	255.9	%	$	2.19	$	0.61	$	1.58	259.0	%	$	1.02	$	0.99	$	0.03	3.0	%
Dividends per share	$	0.70	$	0.20	$	0.50	250.0	%	$	1.30	$	0.60	$	0.70	116.7	%	$	1.00	$	0.60	$	0.40	66.7	%

Net sales in the ~~second~~first quarter of ~~2021~~2022 were ~~62.3%~~9.1% higher than in the same period of ~~2020,~~2021, which was primarily attributable to higher metal prices for copper (+~~81.8%~~17.7%), molybdenum (+~~68.6%~~69.7%), and zinc (+~~48.3%) and silver (+61.9%~~36.0%), as well as to an increase in the sales volume of zinc (+98.8%). This was offset by a decrease in silver (-8.5%) prices as well as decreases in sales volume of ~~zinc (+12.4%). This was slightly offset by decreases in sales volumes of~~ copper ~~(-13.6%~~(-13.4%), molybdenum ~~(-11.0%~~(-2.4%) and silver ~~(-24.6%).~~

~~Net income attributable to SCC in the second quarter of 2021 was 259.4% higher than in the same period of 2020. This growth was mainly attributable to the increase in metal prices mentioned above.~~

Net sales in the first six months of 2021 were 54.9% higher than in the same period of 2020, which was primarily attributable to higher metal prices for copper (+65.9%), molybdenum (+40.9%), silver (+58.8%) and zinc (+37.6%). This was slightly offset by decreases in sales volumes of copper (-9.2%), molybdenum (-5.9%), silver (-14.5%) and zinc (-5.9%(-16.8%).

Net income attributable to SCC in the first ~~six months~~quarter of ~~2021~~2022 was ~~257.7%~~2.7% higher than in the same period of ~~2020.~~2021. This growth was mainly attributable to the increase in metal prices and sales volumes mentioned ~~above and to stable operating costs (+0.3%).~~above.

Production: The table below highlights our mine production data for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended June 30,					Six months ended June 30,					Three months ended March 31,
	2021	2020	Variance	% Change		2021	2020	Variance	% Change		2022	2021	Variance	% Change
Copper (in million pounds)	522.7	558.1	(35.4)	(6.3)	%	1,048.3	1,091.4	(43.1)	(3.9)	%	472.8	525.6	(52.8)	(10.0)	%
Molybdenum (in million pounds)	15.4	17.2	(1.8)	(10.8)	%	31.3	33.1	(1.8)	(5.5)	%	15.6	15.9	(0.3)	(1.9)	%
Silver (in million ounces)	4.6	5.5	(0.9)	(16.2)	%	9.6	10.8	(1.2)	(11.3)	%	4.3	5.0	(0.7)	(14.0)	%
Zinc (in million pounds)	37.7	34.6	3.1	8.9	%	74.0	77.1	(3.1)	(4.0)	%	32.5	36.3	(3.8)	(10.5)	%

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The table below highlights our ~~copper~~mine production data for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
Copper (in million pounds):	2021	2020	Variance	% Change		2021	2020	Variance	% Change		2022	2021	Variance	% Change
Toquepala	130.2	149.3	(19.1)	(12.8)	%	258.6	282.8	(24.2)	(8.6)	%	112.5	128.5	(16.0)	(12.5)	%
Cuajone	93.2	94.8	(1.6)	(1.7)	%	180.7	184.0	(3.3)	(1.8)	%	53.8	87.5	(33.7)	(38.5)	%
La Caridad	72.9	74.7	(1.8)	(2.3)	%	145.2	148.3	(3.1)	(2.0)	%	64.5	72.3	(7.8)	(10.8)	%
Buenavista	221.9	233.3	(11.4)	(4.9)	%	453.8	465.4	(11.6)	(2.5)	%	237.7	231.9	5.8	2.5	%
IMMSA	4.5	6.0	(1.5)	(24.0)	%	10.0	10.9	(0.9)	(8.8)	%	4.3	5.4	(1.1)	(20.4)	%
Total mined copper	522.7	558.1	(35.4)	(6.3)	%	1,048.3	1,091.4	(43.1)	(3.9)	%	472.8	525.6	(52.8)	(10.0)	%

~~Second~~First quarter: Mined copper production in the ~~second~~first quarter of ~~2021~~2022 fell by ~~6.3%~~10.0% to ~~522.7~~472.8 million pounds compared to ~~558.1~~525.6 million pounds in the ~~second~~first quarter of ~~2020.~~2021. This was mainly attributable to a drop in production at ~~all~~ our ~~mines, most importantly~~Cuajone (-38.5%), Toquepala ~~(-12.8%~~(-12.6%), La Caridad (-10.8%) and ~~Buenavista (-4.9%~~IMMSA (-20.4%) mines due to lower grades. This effect was offset by higher production at our Buenavista (+2.5%) mine due to higher ore grades.

Molybdenum production decreased ~~10.8%~~2.3% in the ~~second~~first quarter of ~~2021 with regard~~2022 compared to the levels registered in the ~~second~~first quarter of ~~2020.~~2021. This was attributable to ~~a decrease~~an increase in production at our Toquepala ~~(-18.8%~~(+9.0%) and Buenavista ~~(-29.4%~~(+15.8%) mines due to ~~lower~~higher ore grades and recoveries. This effect was partially offset by a ~~increase~~decrease in production at the Cuajone (-42.0%) and La Caridad ~~(+4.7%) and Cuajone (+2.7%~~(-2.2%) mines due to ~~higher~~lower ore grades.

Silver mine production decreased ~~16.2%~~13.4% in the ~~second~~first quarter of ~~2021~~2022 due to a drop in production at the Toquepala ~~(-24.2%~~(-24.4%), ~~Buenavista (-15.7%~~Cuajone (-34.8%), La Caridad (-5.7%) and IMMSA ~~(-25.2%~~(-15.1%) operations. This was offset by a higher production at the ~~Cuajone~~Buenavista (+~~8.5%~~2.6%) ~~and La Caridad (+1.6%) mines.~~

Zinc production increased 8.9% in the second quarter of 2021 compared with the same period of 2020. This increase was mainly attributable to higher production at the Charcas (+31.8%) and San Martin (+37.3%) mines, which was partially offset by lower production at the Santa Barbara mine (-24.9%).

~~Six months~~: Mined copper production in the first six months of 2021 decreased 3.9% to 1,048.3 million pounds compared to 1,091.4 million pounds in the same period of 2020. This decrease was mainly attributable to a drop in production at all our mines and at Toquepala (-8.6%) and Buenavista (-2.5%) in particular due to lower grades.

Molybdenum production decreased 5.5% in the first six months of 2021 compared to the same period in 2020; this was mainly due to lower production at our Buenavista (-25.8%) and Toquepala (-6.6%) mines, which was partially offset by higher production at the Cuajone (+8.0%) and La Caridad (+2.9%) mines.

Silver mine production decreased 11.3% in the first six months of 2021; this was principally due to lower production at our Toquepala (-17.1%), Buenavista (-14.5%) and IMMSA (-17.5%) operations, which was partially offset by higher production at Cuajone (+10.9%) and La Caridad (+5.0%) mines.mine.

Zinc production decreased ~~4.0%~~10.6% in the first ~~six months~~quarter of ~~2021, which~~2022 compared to the same period of 2021. This decrease was mainly ~~due~~attributable to ~~the shut down~~lower production at the Santa ~~Eulalia mine due to severe flooding. This was partially offset by higher production at our Charcas and~~Barbara (-12.5%), San Martin (-11.0%) and Charcas (-8.5%) mines. ~~We are currently evaluating different options to supply the concentrator at Santa Eulalia.~~

Operating Cash Costs: An overall benchmark that we use, which is a common industry metric to measure performance is operating cash costs per pound of copper produced. Operating cash cost is a non-GAAP measure that does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies. This non-GAAP information should not be considered in isolation or as substitute for measures of performance determined in accordance with GAAP. A reconciliation of our operating cash cost per pound of copper produced to the cost of sales (exclusive of depreciation, amortization and depletion) as presented in the consolidated statement of earnings is presented under the subheading, “Non-GAAP Information Reconciliation” on page ~~60.~~53. We disclose operating cash cost per pound of copper produced, both before and net of by-product revenues.

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We define operating cash cost per pound of copper produced before by-product revenues as cost of sales (exclusive of depreciation, amortization and depletion), plus selling, general and administrative charges, treatment and refining charges net of sales premiums; less the cost of purchased concentrates, workers’ participation and other miscellaneous charges, including royalty charges, and the change in inventory levels; divided by total pounds of copper produced by our own mines.

In our calculation of operating cash cost per pound of copper produced, we exclude depreciation, amortization and depletion, which are considered non-cash expenses. Exploration is considered a discretionary expenditure and is also excluded. Workers’ participation provisions are determined on the basis of pre-tax earnings and are also excluded. Additional exclusions from operating cash costs are items of a non-recurring nature and the mining royalty charge as it is based on various calculations of taxable income, depending on which jurisdiction, Peru or Mexico, is imposing the charge. We believe these adjustments allow our management and stakeholders to more fully visualize our controllable cash cost, which we believe is one of the lowest of all copper-producing companies of similar size.

We define operating cash cost per pound of copper produced net of by-product revenues as operating cash cost per pound of copper produced, as defined in the previous paragraph, less by-product revenues and net revenue (loss) on sale of metal purchased from third parties.

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In our calculation of operating cash cost per pound of copper produced, net of by-product revenues, we credit against our costs the revenues from the sale of all our by-products, including, molybdenum, zinc, silver, gold, etc. and the net revenue (loss) on sale of metals purchased from third parties. We disclose this measure including the by-product revenues in this way because we consider our principal business to be the production and sale of copper. As part of our copper production process, much of our by-products are recovered. These by-products, as well as the processing of copper purchased from third parties, are a supplemental part of our production process and their sales value contribute to covering part of our incurred fixed costs. We believe that our Company is viewed by the investment community as a copper company, and is valued, in large part, by the investment community’s view of the copper market and our ability to produce copper at a reasonable cost.

We believe that both of these measures are useful tools for our management and our stakeholders. Our cash costs before by-product revenues allow us to monitor our cost structure and address areas of concern within operating management. The measure operating cash cost per pound of copper produced net of by-product revenues is a common measure used in the copper industry and is a useful management tool that allows us to track our performance and better allocate our resources. This measure is also used in our investment project evaluation process to determine a project’s potential contribution to our operations, its competitiveness and its relative strength in different price scenarios. The expected contribution of by-products is generally a significant factor used by the copper industry to determine whether to move forward or not in the development of a new mining project. As the price of our by-product commodities can have significant fluctuations from period to period, the value of its contribution to our costs can be volatile.

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Our operating cash cost per pound of copper produced, before and net of by-product revenues, is presented in the table below for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Operating cash cost per pound of copper produced (1)

(In millions, except cost per pound and percentages)


		Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended March 31,
	2021		2020		Variance		% Change		2021		2020		Variance		% Change		2022		2021		Variance		% Change
Total operating cash cost before by‑product revenues	$	817.9	$	684.6	$	133.3	19.5	%	$	1,589.3	$	1,420.3	$	169.0	11.9	%	$	837.7	$	771.3	$	66.4	8.6	%
Total by‑product revenues	$	(521.1)	$	(321.5)	$	(199.6)	62.1	%	$	(914.8)	$	(661.7)	$	(253.1)	38.2	%	$	(583.5)	$	(393.7)	$	(189.8)	48.2	%
Total operating cash cost net of by‑product revenues	$	296.8	$	363.1	$	(66.3)	(18.3)	%	$	674.5	$	758.6	$	(84.1)	(11.1)	%	$	254.2	$	377.6	$	(123.4)	(32.7)	%
Total pounds of copper produced(2)		507.7		541.7		(34.0)	(6.3)	%		1,018.5		1,059.6		(41.1)	(3.9)	%		457.8		510.8		(53.0)	(10.4)	%
Operating cash cost per pound before by‑product revenues	$	1.61	$	1.26	$	0.35	27.8	%	$	1.56	$	1.34	$	0.22	16.4	%	$	1.83	$	1.51	$	0.32	21.2	%
By‑products per pound revenues	$	(1.02)	$	(0.59)	$	(0.43)	72.9	%	$	(0.90)	$	(0.62)	$	(0.28)	45.2	%	$	(1.28)	$	(0.77)	$	(0.51)	66.2	%
Operating cash cost per pound net of by‑product revenues	$	0.59	$	0.67	$	(0.08)	(11.9)	%	$	0.66	$	0.72	$	(0.06)	(8.3)	%	$	0.55	$	0.74	$	(0.19)	(25.7)	%

(1)	These are non-GAAP measures. Please see page 6053 for reconciliation to GAAP measure.

(2)	Net of metallurgical losses.

As seen in the table above, our per pound cash cost before by-product revenues in the ~~second~~first quarter of ~~2021~~2022 was ~~27.4%~~21.2% higher than in the same period of ~~2020.~~2021. This increase iswas mainly attributable to an increase in production ~~costs and to the unit cost effect of lower production.~~costs. Our cash cost per pound net of by-product revenue for the ~~second~~first quarter of 2021 decreased ~~12.1%~~25.7% when compared ~~with~~to the same period of ~~2020.~~2021. This was mainly attributable to a significant increase in by-product revenues.

For the six months ended June 30, 2021, our per pound cash cost before by-product revenues was 16.4% higher than in the same period of 2020. This increase was mainly driven by an increase in production costs. The operating cash cost per pound of copper net of by-product revenue was $0.66 in the six months ended June 30, 2021. This represented an improvement of 7.8% compared to the $0.72 reported in the same period of 2020 and was mainly due to a ~~significant increase in by-product revenues.~~

Metal Prices: The profitability of our operations is dependent on, and our financial performance is significantly affected by, the international market prices for the products we produce, and for copper, molybdenum, zinc and silver in particular.

We are subject to market risks arising from the volatility of copper and other metal prices. For the remaining ~~six~~nine months of ~~2021,~~2022, assuming that expected metal production and sales are achieved, tax rates remain unchanged and no

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effects are generated by potential hedging programs, metal price sensitivity factors would indicate the following change in estimated net income attributable to SCC resulting from metal price changes:


	Copper		Molybdenum		Zinc		Silver		Copper		Molybdenum		Zinc		Silver
Change in metal prices (per pound except silver—per ounce)	$	0.10	$	1.00	$	0.10	$	1.00	$	0.10	$	1.00	$	0.10	$	1.00
Change in net earnings (in millions)	$	58.7	$	18.9	$	6.9	$	7.0	$	85.2	$	24.5	$	10.8	$	8.5

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Business Segments: We view our Company as having three reportable segments and manage it on the basis of these segments. These segments are (1) our Peruvian operations, (2) our Mexican open-pit operations and (3) our Mexican underground operations, known as our IMMSA unit. Our Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities that service both mines. The Peruvian operations produce copper, with significant by-product production of molybdenum, silver and other material. Our Mexican open-pit operations include La Caridad and Buenavista mine complexes, the smelting and refining plants and support facilities, which service both mines. The Mexican open pit operations produce copper, with significant by-product production of molybdenum, silver and other material. Our IMMSA unit includes five underground mines that produce zinc, lead, copper, silver and gold, and several industrial processing facilities for zinc, copper and silver.

Segment information is included in our review of “Results of Operations” in this item and also in Note 1314 “Segment and Related Information” of our condensed consolidated financial statements.

Inflation and Exchange Rate Effect of the Peruvian Sol and the Mexican Peso: Our functional currency is the U.S. dollar and our revenues are primarily denominated in U.S. dollars. Significant portions of our operating costs are denominated in Peruvian sol and Mexican pesos. Accordingly, when inflation and currency devaluation/appreciation of the Peruvian currency and Mexican currency occur, our operating results can be affected. In recent years, we believe such changes have not had a material effect on our results and financial position. Please see Item 3. “Quantitative and Qualitative Disclosures about Market Risk” for more detailed information.

Capital Investment Programs: We made capital investments of ~~$452.4~~$205.2 million in the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, compared to ~~$214.3~~$232.6 million in the same period of ~~2020.~~2021. In general, the capital investments and investment projects described below are intended to increase production, decrease costs or address social and environmental commitments.

Set forth below are descriptions of some of our current expected capital investment programs. We expect to meet the cash requirements for these projects by utilizing cash on hand; internally generated funds and additional external financing, including funding received in September 2019. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy, market conditions or the COVID-19 pandemic.

Projects in Mexico:

Buenavista Zinc - Sonora: This project is located within the Buenavista facility and includes the development of a new concentrator to produce approximately 100,000 ~~tons~~tonnes of zinc and 20,000 ~~tons~~tonnes of copper per year. We have completed the ~~basic~~ engineering ~~study and the detailed engineering study has reached 94% completion.~~study. In order to continue with the project, stronger preventive measures to combat COVID-19 have been put in place. Procurement has progressed ~~84%. Additionally, construction~~99% and all the main equipment is on site. Construction site works are in progress. The project has all the necessary permits. The project´s budget is $413 million, and we expect to initiate operations in the second half of 2023. As of ~~June 30, 2021,~~March 31, 2022, we had invested ~~$178.2~~$240.5 million in this project. When completed, we anticipate that this new facility will double the Company’s zinc production capacity and will provide 490 direct jobs and 1,470 indirect jobs.

Pilares - Sonora: ~~This project, located~~Located six kilometers from La Caridad, ~~will be developed as~~this project consists of an open-pit mine operation with an annual production capacity of 35,000 ~~tons~~tonnes of copper in concentrate. A new 25-meter wide off-road facility for mining trucks has been built and will be used to transport the ore from the pit to the primary crushers at the La Caridad copper concentrator. This project will significantly improve the overall mineral ore grade (combining the 0.78% expected from Pilares with 0.34% from La Caridad). The budget for Pilares is $159 million of which we have invested $79.5 million as

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of March 31, 2022. The project has obtained all permits and licenses required and we expect ~~the project~~ to begin production in the ~~first~~last quarter of 2022. ~~As of June 30, 2021, we had invested $75.3 million in this project.~~

El Pilar - Sonora: This ~~is a~~ low-capital intensity copper ~~development~~greenfield project is strategically located in Sonora, Mexico, approximately 45 kilometers from our Buenavista mine. Its copper oxide mineralization contains estimated proven and probable reserves of ~~281~~317 million ~~tons~~tonnes of ore with an average copper grade of ~~0.301%~~0.249%. We anticipate that El Pilar will operate as a conventional open-pit mine with an annual production capacity of 36,000 ~~tons~~tonnes of copper cathodes. This operation will use highly cost efficient and environmentally friendly SX-EW technology. We estimate a development investment of approximately $310 million. ~~As of June 30, 2021, we had invested $2.0 million in this project.~~ The results from experimental pads in leaching process have confirmed adequate levels of copper recovery. We expect this project to start

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production in ~~2023~~2024 with an expected mine life of 13 years. The basic engineering study is finished and the Company continues developing ~~the~~ project ~~basic engineering~~ and site environmental activities.

Lime plant - Sonora: As part of our cost improvement projects, we are building a new lime plant with a production capacity of 600 metric tonnes per day, which will be the largest lime plant of Mexico. This facility will allow us to reduce to approximately 50% our current lime cost at our Mexican operations. The ~~San Martin mine recovery program.~~ ~~After eleven years~~total budget for the plant is $63.1 million, of ~~illegal stoppage,~~which we ~~resumed control~~have spent $46.2 million as of March 31, 2022. We expect this project initiate operations in the ~~San Martin mine in August 2018. The San Martin facilities deteriorated during this period but we made a major renovation and restarted operations during the second~~third quarter of 2019. Currently, the mine has 200,000 tons of ore and the concentrator has initiated production. In 2020, we produced 14,361 tons of zinc, 2.8 million ounces of silver, 3,601 tons of copper, and 1,425 tons of lead. As of June 2021, the Company had virtually completed the rehabilitation plan to restore operations at the San Martin mine with a total expense of approximately $89.1 million and has reached full operating capacity.2022.

Projects in Peru:

Quebrada Honda dam expansion – Tacna: This project aims to enlarge the main and lateral dams in Quebrada Honda and includes the relocation and repowered of some facilities due to dam growth and implementation of other facilities for water recovery, among other factors. As of ~~June 30, 2021, the engineering study was complete. The majority of the main equipment~~March 31, 2022, pre-commissioning and ~~materials have been procured and~~commissioning activities are ~~arriving according to schedule. Construction is~~ in progress with work on three fronts. This project has a total budget of ~~$140.0~~$179.4 million, of which we ~~had committed $52.0 million and~~have invested ~~$62.8~~$146.2 million as of ~~June 30, 2021.~~March 31, 2022.

Tia Maria - Arequipa: On July 8, 2019, we were granted the construction permit for this 120,000 ~~ton~~tonne annual SX-EW copper greenfield project with a total capital budget of $1,400 million. The Government awarded the permit after completing an exhaustive review process, complying with all established regulatory requirements and addressing all observations raised. The challenges surrounding the construction permit were overcome when on October 30, 2019, the Mining Council of the Peruvian Ministry of Energy and Mines ratified the construction permit for the Tia Maria project.

The Company has been consistently working to promote the welfare of the Islay province population. As part of these efforts, we have implemented successful social programs in education, healthcare and productive development to improve the quality-of-life in the region. We also have promoted agricultural and livestock activities in the Tambo Valley and supported growth in manufacturing, fishing and tourism in Islay.

~~On January 7,~~In 2021, SPCC fortified its relation with the ~~mayor of the Islay province (Arequipa, Peru) awarded a City Diploma~~regional government and successfully overcame its opposition to ~~SPCC~~project initiation. This new consensus was reflected in ~~recognition of the Company’s~~an agreement for “works for taxes” for projects relative to health facilities and roads. Our efforts to ~~assist~~ensure the ~~population~~current and long-term welfare of ~~Islay during the COVID-19 pandemic. SPCC provided medical assistance, tests, oxygen, personal protection equipment and food stuffs to~~ the population in the area of influence of the Tia Maria ~~project.~~project were recognized by several local associations, which sent letters to the National Government to request project initiation.

We ~~consider~~reiterate our view that the initiation of construction activities at Tia Maria will generate significant economic opportunities for the Islay province and the Arequipa region. During the construction and operation phase, we will make it a priority to hire local labor to fill the 9,000 jobs (3,600 direct and 5,400 indirect) that we expect to generate during Tia Maria’s construction phase. When operating, we expect Tia Maria to directly employ 600 workers and indirectly provide jobs for another 4,200. Additionally, from day one of our operations, we will generate significant contributions to revenues in the Arequipa region via royalties and taxes.

We expect the Peruvian government to continue to acknowledge the significant progress the project has made on the social front and the important contributions that Tia Maria will generate for Peru´s economy and, consequently, take the necessary steps to provide SCC with adequate support to initiate construction.

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This greenfield project, located in Arequipa, Peru, will use state of the art SX-EW technology with the highest international environmental standards. SX-EW facilities are the most environmentally friendly in the industry due to their technical process with no emissions released into the atmosphere.

Potential projects

We have a number of other projects that we may develop in the future. We continuously evaluate new projects on the basis of our long-term corporate objectives, expected return on investment, environmental concerns, required investment and estimated production, among other considerations. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy, market conditions or the COVID-19 pandemic.

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El Arco - Baja California: This is a world-class copper deposit located in the central part of the Baja California peninsula with ore reserves of over ~~2.4 billion tons~~1, 230 million tonnes with an average ore grade of ~~0.422%, 0.3 billion tons~~0.40% and 141 million tonnes of leach material with an ore grade of ~~0.288% and 0.11 grams of gold per ton. This~~0.27%. The project ~~envisions~~includes an open-pit mine with a combined concentrator and SX-EW ~~operations, with an estimated~~operations. Annual production ~~capacity of~~is expected to total 190,000 ~~tons~~tonnes of copper and 105,000 ounces of gold ~~annually. The project has~~with an estimated capital budget of $2.9 billion. ~~As of June 30, 2021, we have invested $63.6 million in this project.~~ The Company has started the baseline study and it is reviewing the basic engineering analysis to request the environmental impact permit. Several years back, we began to acquire the rights to all relevant mining concessions in the area; this process was completed in 2020.

Los Chancas - Apurimac: This greenfield project, located in Apurimac, Peru, is a copper and molybdenum porphyry deposit. Current estimates ~~indicate the presence~~ of ~~545~~indicated copper mineral resources are 98 million ~~tons~~tonnes of ~~mineralized material~~oxides with a copper content of

0.45% and 52 million tonnes of sulfides with a copper content of 0.59%~~, molybdenum content of 0.04% and 0.039 grams of gold per ton, as well as 181 million tons of mineralized leachable material with a total copper content of 0.357%~~. Los Chancas project envisions an open-pit mine with a combined operation of concentrator and SX-EW processes to produce 130,000 ~~tons~~tonnes of copper and 7,500 ~~tons~~tonnes of molybdenum anually. The estimated capital investment is $2,600 million and the project is expected to be in operation in 2027. In ~~2019,~~the first quarter of 2022, we continued to engage in social and environmental improvements for the local ~~communities. In 2020,~~

communities and we ~~continued to work~~worked on ~~these activities and plan to conclude~~ the environmental impact assessment for the ~~project in~~

~~2021.~~project.

Michiquillay Project - Cajamarca: On June 12, 2018, Southern Copper signed a contract and made an initial payment of $12.5 million for the acquisition of the Michiquillay project in Cajamarca, Peru. In June 2021, the Company paid an additional $12.5 million to acquire the project. The Company has created a multidisciplinary management team to plan the development of this project. As part of this plan, the Company has established venues of contact with the local and regional authorities and communities ~~in order~~ to promote programs for the sustainable development ofin the area. In 2020, we continued to develop social and environmental programs for the local communities. In February 2021, we completed a semi-detailed environmental impact assessment and submitted it to the Peruvian authorities for approval. This will allow us to begin a 50,000 meter diamond drilling program to verify and update the project´s estimated mineralized materials. In JuneOn September 3, 2021, the Company ~~paid~~signed a Social Agreement with the Michiquillay Community and on November 12, 2021, the Company signed a Social Agreement with the Encañada Community. Additionally, on October 1, 2021 the Peruvian Ministry of Energy and Mines approved the semi-detailed Environmental Impact Study for the project.

The Social Agreements with the Michiquillay and the Encañada communities represent an ~~additional $12.5 million~~opportunity to ~~acquire~~improve the ~~project.~~quality of life of the residents of those communities via our strong social programs and backed by a solid framework for technical work at the project level. These events are important steps that will allow Southern Copper to initiate an in-depth exploration program in the second quarter of 2022.

Michiquillay is a world class mining project with ~~estimated mineralized material~~inferred mineral resources of ~~1,150~~2,288 million ~~tons~~tonnes with an estimated copper grade of ~~0.63%~~0.43%. When developed, we expect Michiquillay to produce 225,000 ~~tons~~tonnes of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years, at a competitive cash-cost. We estimate an investment of approximately $2.5 billion will be required and expect production start-up by 2028 and that Michiquillay will become one of Peru´s largest copper mines. The project will create significant business opportunities in the Cajamarca region; generate new jobs for the local communities and contribute with taxes and royalties to the local, regional and national governments.

The above information ~~above~~ is based on estimates only. We cannot make any assurances that we will undertake any of these projects or that the information noted is accurate.

~~ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)~~

We are committed to improving our ESG record by adopting best practices. In this regard, our sustainable development policies were recently updated. These policies, applicable to SCC and its subsidiaries, formalize our vision, commitments and objectives to promote sustainable development and generate shared value for our stakeholders. For further information on our disclosure on Human Capital Resources, see the section included in Part I, Item 1 of our Annual report on Form 10-K for the year ended December 31, 2020. Also, see our disclosure on our COVID-19 response, environmental disclosure and support of our local communities elsewhere in this report.

Southern Peru signed an inter-institutional cooperation agreement with the Ministry of Health of Peru that allows the Company to support the government in efforts to organize and implement 26 vaccination sites in the regions of Arequipa, Moquegua, Tacna, Cajamarca and Apurimac. The Company will donate more than USD $2.45 million to vaccinate 424 thousand-plus people over the next 2 months, which is equivalent to 40% of the population of these regions. The aforementioned agreement was the third of three agreements signed with the Peruvian government to

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aggressively fight the pandemic. The first entailed a donation of 2,181.4 tons of medical oxygen, which was produced by the oxygen plants at our Ilo smelter to provide liquid oxygen to to the southern regions of Peru. The second donated four oxygen plants (two of them mobile), which are currently operating in the regions of Tacna, Puno, Arequipa, Piura and Cajamarca.ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

In line with our sustainability strategy, we registered on-going improvement in our main sustainability indicators. In terms of safety, we reduced the accident rate of our own personnel and contractors by 22% in the last three years. With reference to the main environmental indicators, our Scope 1 and 2 greenhouse gas emissions have been reduced by more than 10%, while the efficiency in the consumption of fresh water in the concentrators has increased by 4% over the period. Regarding social matters, the population served through our community programs has tripled, while we continue to strengthen the mechanisms for listening and addressing their concerns.

~~Our~~

In an effort to provide certainty to our investors and stakeholders, we present our progress regarding third-party validation of our environmental and social practices. We continue with the process of certifying our occupational health and safety management systems under the international standard ISO 45001 and our environmental management systems under ISO 14001 at all of our mining units. In the first quarter of 2022, the Santa Barbara and San Martin mines received an ISO 45001 certification and the La Caridad Mine and the Lime Plant in Sonora, received an ISO 14001 certification.

Regarding our climate change management, the company is ~~committed with sourcing our operations with renewable energy. In 2020, 22%~~now positioned above average for the sector and region, in view of ~~Southern Copper Corporation’s electricity came~~the fact that Grupo Mexico rose two levels, from ~~renewable sources. We are currently evaluating options~~level C to ~~contract an additional portion~~level B, in the evaluation of ~~our power demand from renewable electricity. In 2022, we expect at least 25% of our energy supply will come from renewable electricity.~~the Carbon Disclosure Project (CDP) in 2021.

The ~~percentage~~communities surrounding our operations in Peru consist of ~~recycled~~dozens of small towns that live from the high Andean desert region to the Pacific coast. We continue to address the challenges and needs of these communities including water ~~from mining operations has increased 5% over~~supply, education and employment. Investments in infrastructure for water supply are noteworthy, representing 70% of the $93.6 million invested in the last ~~three years and reached 74%~~ten years. In the first quarter of 2022, the construction of the Cularjahuira dam in ~~2020. This represented savings~~the province of ~~approximately 3.5~~Candarave, in the area of influence of our Toquepala mine, was completed; which will store up to 2.55 million cubic meters of ~~fresh~~ water ~~a year. The Company has made major efforts~~ to ~~increase the amount~~irrigate 500 hectares of ~~water available to the nearby communities in Mexico~~agricultural land and ~~Peru and has rehabilitated more than 200 kilometers~~will directly benefit 585 families of ~~irrigation canals and 400 water reservoirs. These initiatives have benefitted 20 thousand farmers and in just 5 years, the Company has invested $79 million in water projects for communities.~~

Grupo Mexico published its Sustainable Development Report 2020, which contains information on Southern Copper Corporation’s progress in areas relative to sustainability and is aligned with the reporting standards of the Global Reporting Initiative (GRI) and, for the first time, also adheres to the frameworks of the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosure. The 2020 version includes a section on the SCC’s response to the COVID-19 pandemic and provides greater detail on issues relative to economic, governance and climate change performance.

~~CLIMATE CHANGE~~local farmers.

~~Peruvian operations:~~ On April 17, 2018, the Peruvian government enacted Law N. 30754, establishing a Climate Change Framework. Through this law, promoting public and private investments in climate change management is declared to be of national interest. The law proposes to create an institutional framework to address climate change in Peru, outlining new measures, particularly with respect to climate change mitigation. It includes, for example, provisions regarding: increasing carbon capture and use of carbon sinks; afforestation and reforestation practices; land use changes; and sustainable systems of transportation, solid waste management, and energy systems. This is the first climate change framework law in Latin America to incorporate obligations from the Paris Agreement. Regulations to this law were enacted by Supreme Decree 013-2019, which was published on December 31, 2019 and are applicable to all Peruvian institutions and agencies. It is expected that further Peruvian regulations will be applicable to non-governmental entities. The Company anticipates initiating a multi-year process to adopt applicable reporting recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD) once new Peruvian climate change regulations applicable to non-governmental entities are implemented. The Company is committed to the environment and to managing climate-related impacts. The Company’s focus is to seek continuous improvement in the responsible use of natural resources while complying with strict applicable legal standards for prevention, mitigation, control and remediation of environmental impacts. Implementing continuous improvement in the Company’s processes improves efficiency in the use and consumption of energy, water, and other natural resources.

~~Mexican operations:~~ Grupo Mexico, the indirect parent of SCC has issued sustainability reports under the Global Reporting Initiative (GRI) for more than 10 years. Grupo Mexico also participates in different Mexican and international reporting programs such as the Greenhouse Gases (GHG) Mexico Program and CDP (formerly the Carbon Disclosure Project). In 2013, GHG and CDP signed a memorandum of understanding to work on aligning their reporting frameworks. Grupo Mexico’s 2018 CDP questionnaire included responses to the Task Force on Climate-Related Disclosure or TCFD concerns. In compliance with the 2012 Mexican Climate Change Law, Grupo Mexico’s GHG emissions are reported and verified independently. Grupo Mexico’s Sustainability Reports, which disclose inventories of GHG emissions, can be found at “https://www.gmexico.com/en/Pages/development.aspx”. As indicated above, the Grupo Mexico 2020 report is aligned with the reporting standards of the Global Reporting Initiative (GRI) and, for the first time, also adheres to the frameworks of the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures.

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ACCOUNTING ESTIMATES

Our discussion and analysis of financial condition and results of operations, as well as quantitative and qualitative disclosures about market risks, are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We make our best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: ore reserves, revenue recognition, ore stockpiles on leach pads and related amortization, estimated impairment of assets, asset retirement obligations, determination of discount rates related to the financial lease liabilities, classification of operating leases versus financial leases, valuation allowances for deferred tax assets, unrecognized tax benefits and fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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RESULTS OF OPERATIONS

The following highlights key financial results for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in millions):


	Three Months Ended									Six Months Ended									Three Months Ended
	June 30,									June 30,									March 31,
Statement of Earnings Data	2021		2020		Variance		% Change			2021		2020		Variance		% Change			2022		2021		Variance		% Change
Net sales	$	2,897.0	$	1,785.4	$	1,111.6	$	62.3	%	$	5,429.5	$	3,505.1	$	1,924.4	$	54.9	%	$	2,763.8	$	2,532.5	$	231.3	$	9.1	%
Operating costs and expenses		(1,221.8)		(1,208.2)		(13.6)		1.1	%		(2,402.7)		(2,394.7)		(8.0)		0.3	%		(1,293.7)		(1,180.9)		(112.8)		9.6	%
Operating income		1,675.2		577.2		1,098.0		190.2	%		3,026.8		1,110.4		1,916.4		172.6	%		1,470.1		1,351.6		118.5		8.8	%
Non‑operating income (expense)		(96.2)		(88.8)		(7.4)		8.3	%		(181.1)		(185.0)		3.9		(2.1)	%		(71.4)		(84.9)		13.5		(15.9)	%
Income before income taxes		1,579.0		488.4		1,090.6		223.3	%		2,845.7		925.4		1,920.3		207.5	%		1,398.7		1,266.7		132.0		10.4	%
Income taxes		(647.7)		(224.4)		(423.3)		188.6	%		(1,155.2)		(446.2)		(709.0)		158.9	%		(612.1)		(507.5)		(104.6)		20.6	%
Equity earnings of affiliate		5.1		(3.1)		8.2		(264.5)	%		13.1		(2.1)		15.2		(723.8)	%		1.2		7.9		(6.7)		(84.8)	%
Net income attributable to non‑controlling interest		(3.7)		(1.4)		(2.3)		164.3	%		(7.0)		(2.8)		(4.2)		150.0	%		(3.1)		(3.3)		0.2		(6.1)	%
Net income attributable to SCC	$	932.7	$	259.5	$	673.2	$	259.4	%	$	1,696.6	$	474.3	$	1,222.3	$	257.7	%	$	784.7	$	763.8	$	20.9	$	2.7	%

NET SALES

Net sales in the ~~second~~first quarter of ~~2021~~2022 were ~~62.3%~~9.1% higher than in the same period of ~~2020.~~2021. This improvement was driven primarily by an increase in metal prices offor copper (+~~81.8% - LME)~~17.7%), molybdenum (+~~68.6%), silver (+61.9%~~69.7%) and zinc (+~~48.3%~~36.0%) ~~and by~~, as well as to an ~~uptick~~increase in the sales volume of zinc (+~~12.4%~~98.8%). This ~~effect~~ was ~~slightly~~partially offset by ~~lower~~a decrease in silver (-8.5%) prices as well as decreases in sales ~~volumes for~~volume of copper ~~(-13.6%~~(-13.4%), molybdenum ~~(-11.0%~~(-2.4%) and silver ~~(-24.6%~~(-16.8%).

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		Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended March 31,
	2021		2020		% Change		2021		2020		% Change		2022		2021		% Change
Copper price ($per pound—LME)	$	4.40	$	2.42	81.8	%	$	4.13	$	2.49	65.9	%	$	4.53	$	3.85	17.7	%
Copper price ($per pound—COMEX)	$	4.43	$	2.43	82.3	%	$	4.14	$	2.50	65.6	%	$	4.54	$	3.86	17.6	%
Molybdenum price ($per pound)(1)	$	13.89	$	8.24	68.6	%	$	12.54	$	8.90	40.9	%	$	18.99	$	11.19	69.7	%
Zinc price ($per pound—LME)	$	1.32	$	0.89	48.3	%	$	1.28	$	0.93	37.6	%	$	1.70	$	1.25	36.0	%
Silver price ($per ounce—COMEX)	$	26.78	$	16.54	61.9	%	$	26.54	$	16.71	58.8	%	$	24.05	$	26.29	(8.5)	%

(1)	Platts Metals Week Dealer Oxide

The table below provides our metal sales as a percentage of our total net sales for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended				Six Months Ended				Three Months Ended
	June 30,					June 30,				March 31,
Sales as a percentage of total net sales		2021		2020		2021		2020		2022		2021
Copper		81.1	%	82.3	%	82.2	%	80.9	%	78.0	%	83.6	%
Molybdenum		9.7	%	6.0	%	8.3	%	6.6	%	10.0	%	6.7	%
Silver		4.1	%	5.6	%	4.8	%	5.4	%	3.8	%	5.5	%
Zinc		2.8	%	2.7	%	2.2	%	3.2	%	3.6	%	1.4	%
Other by‑products		2.3	%	3.4	%	2.5	%	3.9	%	4.6	%	2.8	%
Total		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

The table below provides our copper sales by type of product for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. The difference in value between products is the level of processing. At the market price, concentrates take a discount since

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they require smelting and refining processes, while refined and rod copper receive premiums due to their purity and presentation.


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
Copper Sales (million pounds)	2021	2020	Variance	% Change		2021	2020	Variance	% Change		2022	2021	Variance	% Change
Refined (including SX‑EW)	210.3	294.2	(83.9)	(28.5)	%	446.3	569.9	(123.6)	(21.7)	%	252.1	236.1	16.0	6.8	%
Rod	122.3	73.7	48.6	65.9	%	245.8	175.3	70.5	40.2	%	112.1	123.5	(11.4)	(9.2)	%
Concentrates and other	182.3	228.0	(45.7)	(20.0)	%	352.3	405.2	(52.9)	(13.1)	%	94.2	170.0	(75.8)	(44.6)	%
Total	514.9	595.9	(81.0)	(13.6)	%	1,044.4	1,150.4	(106.0)	(9.2)	%	458.4	529.6	(71.2)	(13.4)	%

The table below provides our copper sales volume by type of product as a percentage of our total copper sales volume for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended June 30,					Six months ended June 30,				Three months ended March 31,
Copper Sales by product type		2021		2020		2021		2020		2022		2021
Refined (including SX‑EW)		40.8	%	49.4	%	42.7	%	49.5	%	55.0	%	44.6	%
Rod		23.8	%	12.4	%	23.6	%	15.3	%	24.5	%	23.3	%
Concentrates and other		35.4	%	38.2	%	33.7	%	35.2	%	20.5	%	32.1	%
Total		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

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OPERATING COSTS AND EXPENSES

The table below summarizes the production cost structure by major components as a percentage of total production cost:


	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2021		2020		2021		2020		2022		2021
Power	16.4	%	17.8	%	18.0	%	16.8	%	17.4	%	19.7	%
Labor	11.7	%	14.0	%	11.8	%	13.8	%	11.5	%	11.9	%
Fuel	14.3	%	9.5	%	14.2	%	11.2	%	16.2	%	14.1	%
Maintenance	21.6	%	21.5	%	21.1	%	21.9	%	19.5	%	20.6	%
Operating material	17.2	%	17.4	%	17.0	%	17.5	%	20.2	%	16.8	%
Other	18.8	%	19.8	%	17.9	%	18.8	%	15.2	%	16.9	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

~~Second~~First quarter: Operating costs and expenses were ~~$1,221.8~~$1,293.7 million in the ~~second~~first quarter of ~~2021~~2022 compared to ~~$1,208.2~~$1,180.9 million in the same period of ~~2020.~~2021. The increase of ~~$13.6~~$112.8 million was primarily due to:

Operating cost and expenses for the second quarter of 2020

$
1,208.2

Plus:

•
Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly driven by an uptick in the workers' participation expense and an increase in the cost of repair materials, fuel and power; this was partially offset by an increase in capitalized leachable material and lower inventory consumption.

84.4

•
Increase in exploration expense.

3.2

•
Increase in depreciation, amortization and depletion expense.

1.6

Less:

•
Decrease in the volume and cost of metals purchased from third parties.

(75.6)

Operating cost and expenses for the second quarter of 2021

$
1,221.8

~~Six months:~~ ~~Operating costs and expenses were $2,402.7 million in the first six months of 2021 compared to $2,394.7 million in the same period of 2020. The increase of $8.0 million was primarily due to:~~


Operating cost and expenses for the first six months of 2020		$	2,394.7
Operating cost and expenses for the first quarter of 2021				Operating cost and expenses for the first quarter of 2021	$	1,180.9
Plus:	Plus:
	Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly attributable to an increase in the workers' participation expense and in the cost of repairing materials, fuel and power; this was partially offset by an increase in capitalized leachable material and lower inventory consumption.		160.6
•				Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to increases in fuel costs and foreign currency effect, partially offset by an decrease in worker´s participation expense and lower inventory consumption.		64.0
•	Increase in depreciation, amortization and depletion expense.		9.2	Increase in cost of metals purchased from third parties.		49.9
•	Increase in exploration expense.		1.0	Increase in exploration expenses.		2.7
•	Increase in selling, general and administrative expenses.		0.9	Increase in selling, general and administrative expenses.		0.2
Less:				Less:
•	Decrease in volume and cost of metals purchased from third parties.		(163.7)	Decrease in depreciation, amortization and depletion.		(4.0)
Operating cost and expenses for the first six months of 2021		$	2,402.7
Operating cost and expenses for the first quarter of 2022				Operating cost and expenses for the first quarter of 2022	$	1,293.7

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NON-OPERATING INCOME (EXPENSES)

Non-operating income (expense) represented a net expense of ~~$96.2 million and $181.1~~$71.4 million in the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 compared to a net expense of ~~$88.8 million and $185.0~~$84.9 million in the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021.

~~Second~~First quarter: The ~~$7.4 million increase in the expense level was principally due to:~~

●	$7.2 million increase in miscellaneous expense, net, which was mainly attributable to a $5.0 million insurance payment received in the second quarter of 2020 due to rain damages at our Peruvian operations,

●	~~$3.0 million decrease in interest income; which was partially offset by a~~

●	~~$1.5 million decrease in interest expense, and a~~

●	~~$1.3 million increase in capitalized interest.~~

~~Six months:~~ ~~The $3.9~~$13.5 million decrease in the expense level was principally due to:

●	$~~6.6~~9.4 million decrease in ~~interest~~miscellaneous expense, ~~primarily attributable to the debt repayment of $400 million in April 2020.~~net, partially offset by

●	$~~3.3~~2.2 million increase in ~~capitalized~~ interest income,

●	$~~2.5~~1.9 million ~~decrease~~increase in ~~miscellaneous expense, net; which was partially offset by a~~

●	~~$8.5 million decrease in interest income.~~capitalized interest.

INCOME TAXES

Six Months Ended


June 30,

2021

2020

Provision for income taxes ($in millions)

$
1,155.2

$
446.2

Effective income tax rate

40.6
%

48.2
%


	Three Months Ended
	March 31,
	2022			2021
Provision for income taxes ($in millions)	$	612.1		$	507.5
Effective income tax rate		43.8	%		40.1	%

~~These provisions include~~In addition to the income taxes ~~for~~of Peru, Mexico and the United ~~States. The Mexican royalty,~~States, the ~~Peruvian royalty~~provision for income taxes also includes the mining royalties from Peru and Mexico and the Peruvian special mining tax are included in the income tax provision. The decrease in the effective income tax rate in 2021 compared to the same period in 2020 was primarily attributable to a movement in exchange gains and losses from the strong depreciation of the Mexican peso against the U.S. dollar in 2020.tax.

SEGMENT RESULT ANALYSIS

We have three segments: the Peruvian operations, the Mexican open-pit operations and the Mexican underground mining operations.

The table below presents information regarding the volume of our copper sales by segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
Copper Sales (million pounds)	2021	2020	Variance	% Change		2021	2020	Variance	% Change		2022	2021	Variance	% Change
Peruvian operations	216.7	244.1	(27.4)	(11.2)	%	430.6	472.2	(41.6)	(8.8)	%	187.1	213.9	(26.8)	(12.5)	%
Mexican open‑pit	298.1	350.7	(52.6)	(15.0)	%	610.6	672.5	(61.9)	(9.2)	%	270.2	312.5	(42.3)	(13.5)	%
Mexican IMMSA unit	6.7	6.4	0.3	4.7	%	13.1	15.1	(2.0)	(13.2)	%	5.6	6.4	(0.8)	(12.5)	%
Other and intersegment elimination	(6.6)	(5.3)	(1.3)	24.5	%	(9.9)	(9.4)	(0.5)	5.3	%	(4.5)	(3.3)	(1.2)	36.4	%
Total copper sales	514.9	595.9	(81.0)	(13.6)	%	1,044.4	1,150.4	(106.0)	(9.2)	%	458.4	529.5	(71.1)	(13.4)	%

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The table below presents information regarding the volume of sales by segment of our significant by-products for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
By‑product Sales (million pounds, except silver—million ounces)	2021	2020	Variance	% Change		2021	2020	Variance	% Change		2022	2021	Variance	% Change
Peruvian operations:
Molybdenum contained in concentrate	7.1	8.1	(1.0)	(12.3)	%	14.7	15.0	(0.3)	(2.0)	%	7.0	7.6	(0.6)	(7.9)	%
Silver	1.3	1.5	(0.2)	(13.3)	%	2.5	2.8	(0.3)	(10.7)	%	1.0	1.2	(0.2)	(16.7)	%
Mexican open‑pit operations:
Molybdenum contained in concentrate	8.2	9.1	(0.9)	(9.9)	%	16.5	18.2	(1.7)	(9.3)	%	8.5	8.3	0.2	2.4	%
Silver	2.5	3.5	(1.0)	(28.6)	%	5.2	6.3	(1.1)	(17.5)	%	2.6	2.7	(0.1)	(3.7)	%
IMMSA unit
Zinc‑refined and in concentrate	58.8	52.3	6.5	12.4	%	86.4	116.0	(29.6)	(25.5)	%	54.9	27.6	27.3	98.9	%
Silver	1.4	1.7	(0.3)	(17.6)	%	3.3	3.8	(0.5)	(13.2)	%	1.6	1.9	(0.3)	(15.8)	%
Other and intersegment elimination
Silver	(0.6)	(0.6)	—	—	%	(1.1)	(1.3)	0.2	(15.4)	%	(0.8)	(0.5)	(0.3)	60.0	%
Total by‑product sales
Molybdenum contained in concentrate	15.3	17.2	(1.9)	(11.0)	%	31.2	33.2	(2.0)	(6.0)	%	15.5	15.9	(0.4)	(2.5)	%
Zinc‑refined and in concentrate	58.8	52.3	6.5	12.4	%	86.4	116.0	(29.6)	(25.5)	%	54.9	27.6	27.3	98.9	%
Silver	4.6	6.1	(1.5)	(24.6)	%	9.9	11.6	(1.7)	(14.7)	%	4.4	5.3	(0.9)	(17.0)	%

Peruvian Operations:


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
	2021		2020		Variance		% Change			2021		2020		Variance		% Change			2022		2021		Variance		% Change
Net sales	$	1,142.2	$	688.6	$	453.6		65.9	%	$	2,098.1	$	1,346.9	$	751.2		55.8	%	$	1,094.8	$	955.8	$	139.0		14.5	%
Operating costs and expenses		(507.8)		(487.0)		(20.8)		4.3	%		(987.5)		(990.0)		2.5		(0.3)	%		(562.0)		(479.8)		(82.2)		17.1	%
Operating income	$	634.4	$	201.6	$	432.8		214.7	%	$	1,110.6	$	356.9	$	753.7		211.2	%	$	532.8	$	476.0	$	56.8		11.9	%

Net sales in the ~~second~~first quarter of ~~2021~~2022 were ~~$1,142.2~~$1,094.8 million compared to ~~$688.6~~$955.8 million in the ~~second~~first quarter of ~~2020.~~2021. The increase in net sales was mainly driven by higher copper (+~~81.8%~~17.7%), and molybdenum (+~~68.6%~~69.7%) ~~and silver (+61.9%) prices, which~~prices; this was partially offset by lower copper ~~(-11.2%~~(-12.5%), molybdenum ~~(-12.3%~~(-7.9%) and silver ~~(-13.3%~~(-16.7%) sales ~~volumes.~~

~~Operating costs and expenses~~ ~~in the second quarter of 2021 increased by $20.8 million to $507.8 million compared to $487.0 million in the second quarter of 2020. This was primarily due to:~~

Operating costs and expenses for the second quarter of 2020

$
487.0

Plus:

•
Increase in cost of sales (exclusive of depreciation, amortization and depletion), which was mainly driven by an increase in the workers' participation expense and in the cost of repair materials and fuel; this was partially offset by an increase in capitalized leachable material, a decrease in inventory consumption and foreign currency effect.

21.5

•
Increase in selling, general and administrative expenses.

1.2

•
Increase in exploration expenses.

0.7

Less:

•
Decrease in depreciation, amortization and depletion expense.

(2.6)

Operating costs and expenses for the second quarter of 2021

$
507.8

~~Table of Contents~~

~~Net sales~~ ~~in the first six months of 2021 were $2,098.1 million compared to $1,346.9 million in the same period of 2020. The increase in net sales was mainly driven by higher copper (+65.7%), molybdenum (+40.8%~~volumes, as well as, lower silver (-8.5%) ~~and silver (+58.8%) prices, which was partially offset by lower copper (-8.8%), molybdenum (-2.0%) and silver (-10.7%) sales volumes.~~prices.

Operating costs and expenses in the first ~~six months~~quarter of ~~2021 decreased~~2022 increased by ~~$2.5~~$82.2 million to ~~$987.5~~$562.0 million compared to ~~$990.0~~$479.8 million in the same period of ~~2020.~~2021. This was primarily due to:

Operating costs and expenses for the first six months of 2020

$
990.0

Plus:

•
Increase in cost of sales (exclusive of depreciation, amortization and depletion), which was mainly driven by an increase in the workers' participation expense and in the cost of repair materials, fuel and power; this was partially offset by an increase in capitalized leachable material and by a decrease in inventory consumption and labor costs.

26.6

•
Increase in exploration expenses.

3.1

•
Increase in selling, general and administrative expenses.

1.5

Less:

•
Decrease in volume and cost of metals purchased from third parties.

(31.2)

•
Decrease in depreciation, amortization and depletion expense.

(2.5)

Operating costs and expenses for the first six months of 2021

$
987.5

~~Mexican Open-pit Operations~~:


Operating costs and expenses for the first quarter of 2021		$	479.8
Plus:
•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to increases in fuel costs and foreign currency effect, partially offset by an decrease in worker´s participation expense and an increase in capitalized leachable material.		74.2
•	Increase in cost of metals purchased from third parties.		9.9
•	Increase in exploration expenses.		2.8
Less:
•	Decrease in selling, general and administrative expenses.		(0.9)
•	Decrease in depreciation, amortization and depletion expense.		(3.8)
Operating costs and expenses for the first quarter of 2022		$	562.0

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

Variance

% Change


2021

2020

Variance

% Change

Net sales
$
1,632.2

$
1,016.7

$
615.5

60.5
%

$
3,110.7

$
1,970.4

$
1,140.3

57.9
%

Operating costs and expenses

(611.0)

(640.0)

29.0

(4.5)
%

(1,232.9)

(1,213.8)

(19.1)

1.6
%

Operating income
$
1,021.2

$
376.7

$
644.5

171.1
%

$
1,877.8

$
756.6

$
1,121.2

148.2
%

~~Net sales~~ in the second quarter of 2021 were $1,632.2 million, compared to $1,016.7 million in the second quarter of 2020. The increase of $615.5 million was principally due to higher copper (+81.8%), molybdenum (+8.6%) and silver (+61.9%) prices. This effect was slightly offset by decreases in copper (-15.0%), silver (-28.6%) and molybdenum (-9.9%) sales volumes.

~~Operating costs and expenses~~ ~~in the second quarter of 2021 decreased by $29.0 million to $611.0 million versus $640.0 million in the same 2020 period, primarily due to:~~

Operating costs and expenses for the second quarter of 2020

$
640.0

Less:

•
Decrease in cost and volume of metals purchased from third parties.

(73.4)

•
Decrease in selling, general and administrative expenses.

(2.8)

•
Decrease in exploration expenses.

(0.1)

Plus:

•
Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly attributable to an increase in the workers' participation expense; foreign currency effect and higher costs for repair materials, fuel and power; this was partially offset by an increase in capitalized leachable material and by a decrease in inventory consumption.

45.3

•
Increase in depreciation, amortization and depletion expense.

2.0

Operating costs and expenses for the second quarter of 2021

$
611.0

~~Net sales~~ in the first six months of 2021 were $3,110.7 million, compared to $1,970.4 million in the same period of 2020. The increase of $1,140.3 million was principally due to higher copper (+65.9%), molybdenum (+40.9%) and silver (+58.8%) prices. This effect was slightly offset by decreases in copper (-9.2%), silver (-17.5%) and molybdenum (-9.3%) sales volumes.

5549

Table of Contents

Mexican Open-pit Operations:


	Three Months Ended March 31,
	2022		2021		Variance		% Change
Net sales	$	1,646.2	$	1,478.5	$	167.7		11.3	%
Operating costs and expenses		(662.4)		(621.9)		(40.5)		6.5	%
Operating income	$	983.8	$	856.6	$	127.2		14.8	%

Net sales in the first quarter of 2022 were $1,646.2 million, compared to $1,478.5 million in the same period of 2021. The increase of $167.7 million was principally due to higher copper (+17.7%) and molybdenum (+69.7%) prices, and higher sales volume of molybdenum (+2.4%). This effect was slightly offset by decreases in copper (-13.5%) and silver (-3.7%) sales volume, as well as lower silver prices (-8.5%).

Operating costs and expenses in the first ~~six months~~quarter of ~~2021~~2022 increased by ~~$19.1~~$40.5 million to ~~$1,232.9~~$662.4 million versus ~~$1,213.8~~$621.9 million in the same ~~2020~~ period of 2021, primarily due to:


Operating costs and expenses for the first six months of 2020		$	1,213.8	Operating costs and expenses for the first quarter of 2021		$	621.9
Plus:				Plus:
•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly driven by an increase in the higher workers' participation expense; foreign currency effect and higher costs for repair materials, fuel and power; this was partially offset by an increase in capitalized leachable material.		142.8	•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to increases in fuel costs and foreign currency effect, partially offset by an decrease in worker´s participation expense and a decrease in inventory consumption.		23.7
•	Increase in depreciation, amortization and depletion expense.		6.2	•	Increase in cost of metals purchased from third parties.		14.7
Less:				•	Increase in depreciation, amortization and depletion expense.		2.5
•	Decrease in cost and volume of metals purchased from third parties.		(126.0)	Less:
•	Decrease in selling, general and administrative expenses.		(3.6)	•	Decrease in selling, general and administrative expenses.		(0.4)
•	Decrease in exploration expenses.		(0.3)	•	Decrease in exploration expenses.		—
Operating costs and expenses for the first six months of 2021		$	1,232.9	Operating costs and expenses for the first quarter of 2022		$	662.4

Mexican Underground Operations (IMMSA):


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
	2021		2020		Variance		% Change			2021		2020		Variance		% Change			2022		2021		Variance		% Change
Net sales	$	161.4	$	101.6	$	59.8		58.9	%	$	285.7	$	236.1	$	49.6		21.0	%	$	177.5	$	124.3	$	53.2		42.8	%
Operating costs and expenses		(129.1)		(96.2)		(32.9)		34.2	%		(226.7)		(224.3)		(2.4)		1.1	%		(146.5)		(97.7)		(48.8)		49.9	%
Operating income	$	32.3	$	5.4	$	26.9		498.1	%	$	59.0	$	11.8	$	47.2		400.0	%	$	31.0	$	26.6	$	4.4		16.5	%

Net sales in the ~~second~~first quarter of ~~2021~~2022 were ~~$161.4~~$177.5 million, compared to ~~$101.6~~$124.3 million in the ~~second quarter~~same period of ~~2020.~~2021. This increase of ~~$59.8~~$53.2 million was primarily due to higher copper (+~~81.8%), silver (+61.9%~~17.7%) and zinc (+~~48.3%~~36.0%) prices and ~~increases~~to an increase in zinc (+~~12.4%) and copper (+4.7%~~98.9%) sales ~~volumes.~~volume. This effect was partially offset by a decrease in copper (-12.5%) and silver ~~(-17.6%~~(-15.8%) sales ~~volume.~~volumes and by a drop in silver (-8.5%) prices.

Operating costs and expenses in the ~~second~~first quarter of ~~2021~~2022 increased by ~~$32.9~~$48.8 million ~~situating at $129.1~~and reached $146.5 million versus ~~$96.2~~$97.7 million in the ~~second quarter~~same period of ~~2020.~~2021. This was primarily due to:

Operating costs and expenses for the second quarter of 2020

$
96.2
Plus:

•
Increase in cost of sales (exclusive of depreciation, amortization and depletion), which was mainly due to an uptick in the cost of: metals purchased from third parties; power; workers' participation and repair materials. The aforementioned was partially offset by a decrease in inventory consumption.

30.7
•
Increase in depreciation, amortization and depletion expense.

2.5
•
Increase in selling, general and administrative expenses.

1.0
Less:

•
Decrease in exploration expenses.

(1.3)
Operating costs and expenses for the second quarter of 2021

$
129.1

~~Net sales~~ in the first six months of 2021 were $285.7 million, compared to $236.1 million in the same period of 2020. This increase of $49.6 million was primarily due to higher zinc (+37.6%), copper (+65.9%) and silver (+58.8%) prices and increases in zinc (+12.4%) and copper (+4.7%) sales volumes. This effect was partially offset by a decrease in the silver (-17.6%) sales volume.


Operating costs and expenses for the first quarter of 2021		$	97.7
Plus:
•	Increase in cost of sales (exclusive of depreciation, amortization and depletion) mainly due to foreign currency effect; partially offset by a reduction in power expenses.		12.9
•	Increase in cost of metals purchased from third parties.		38.4
•	Increase in selling, general and administrative expenses.		0.3
Less:
•	Decrease in exploration expenses.		(0.2)
•	Decrease in depreciation, amortization and depletion expense.		(2.6)
Operating costs and expenses for the first quarter of 2022		$	146.5

5650

Table of Contents

~~Operating costs and expenses~~ ~~in the first six months of 2021 increased by $2.4 million, situating at $226.7 million versus $224.3 million in the same period of 2020. This was primarily due to:~~

Operating costs and expenses for the first six months of 2020

$
224.3
Plus:

•
Increase in depreciation, amortization and depletion expense.

5.8
•
Increase in selling, general and administrative expenses.

0.7
Less:

•
Decrease in exploration expenses.

(3.0)
•
Decrease in cost of sales (exclusive of depreciation, amortization and depletion); this was mainly driven by a drop in inventory consumption, which was partially offset by increases in the cost of metals purchased from third parties, power, workers' participation and repair materials.

(1.1)
Operating costs and expenses for the first six months of 2021

$
226.7

Intersegment Eliminations and Adjustments:

The net sales, operating costs and expenses and operating income discussed above will not be directly equal to amounts in our condensed consolidated statement of earnings because the adjustments of intersegment operating revenues and expenses must be taken into account. Please see Note 1314 “Segment and Related Information” of the condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow:

The following table shows the cash flow for the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 (in millions):


	2021		2020		Variance		2022		2021		Variance
Net cash provided by operating activities	$	1,844.2	$	894.5	$	949.7	$	820.7	$	782.6	$	38.1
Net cash used in investing activities	$	(597.9)	$	(163.9)	$	(434.0)	$	(124.9)	$	(237.8)	$	112.9
Net cash provided by (used in) financing activities	$	(1,007.7)	$	(866.2)	$	(141.5)
Net cash used in financing activities							$	(774.8)	$	(465.1)	$	(309.7)

Net cash provided by operating activities:

The change in net cash from operating activities for the first ~~six~~three months of ~~2021~~2022 and ~~2020~~2021 include (in millions):


	2021		2020		Variance		% Change			2022		2021		Variance		% Change
Net income	$	1,703.6	$	477.1	$	1,226.5		257.1	%	$	787.8	$	767.1	$	20.7		2.7	%
Depreciation, amortization and depletion		396.0		386.8		9.2		2.4	%		196.6		200.6		(4.0)		(2.0)	%
Provision (benefit) for deferred income taxes		3.2		(11.3)		14.5		(128.3)	%		43.7		(38.9)		82.6		(212.3)	%
Loss (gain) on foreign currency transaction effect		(13.4)		(28.9)		15.5		(53.6)	%		55.7		(19.7)		75.4		(382.7)	%
Other adjustments to net income		2.8		10.2		(7.4)		(72.5)	%		8.3		2.7		5.6		207.4	%
Operating assets and liabilities		(248.0)		60.6		(308.6)		(509.2)	%		(271.4)		(129.2)		(142.2)		110.1	%
Net cash provided by operating activities	$	1,844.2	$	894.5	$	949.7		106.2	%	$	820.7	$	782.6	$	38.1		4.9	%

Significant items added to (deducted from) net income to arrive at operating cash flow include depreciation, amortization and depletion, deferred tax amounts, foreign currency fluctuations and changes in operating assets and liabilities.

~~Table of Contents~~

~~Six~~Three months ended ~~June, 2021:~~March 31, 2022: Net income was ~~$1,703.6~~$787.8 million, which represented approximately ~~92.4%~~96.0% of the net operating cash flow. Operating cash flow decreased by ~~$248.0~~$271.4 million due to the following variances in operating assets and liabilities:

●	$~~(366.7)~~172.9 million decrease in trade accounts receivable, primarily driven by higher collections at our Peruvian and Mexican operations.

●	$(525.0) million decrease in accounts payable and accrued liabilities which was mainly due to the decrease in accrued income taxes at our Mexican and Peruvian operations.

●	$122.2 million decrease in other operating assets and liabilities.

●	$(41.5) million net increase in inventory; this was primarily driven by a $12.2 million increase in the work in process inventory.

Three months ended March 31, 2021: Net income was $767.1 million, which represented approximately 98.0% of the net operating cash flow. Operating cash flow decreased by $129.2 million due to the following variances in operating assets and liabilities:

●	$(163.3) million increase in trade accounts receivable, which was mainly attributable to the increase in metal prices in the first ~~semester~~quarter of 2021.

Table of Contents

●	$~~1.1~~38.2 million net decrease in ~~inventory; this~~inventory, which was primarily driven by a ~~$15.0~~$16.8 million ~~drop~~of decrease in the leaching inventory ~~which was in turn partially offset by~~and a ~~$14.4~~$19.4 million ~~increase~~drop in the work in process inventory.

●	$~~77.2 million increase in accounts payable and accrued liabilities, which was mainly due to the increase in accrued income taxes at our Mexican and Peruvian operations.~~

●	~~$40.4 million decrease in other operating assets and liabilities.~~

~~Six months ended June 30, 2020:~~ Net income was $477.1 million, approximately 53.3% of the net operating cash flow. The change in deferred income taxes in 2020 is mainly due to a Peruvian jurisdiction benefit. In addition, there was a gain on foreign currency transaction as a result of the depreciation of the Peruvian sol and Mexican peso with respect to the U.S. dollar. Operating cash flow increased by $60.6 million due to variances in operating assets and liabilities as follows:

●	~~$(21.0) million increase in trade accounts receivable mainly as a result of the increase in copper prices during the second quarter of 2020.~~

●	~~$156.4 million of net decrease in inventory, which included $114.2 million of lower leaching inventory mainly at our Peruvian operations, as well as $22.2 million of lower work in process.~~

●	~~$(169.0)~~(1.3) million decrease in accounts payable and accrued ~~liabilities, which included principally income taxes and workers’ participation payments at our operations.~~liabilities.

●	$~~94.2~~(2.8) million ~~decrease~~increase in other operating assets and ~~liabilities, which included principally $88.4 million of lower prepaid taxes.~~liabilities.

Net cash used in investing activities:

~~Six~~Three months ended ~~June 30, 2021:~~March 31, 2022: Net cash used in investing activities included ~~$452.4~~$205.2 million for capital investments. The capital investments included:

●	$~~312.0~~124.0 million of investments at our Mexican operations:

●

$23.1 million for the Buenavista-Zinc project,

●

$3.7 million for the Pilares project,

●

$17.8 million for the MexArco unit,

●

$33.7 million at our IMMSA unit,

●

$43.6 million for various replacement and maintenance expenditures, and

●

$2.1 million increase in capital expenditures incurred but not yet paid.

●	$81.2 million of investments at our Peruvian operations:

●

$8.2 million for the Quebrada Honda dam expansion,

●

$1.1 million for the relocation of facilities at Toquepala,

●

$1.8 million for projects at the Ilo facilities,

●

$52.0 million for various other replacement and maintenance expenditures, and

●

$18.1 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the first three months of 2022 include $80.4 million of net purchases of short-term investments.

Three months ended March 31, 2021: Net cash used in investing activities included $232.6 million for capital investments. The capital investments included:

●	$166.1 million of investments at our Mexican operations:

●

$~~103.5~~56.1 million for the Buenavista-Zinc ~~project,~~

●

~~$26.8 million for the new tailing disposal deposit at the Buenavista mine,~~

●

~~$16.7 million for the Pilares~~ project,

●

$16.1 million for land acquisitions for new projects,

●

$~~34.0~~12.7 million for the Pilares project,

●

$10.6 million for the new tailing disposal deposit at the Buenavista mine,

●

$15.0 million at our IMMSA unit,

●

$~~102.0~~42.1 million for various replacement and maintenance expenditures, mainly at our Buenavista and La Caridad mines, and

●

$~~12.9~~13.5 million decrease in capital expenditures incurred but not yet paid.

●	$~~140.4~~66.5 million of investments at our Peruvian operations:

●

$~~32.1~~14.9 million for the Quebrada Honda dam expansion,

●

$~~16.2~~14.2 million for the Toquepala concentrator expansion project,

●

$~~8.9~~2.6 million for projects at the Ilo facilities,

●

$2.4 million for the relocation of facilities at Toquepala,

●

$~~5.6 million for projects at the Ilo facilities,~~

●

~~$66.3~~23.1 million for various other replacement and maintenance expenditures, and

●

$~~11.3~~9.3 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the first three months of 2021 include $5.2 million of net purchases of short-term investments.

5852

Table of Contents

Investment activities in the first six months of 2021 include $135.0 million of net purchases of short-term investments, and $12.5 million for the second payment for the acquisition of the Michiquillay project.

~~Six months ended June 30, 2020:~~ ~~Net cash used for investing activities included $214.3 million for capital investments. The capital investments included:~~

●	~~$148.3 million of investments at our Mexican operations:~~

●

~~$77.4 million for various replacement and maintenance expenditures, mainly at our Buenavista and La Caridad mines.~~

●

~~$12.6 million for the Buenavista-Zinc project,~~

●

~~$8.8 million for the new tailing disposal deposit at the Buenavista mine,~~

●

~~$3.5 million for the Pilares project,~~

●

~~$8.3 million for the over elevation of tailings deposit N° 7 at the La Caridad Mine,~~

●

~~$41.3 million at our IMMSA unit, and~~

●

~~$(3.6) million increase in capital expenditures incurred but not yet paid.~~

●	~~$66.0 million of investments at our Peruvian operations:~~

●

~~$10.4 million for the fresh water pipeline replacement at Suches,~~

●

~~$7.8 million for the building of the containment dike N°4 at Quebrada Santallana,~~

●

~~$6.1 million for the Toquepala concentrator expansion project,~~

●

~~$5.2 million for the reservoir expansion at Quebrada Honda,~~

●

~~$3.2 million for the pumping system neutralization plant at Toquepala,~~

●

~~$2.5 million for the new substation at Quebrada Honda,~~

●

~~$31.8 million for various other replacement and maintenance expenditures, and~~

●

~~$(1.0) million increase in capital expenditures incurred but not yet paid.~~

~~The first six months of 2020 investment activities include $50.0 million of net proceeds from short-term investments.~~

Net cash used in financing activities in the six months ended June 30, 2021 was $1,007.7 million and included a dividend distribution of $1,005.0 million. Net cash used in financing activities in the six months ended June 30, 2020 was $866.2 million, and included a dividend distribution of $463.8 million, as well as a debt repayment of $400 million.

Dividends:

On ~~May 25, 2021,~~March 2, 2022, we paid a dividend of ~~$0.70~~$1.00 per share for a total of ~~$541.1~~$773.1 million. On ~~July 22, 2021, our~~April 28, 2022, the Board of Directors authorized a ~~quarterly~~ dividend of ~~$0.90~~$1.25 per share ~~for an expected total of approximately $695.8 million,~~payable on May 31, 2022 to ~~be paid on August 26, 2021 to SCC~~ shareholders of record at the close of business on ~~August 12, 2021.~~May 17, 2022.

Capital Investment and Exploration Programs:

A discussion of our capital investment programs is an important part of understanding our liquidity and capital resources. We expect to meet the cash requirements for these capital investments from cash on hand, internally generated funds and from additional external financing if required. For information regarding our capital investment programs, please see the discussion under the caption “Capital Investment Programs” under this Item 2.

Contractual Obligations:

There have been no material changes in our contractual obligations in the ~~second~~first quarter of ~~2021.~~2022. Please see item 7 in Part II of our ~~2020~~2021 annual report on Form 10-K.

~~Table of Contents~~

NON-GAAP INFORMATION RECONCILIATION

Operating cash cost: Following is a reconciliation of “Operating Cash Cost” (see page ~~43)~~40) to cost of sales (exclusive of depreciation, amortization and depletion) as reported in our consolidated statement of earnings, in millions of dollars and dollars per pound of copper in the table below:


	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended				Three Months Ended				Three Months Ended
	June 30, 2021				June 30, 2020				June 30, 2021				June 30, 2020				March 31, 2022				March 31, 2021
			$ per				$ per				$ per				$ per				$ per				$ per
	$ millions		pound		$ millions		pound		$ millions		pound		$ millions		pound		$ millions		pound		$ millions		pound
Cost of sales (exclusive of depreciation, amortization and depletion)	$	985.5	$	1.95	$	976.7	$	1.80	$	1,929.3	$	1.90	$	1,932.4	$	1.82	$	1,057.7	$	2.31	$	943.8	$	1.85
Add:
Selling, general and administrative		31.4		0.06		31.4		0.06		61.6		0.06		60.6		0.06		30.3		0.06		30.1		0.06
Sales premiums, net of treatment and refining charges		(8.6)		(0.02)		10.2		0.02		(15.6)		(0.02)		9.5		0.01		(6.1)		(0.01)		(7.0)		(0.01)
Less:
Workers’ participation		(105.5)		(0.21)		(41.1)		(0.08)		(209.7)		(0.21)		(94.7)		(0.09)		(87.8)		(0.19)		(104.2)		(0.21)
Cost of metals purchased from third parties		(68.6)		(0.14)		(144.2)		(0.27)		(109.8)		(0.11)		(273.5)		(0.26)		(91.0)		(0.20)		(41.2)		(0.08)
Royalty charge and other, net		(43.6)		(0.08)		(44.6)		(0.08)		(59.9)		(0.05)		(53.1)		(0.05)		(112.6)		(0.24)		(16.3)		(0.03)
Inventory change		27.3		0.05		(103.8)		(0.19)		(6.6)		(0.01)		(160.9)		(0.15)		47.2		0.10		(33.9)		(0.07)
Operating Cash Cost before by‑product revenues	$	817.9	$	1.61	$	684.6	$	1.26	$	1,589.3	$	1.56	$	1,420.3	$	1.34	$	837.7	$	1.83	$	771.3	$	1.51
Add:
By‑product revenues(1)		(522.3)		(1.02)		(300.7)		(0.56)		(905.0)		(0.89)		(622.1)		(0.59)		(576.4)		(1.26)		(382.7)		(0.75)
Net revenue on sale of metal purchased from third parties		1.2		—		(20.8)		(0.03)		(9.8)		(0.01)		(39.6)		(0.03)		(7.1)		(0.02)		(11.0)		(0.02)
Add:
Total by‑product revenues		(521.1)		(1.02)		(321.5)		(0.59)		(914.8)		(0.90)		(661.7)		(0.62)		(583.5)		(1.28)		(393.7)		(0.77)
Operating Cash Cost net of by‑product revenues	$	296.8	$	0.59	$	363.1	$	0.67	$	674.5	$	0.66	$	758.6	$	0.72	$	254.2	$	0.55	$	377.6	$	0.74
Total pounds of copper produced (in millions)		507.7				541.7				1,018.5				1,059.6

(1)	By-product revenues included in our presentation of operating cash cost contain the following:

Three Months Ended

Three Months Ended

Six Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020




$ per



$ per



$ per



$ per

$ millions

pound

$ millions

pound

$ millions

pound

$ millions

pound

Molybdenum

$
(282.2)

$
(0.55)

$
(107.0)

$
(0.20)

$
(451.8)

$
(0.44)

$
(233.0)

$
(0.22)

Silver

(116.2)

(0.23)

(96.4)

(0.18)

(243.4)

(0.24)

(172.1)

(0.16)

Zinc

(60.7)

(0.12)

(38.8)

(0.07)

(78.5)

(0.08)

(90.2)

(0.09)

Sulfuric Acid

(34.1)

(0.07)

(28.8)

(0.05)

(70.2)

(0.07)

(71.2)

(0.07)

Gold and others

(29.1)

(0.05)

(29.7)

(0.06)

(61.1)

(0.06)

(55.6)

(0.05)

Total

$
(522.3)

$
(1.02)

$
(300.7)

$
(0.56)

$
(905.0)

$
(0.89)

$
(622.1)

$
(0.59)

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	Three Months Ended				Three Months Ended
		March 31, 2022				March 31, 2021
			$ per				$ per
	$ millions		pound		$ millions		pound
Molybdenum	$	(275.8)	$	(0.60)	$	(169.6)	$	(0.33)
Silver		(108.7)		(0.24)		(127.2)		(0.25)
Zinc		(63.6)		(0.14)		(17.8)		(0.04)
Sulfuric Acid		(99.6)		(0.22)		(36.1)		(0.07)
Gold and others		(28.7)		(0.06)		(32.0)		(0.06)
Total	$	(576.4)	$	(1.26)	$	(382.7)	$	(0.75)

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Commodity price risk:

For additional information on metal price sensitivity, refer to “Metal Prices” in Part I, Item 2 of this quarterly report on Form 10-Q for the period ended ~~June 30, 2021.~~March 31, 2022.

Foreign currency exchange rate risk:

Our functional currency is the U.S. dollar. Portions of our operating costs are denominated in Peruvian soles and Mexican pesos. Since our revenues are primarily denominated in U.S. dollars, when inflation or deflation in our Mexican or Peruvian operations is not offset by a change in the exchange rate of the sol or the peso to the dollar, our financial position, results of operations and cash flows could be affected by local cost conversion when expressed in U.S. dollars. In addition, the dollar value of our net monetary assets denominated in soles or pesos can be affected by exchange rate variances of the sol or the peso, resulting in a re-measurement gain or loss in our financial statements. Recent inflation and exchange rate variances are provided in the table below for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021
Peru:
Peruvian inflation rate	0.7	%	(*)	%	2.1	%	0.9	%	1.8	%	1.5	%

Initial exchange rate	3.758		3.442		3.624		3.317		3.998		3.624
Closing exchange rate	3.866		3.541		3.866		3.541		3.701		3.758
Appreciation/(devaluation)	(2.9)	%	(2.9)	%	(6.7)	%	(6.8)	%	7.4	%	(3.7)	%

Mexico:
Mexican inflation rate	1.1	%	(0.3)	%	3.4	%	0.6	%	2.4	%	2.3	%

Initial exchange rate	20.605		23.512		19.949		18.845		20.584		19.949
Closing exchange rate	19.803		22.972		19.803		22.972		19.994		20.605
Appreciation/(devaluation)	3.9	%	2.3	%	0.7	%	(21.9)	%	2.9	%	(3.3)	%

Change in monetary position:

Assuming an exchange rate variance of 10% at ~~June 30, 2021,~~March 31, 2022, we estimate our net monetary position in Peruvian sol and Mexican peso would increase (decrease) our net earnings as follows:


	Effect in net		Effect in net
	earnings		earnings
	($ in millions)		($ in millions)
Appreciation of 10% in U.S. dollar vs. Peruvian sol	$	32.6	$	23.7
Devaluation of 10% in U.S. dollar vs. Peruvian sol	$	(39.8)	$	(28.9)
Appreciation of 10% in U.S. dollar vs. Mexican peso	$	8.6	$	3.0
Devaluation of 10% in U.S. dollar vs. Mexican peso	$	(10.5)	$	(3.7)

Open sales risk:

Our provisional copper and molybdenum sales contain an embedded derivative that is required to be separate from the host contract for accounting purposes. The host contract is the receivable from the sale of copper and molybdenum concentrates at prevailing market prices at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to settlement. See Note 1213 to our condensed consolidated financial statements for further information about these provisional sales.

~~Table of Contents~~

Short-term Investments:

For additional information on our trading securities and available-for-sale investments, refer to “Short-term Investments” in Part I, Item 1 of this quarterly report on Form 10-Q for the period ended ~~June 30, 2021.~~March 31, 2022.

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Derivative Instruments:

From time to time, we use derivative instruments to manage our cash flows exposure to changes in commodity prices. We do not enter into derivative contracts unless we anticipate that the possibility exists that future activity will expose our future cash flows to deterioration. Derivative contracts for commodities are entered into to manage the price risk associated with forecasted purchases of the commodities that we use in our manufacturing process.

Cash Flow Hedges of Natural Gas

Our objective in using natural gas derivatives is to protect the stability of natural gas costs and manage exposure to natural gas price increases. To protect natural gas costs from estimated price increases in the past winter season, we acquired two derivative instruments that began in November 2021 and ended in March 2022.

Derivative instruments and its effects as of March 31, 2002, were as follows:



Derivatives designated as hedging instruments under ASC 815	Call Option		Financial Swap Cash Settlement
Commodity contracts	Natural gas		Natural gas
Gas volume (MMBTUs)	5,285,000		5,285,000
Hedge premium ($per MMBTU)	0.55		-
Reference price (swap: $per MMBTU))	Prior month average IFREC price		3.75
Hedge	Daily fluctuation range		Monthly average price
	1Q 2022	November 2021 - March 2022	1Q 2022	November 2021 - March 2022
Cost (million $)	(1.7)	(2.9)	-	-
Profit (million $)	0.5	0.5	1.7	4.7
Net favorable/unfavorable effect (million $)	(1.2)	(2.4)	1.7	4.7
	1Q 2022		November 2021 - March 2022
Combined profit (million $)	0.5		2.3

We assessed these derivative instruments as Cash Flow Hedges. As such, the effective portions of said hedges are initially reported in Other Comprehensive Income (OCI) and were reclassified as earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affected earnings. The Company did not identify any ineffective portions of these derivatives.

As of March 31, 2022 and the same period of 2021, we did not hold any derivative instruments.

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 risks and uncertainties relating to general U.S. and international economic and political conditions, the cyclical and volatile prices of copper, other commodities and supplies, including fuel and electricity, availability of materials, insurance coverage, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, lower than expected ore grades, water and geological problems, the failure of equipment or processes to operate in accordance with specifications, failure to obtain financial assurance to meet closure and remediation obligations, labor relations, litigation and environmental risks as well as political and economic risk associated with foreign operations. Results of operations are directly affected by metal prices on commodity exchanges that can be volatile.

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Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of ~~June 30, 2021,~~March 31, 2022, the Company conducted an evaluation under the supervision and with the participation of the Company’s disclosure committee and the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness and the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of ~~June 30, 2021,~~March 31, 2022, to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is:

Recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and

Accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Southern Copper Corporation:

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Southern Copper Corporation and subsidiaries (the “Company”) as of ~~June 30, 2021,~~March 31, 2022, the related condensed consolidated statements of earnings, comprehensive income and cash flows for the three-month ~~and six-month~~ periods ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020,~~ and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2020,~~2021, and the related consolidated statements of earnings, comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated ~~February 25, 2021,~~March 7, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2020~~2021 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~Emphasis of a Matter~~

We draw attention to Note 1 of the interim financial information, which describes the effects of the new outbreak of coronavirus disease ("COVID-19") as of June 30, 2021 and for the three-month and six-month periods then ended.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the condensed consolidated interim financial statements taken as a whole. Accordingly, we do not express such an opinion.

Galaz, Yamazaki, Ruiz Urquiza, S.C.

Member of Deloitte Touche Tohmatsu Limited


/s/ ~~Daniel Toledo Antonio~~Paulina Ramos Ramirez
C.P.C. ~~Daniel Toledo Antonio~~Paulina Ramos Ramirez
Mexico City, Mexico
~~July 27, 2021~~May 5, 2022

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings:

The information provided in Note 10 “Commitments and Contingencies” to the condensed consolidated financial statements contained in Part I of this Form 10-Q, is incorporated herein by reference.

Item 1A. Risk Factors:

~~There have been no material changes~~The Company's operations and financial results are subject to ~~our risk factors during the three months ended June 30, 2021. For additional information on risk factors, refer to~~various risks and uncertainties, including those described in “Risk Factors” included in Part I, Item 1A of our Annual report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on ~~February 25,~~March 7, 2022. The following supplements and updates the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Potential delays in transportation of products to customers and possible shortages of critical parts, equipment, and other resources may adversely affect our results of operations.

Current challenges in the global shipping industry have led to congestion in ports, a shortage in containers, and a lack of space on ships. Because of this situation, the Company faces a risk of potential supply chain disruptions that may adversely affect our operations and development projects. To address this potential issue, we have increased our safety stock levels and adjusted our replacement algorithms. Additionally, our revenues and collections may also be adversely affected by transportation delays that could have a negative impact on our sales agreements. Although the recovery of the global economy is causing the aforementioned issues at ports and in the shipping industry, this situation is expected to be resolved gradually and to return to normal levels in the short term. However, if these issues continue for a longer period, our supply chain and our sales flow could be adversely impacted.

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

In recent months, the political action of certain groups in Peru has caused an increase in violence in the demands of certain communities, which has affected Cuajone's operations. On February 28, 2022, a small group of protesters from the community of Tumilaca, Pocata, Coscore and Tala, which have 472 residents in total, seized the facilities at the Viña Blanca water reservoir and cut off the water supply to the homes of the approximately 5,000 people who live in Cuajone. Prior to this illegal action, on February 18, 2022, the railway between Cuajone and Ilo was also blocked by a group of community members.

After several unsuccessful attempts by the authorities to restore order through dialogue efforts, on April 20, 2022, the Peruvian government declared a state of emergency in the Moquegua region. On April 21, 2022, the protesters returned the installations of the Viña Blanca water reservoir and the railway to the Company. Our personnel immediately evaluated the damage caused to the facilities by acts of vandalism and took the necessary steps to resume production at the Cuajone mining unit. As of today, the industrial railroad and the Cuajone mine, concentrator and related facilities are operating at full capacity.

However, if there is a recurrence of such incidents, we cannot guarantee that they will not adversely impact other facilities, the results of our operations; and our financial position.

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Item 2. Unregistered Sale of Equity Securities and Use of Proceeds:

SCC share repurchase program:

In 2008, the Company’s BOD authorized a $500 million share repurchase program that has since been increased by the BOD and is currently authorized to $3 billion. Pursuant to this program, the Company has purchased 119.5 million shares of common stock at a cost of $2.9 billion. These shares are available for general corporate purposes. The Company may purchase additional shares of its common stock 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.

The NYSE closing price of SCC common shares as of ~~June 30, 2021~~March 31, 2022 was ~~$64.32~~$75.90 and the maximum number of shares that the Company could purchase at that price ~~is 1.3 million shares.~~was 1.1 million. As a result of the repurchase of shares of SCC’s common stock, Grupo Mexico’s direct and indirect ownership was 88.9% as of ~~June 30, 2021.~~March 31, 2022. There has not been any activity in the SCC share repurchase program since the third quarter of 2016.

Item 4. Mine Safety Disclosures:

Not applicable.

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Item 6. ~~Exhibits~~


~~Exhibit No.~~		~~Description of Exhibit~~

~~3.1~~		~~(a) Amended and Restated Certificate of Incorporation, filed on October 11, 2005.~~ ~~(b) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 2, 2006.~~ ~~(c) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 28, 2008.~~

~~3.2~~		~~By-Laws, as last amended on July 23, 2020.~~

~~4.1~~		~~(a) Indenture governing $600 million 7.500% Notes due 2035, by and among Southern Copper Corporation, the Bank of New York and The Bank of New York (Luxembourg) S.A~~ ~~(b) Indenture governing $400 million 7.500% Notes due 2035, by and between Southern Copper Corporation, The Bank of New York, The Bank of New York (Luxembourg) S.A.~~

~~4.2~~		~~Form of 6.375% Note (included in Exhibit 4.1).~~

~~4.3~~		~~Form of New 7.500% Note (included in Exhibit 4.2(a)).~~

~~4.4~~		~~Form of New 7.500% Note (included in Exhibit 4.2(b)).~~

~~4.5~~		~~Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which $1.1 billion of 6.750% Notes due 2040 were issued.~~


~~4.6~~		Second Supplemental Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 6.750% Notes due 2040 were issued.


~~4.7~~		~~Form of 6.750% Notes due 2040.~~

~~4.8~~		Third Supplemental Indenture dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.500% Notes due 2022 were issued.

~~4.9~~		Fourth Supplemental Indenture, dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.250% Notes due 2042 were issued.

~~4.10~~		~~Form of 3.500% Notes due 2022.~~


~~4.11~~		~~Form of 5.250% Notes due 2042.~~

~~4.12~~		Fifth Supplemental Indenture dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.875% Notes due 2025 were issued.

~~4.13~~		Sixth Supplemental Indenture, dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.875% Notes due 2045 were issued.

~~4.14~~		~~Form of 3.875% Notes due 2025.~~

~~4.15~~		~~Form of 5.875% Notes due 2045.~~

~~10.1~~		~~Directors’ Stock Award Plan of the Company, as amended through January 28, 2023.~~

~~10.2~~		Agreement and Plan of Merger, dated as of October 21, 2004, by and among Southern Copper Corporation, SCC Merger Sub, Inc., Americas Sales Company, Inc., Americas Mining Corporation and Minera Mexico S.A. de C.V.

~~Table of Contents~~


~~Exhibit No.~~		~~Description of Exhibit~~
~~10.3~~		~~Tax Agreement entered into by the Company and Americas Mining Corporation, effective as of February 20, 2017.~~

~~14.0~~		~~Code of Business Conduct and Ethics adopted by the Board of Directors on May 8, 2003 and amended on April 23, 2015~~

~~15.0~~		~~Consent of Registered Public Accounting Firm (Galaz, Yamazaki, Ruiz Urquiza, S.C. - Member of Deloitte Touche Tohmatsu, Limited).~~

~~31.1~~		~~Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.~~

~~32.2~~		~~Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.~~

~~101.INS~~		XBRL Instance Document (submitted electronically with this report). The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document (submitted electronically with this report).~~

~~101.CAL~~		~~XBRL Taxonomy Calculation Linkbase Document (submitted electronically with this report).~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document (submitted electronically with this report).~~

~~101.LAB~~		~~XBRL Taxonomy Label Linkbase Document (submitted electronically with this report).~~

~~101.PRE~~		~~XBRL Taxonomy Presentation Linkbase Document (submitted electronically with this report).~~

~~104~~		The cover page from our Quarterly Report on Form 10-Q for the period ended June 30, 2021, filed with the Securities and Exchange Commission on July 27, 2021, is formatted in Inline Extensible Business Reporting Language (“iXBRL”)

Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Earnings for the three and six months ended June 30, 2021, and 2020; (ii) the Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30, 2021, and 2020; (iii) the Condensed Consolidated Balance Sheet at June 30, 2021 and December 31, 2020; (iv) the Condensed Consolidated Statement of Cash Flows for the three and six months ended June 30, 2021 and 2020; and (v) the Notes to Condensed Consolidated Financial Statements tagged in detail. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

~~Table of Contents~~

~~SOUTHERN COPPER CORPORATION~~

~~List of~~ Exhibits


Exhibit No.		Description of Exhibit

3.1		(a) Amended and Restated Certificate of Incorporation, filed on October 11, 2005. (Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the third quarter of 2005 and incorporated herein by reference). (b) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 2, 2006. (Filed as Exhibit 3.1 to Registration Statement on Form S-4, File No. 333-135170) filed on June 20, 2006 and incorporated herein by reference). (c) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated May 28, 2008. (Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the second quarter of 2008 and incorporated herein by reference).

3.2		By-Laws, as last amended on ~~July 23, 2020.~~January 27, 2022. (Filed as Exhibit 3.2 to the Company’s Form 8-K filed on ~~July 28, 2020~~January 31, 2022 and incorporated herein by reference).

4.1		(a) Indenture governing $600 million 7.500% Notes due 2035, by and among Southern Copper Corporation, the Bank of New York and The Bank of New York (Luxembourg) S.A. (Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 1, 2005) and incorporated herein by reference). (b) Indenture governing $400 million 7.500% Notes due 2035, by and between Southern Copper Corporation, The Bank of New York, The Bank of New York (Luxembourg) S.A.(Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on August 1, 2005 and incorporated herein by reference).

4.2		Form of 6.375% Note (included in Exhibit 4.1).

4.3		Form of New 7.500% Note (included in Exhibit 4.2(a)).

4.4		Form of New 7.500% Note (included in Exhibit 4.2(b)).

4.5		Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which $1.1 billion of 6.750% Notes due 2040 were issued (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 19, 2010 and incorporated herein by reference).


4.6	Second Supplemental Indenture, dated as of April 16, 2010, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 6.750% Notes due 2040 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 19, 2010 and incorporated herein by reference).


4.7		Form of 6.750% Notes due 2040 (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 19, 2010 and incorporated herein by reference).

4.8		Third Supplemental Indenture dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.500% Notes due 2022 were issued (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

4.9		Fourth Supplemental Indenture, dated as of November 8, 2012, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.250% Notes due 2042 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

4.10		Form of 3.500% Notes due 2022. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

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Exhibit No.			Description of Exhibit
4.11			Form of 5.250% Notes due 2042. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

4.12			Fifth Supplemental Indenture dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 3.875% Notes due 2025 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

4.13			Sixth Supplemental Indenture, dated as of April 23, 2015, between Southern Copper Corporation and Wells Fargo Bank, National Association, as trustee, pursuant to which the 5.875% Notes due 2045 were issued. (Filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

4.14			Form of 3.875% Notes due 2025. (Filed as Exhibit A to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

4.15			Form of 5.875% Notes due 2045. (Filed as Exhibit A to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April 24, 2015 and incorporated herein by reference).

10.1			Directors’ Stock Award Plan of the Company, as amended through January 28, 2023. (Filed as an exhibit to the Company’s 2018 Proxy Statement and incorporated herein by reference). The plan expired by its terms on January 30, 2017. A 5-year extension of the plan was approved by the Company’s stockholders at the 2018 Annual Meeting of Stockholders.

10.2			Agreement and Plan of Merger, dated as of October 21, 2004, by and among Southern Copper Corporation, SCC Merger Sub, Inc., Americas Sales Company, Inc., Americas Mining Corporation and Minera Mexico S.A. de C.V. (Filed as an Exhibit to Current Report on Form 8-K filed on October 22, 2004 and incorporated herein by reference).

10.3			Tax Agreement entered into by the Company and Americas Mining Corporation, effective as of February 20, 2017. (Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the first quarter of 2017 and incorporated herein by reference).

14.0			Code of Business Conduct and Ethics adopted by the Board of Directors on May 8, 2003 and amended on April 23, 2015. (Filed as Exhibit 14 to the Company’s Current Report on Form 8-K filed April 29, 2015 and incorporated herein by reference).

15.0			Consent of Registered Public Accounting Firm (Galaz, Yamazaki, Ruiz Urquiza, S.C. - Member of Deloitte Touche Tohmatsu, Limited) (filed herewith).
23.2			Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for the Cuajone Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.3			Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for the Toquepala Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.4			Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for the Tia Maria Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.5			Consent of Qualified Persons for Technical Report Summary of Mineral Resources for the Los Chancas Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.6			Consent of Qualified Persons for Technical Report Summary of Mineral Resources for the Michiquillay Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).

Table of Contents


Exhibit No.	Description of Exhibit
23.7	Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for Buenavista del Cobre. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.8	Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for the La Caridad Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.9	Consent of Qualified Persons for Technical Report Summary of Mineral Resources for the Pilares Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.10	Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for the El Pilar Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.11	Consent of Qualified Persons for Technical Report Summary of Mineral Reserves and Mineral Resources for the El Arco Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.12	Consent of Qualified Persons for Technical Report Summary of Mineral Resources for the Charcas Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
23.13	Consent of Qualified Persons for Technical Report Summary of Mineral Resources for the Santa Barbara Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).

23.14		Consent of Qualified Persons for Technical Report Summary of Mineral Resources for the San Martin Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).

31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.

32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C., Section 1350. This document is being furnished in accordance with SEC Release No. 33-8238.
96.1	Technical Report Summary of Mineral Reserves and Mineral Resources for the Cuajone Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.2	Technical Report Summary of Mineral Reserves and Mineral Resources for the Toquepala Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.3	Technical Report Summary of Mineral Reserves and Mineral Resources for the Tia Maria Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.4	Technical Report Summary of Mineral Resources for the Los Chancas Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.5	Technical Report Summary of Mineral Resources for the Michiquillay Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).

Table of Contents


Exhibit No.			Description of Exhibit
96.6			Technical Report Summary of Mineral Reserves and Mineral Resources for Buenavista del Cobre. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.7			Technical Report Summary of Mineral Reserves and Mineral Resources for the La Caridad Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.8			Technical Report Summary of Mineral Resources for the Pilares Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.9			Technical Report Summary of Mineral Reserves and Mineral Resources for the El Pilar Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.10			Technical Report Summary of Mineral Reserves and Mineral Resources for the El Arco Project. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.11			Technical Report Summary of Mineral Resources for the Charcas Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.12			Technical Report Summary of Mineral Resources for the Santa Barbara Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).
96.13			Technical Report Summary of Mineral Resources for the San Martin Mine. (Filed as an Exhibit to the Company’s Current Report on Form 10-K filed on March 7, 2022 and incorporated herein by reference).

101.INS			XBRL Instance Document (submitted electronically with this report). The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document (submitted electronically with this report).

101.CAL			XBRL Taxonomy Calculation Linkbase Document (submitted electronically with this report).

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document (submitted electronically with this report).

101.LAB			XBRL Taxonomy Label Linkbase Document (submitted electronically with this report).

~~Table of Contents~~


~~Exhibit No.~~	~~Description of Exhibit~~
101.PRE		XBRL Taxonomy Presentation Linkbase Document (submitted electronically with this report).

104		The cover page from our Quarterly Report on Form 10-Q for the period ended ~~June 30, 2021,~~March 31, 2022, filed with the Securities and Exchange Commission on ~~July 27,~~November 1, 2021, is formatted in Inline Extensible Business Reporting Language (“iXBRL”).

Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Earnings for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020;~~2021; (ii) the Condensed Consolidated Statement of Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020;~~2021; (iii) the Condensed Consolidated Balance Sheet at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020;~~2021; (iv) the Condensed Consolidated Statement of Cash Flows for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020;~~2021; and (v) the Notes to Condensed Consolidated Financial Statements tagged in detail. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

6964

Table of Contents

PART II — OTHER INFORMATION

SIGNATURES

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.


	SOUTHERN COPPER CORPORATION
	(Registrant)


	/s/ Oscar Gonzalez Rocha
	Oscar Gonzalez Rocha
	President and Chief Executive Officer

~~July 27, 2021~~May 5, 2022


	/s/ Raul Jacob
	Raul Jacob
	Vice President, Finance, Treasurer and Chief Financial Officer

~~July 27, 2021~~May 5, 2022

7065


	Six Months Ended June 30, 2021
			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	948.4	$	176.1	$	—	$	(65.0)	$	1,059.5
United States		782.6		31.7		81.0		—		895.3
Peru		—		0.1		290.6		—		290.7
Brazil		—		7.6		217.6		—		225.2
Chile		2.9		—		151.3		—		154.2
Other American countries		18.0		0.7		2.8		—		21.5
Europe:
Switzerland		612.6		25.8		195.5		—		833.9
Italy		0.2		1.9		181.9		—		184.0
Spain		193.2		—		43.4		—		236.6
Other European countries		148.1		33.2		199.9		—		381.2
Asia:
Singapore		235.0		8.4		236.0		—		479.4
Japan		24.4		—		310.3		—		334.7
Other Asian countries		145.3		0.2		187.8		—		333.3
Total	$	3,110.7	$	285.7	$	2,098.1	$	(65.0)	$	5,429.5


	Three Months Ended June 30, 2020
			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	207.2	$	70.5	$	—	$	(21.5)	$	256.2
United States		298.7		4.0		19.5		—		322.2
Peru		—		2.6		40.1		—		42.7
Brazil		—		1.3		20.9		—		22.2
Chile		17.6		—		41.0		—		58.6
Other American countries		0.7		0.6		0.2		—		1.5
Europe:
Switzerland		236.2		15.9		147.8		—		399.9
Italy		—		1.0		52.1		—		53.1
Spain		18.2		—		—		—		18.2
Other European countries		56.1		3.6		66.9		—		126.6
Asia:
Singapore		116.2		1.9		111.1		—		229.2
Japan		2.3		—		138.1		—		140.4
Other Asian countries		63.5		0.2		50.9		—		114.6
Total	$	1,016.7	$	101.6	$	688.6	$	(21.5)	$	1,785.4


	Six Months Ended June 30, 2020
			Mexican
	Mexican		IMMSA		Peruvian		Corporate &
	Open-Pit		Unit		Operations		Elimination		Consolidated
The Americas:
Mexico	$	570.9	$	169.7	$	—	$	(48.3)	$	692.3
United States		556.9		4.2		60.4		—		621.5
Peru		—		5.6		113.1		—		118.7
Brazil		—		4.8		75.4		—		80.2
Chile		19.5		—		89.2		—		108.7
Other American countries		9.0		1.4		0.4		—		10.8
Europe:
Switzerland		408.6		30.9		214.3		—		653.8
Italy		—		4.4		118.9		—		123.3
Spain		64.8		—		—		—		64.8
Other European countries		76.4		9.7		119.9		—		206.0
Asia:
Singapore		177.9		5.1		246.9		—		429.9
Japan		11.7		—		236.8		—		248.5
Other Asian countries		74.7		0.3		71.6		—		146.6
Total	$	1,970.4	$	236.1	$	1,346.9	$	(48.3)	$	3,505.1


	Jun-21	Dec-20	Jun-20
($ in millions, except ratios)
Cash and cash equivalents	2,394.3	2,183.6	1,808.8
Accounts receivable	1,506.6	1,136.6	937.7
Total assets	17,695.4	16,946.5	15,805.0
Long term debt	6,545.9	6,544.2	6,542.6
Sales	5,429.5	7,984.9	3,505.1

RATIOS
Current assets to current liabilities	3.80	3.49	4.33
Accounts receivable turnover (1)	3.60	7.03	3.74
Total debt ratio (2)	0.37	0.39	0.41
Net income margin (3)	31.2%	19.7%	13.5%


Operating costs and expenses for the second quarter of 2020		$	487.0
Plus:
•	Increase in cost of sales (exclusive of depreciation, amortization and depletion), which was mainly driven by an increase in the workers' participation expense and in the cost of repair materials and fuel; this was partially offset by an increase in capitalized leachable material, a decrease in inventory consumption and foreign currency effect.		21.5
•	Increase in selling, general and administrative expenses.		1.2
•	Increase in exploration expenses.		0.7
Less:
•	Decrease in depreciation, amortization and depletion expense.		(2.6)
Operating costs and expenses for the second quarter of 2021		$	507.8


Operating costs and expenses for the first six months of 2020		$	990.0
Plus:
•	Increase in cost of sales (exclusive of depreciation, amortization and depletion), which was mainly driven by an increase in the workers' participation expense and in the cost of repair materials, fuel and power; this was partially offset by an increase in capitalized leachable material and by a decrease in inventory consumption and labor costs.		26.6
•	Increase in exploration expenses.		3.1
•	Increase in selling, general and administrative expenses.		1.5
Less:
•	Decrease in volume and cost of metals purchased from third parties.		(31.2)
•	Decrease in depreciation, amortization and depletion expense.		(2.5)
Operating costs and expenses for the first six months of 2021		$	987.5


Operating costs and expenses for the second quarter of 2020		$	640.0
Less:
•	Decrease in cost and volume of metals purchased from third parties.		(73.4)
•	Decrease in selling, general and administrative expenses.		(2.8)
•	Decrease in exploration expenses.		(0.1)
Plus:
•	Increase in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly attributable to an increase in the workers' participation expense; foreign currency effect and higher costs for repair materials, fuel and power; this was partially offset by an increase in capitalized leachable material and by a decrease in inventory consumption.		45.3
•	Increase in depreciation, amortization and depletion expense.		2.0
Operating costs and expenses for the second quarter of 2021		$	611.0


Operating costs and expenses for the first six months of 2020		$	224.3
Plus:
•	Increase in depreciation, amortization and depletion expense.		5.8
•	Increase in selling, general and administrative expenses.		0.7
Less:
•	Decrease in exploration expenses.		(3.0)
•	Decrease in cost of sales (exclusive of depreciation, amortization and depletion); this was mainly driven by a drop in inventory consumption, which was partially offset by increases in the cost of metals purchased from third parties, power, workers' participation and repair materials.		(1.1)
Operating costs and expenses for the first six months of 2021		$	226.7