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SOUTHERN COPPER CORP/ Annual Report (Amendment), Year Ended Dec 31, 2003

Filing Date
Filed February 25, 2005
Period End
December 31, 2003
Security
SCCO
In the record · 2016–202610-K1510-Q328-K86

SCCO filed 15 annual reports (10-K), 32 quarterly reports (10-Q) and 86 current reports (8-K) between 2016 and 2026.

  1. FY2018 annual report10-K · Mar ’19Mar ’19
  2. Leadership change8-K · Jul ’21Jul ’21
  3. Leadership change8-K · Jul ’25Jul ’25

01—Abstract

Summary

Summary of the 10-K/A filed February 25, 2005. Cited figures are marked; the original filing is the authoritative source.

Southern Peru Copper Corporation (SCCO, NYSE: PCU) filed this amended and restated 10-K/A (Amendment No. 3) for fiscal 2003 on February 25, 2005.

The amendment revises portions of Items 1, 2, 7 and 8 and presents the full report, but all information is stated as of December 31, 2003 and does not reflect later events. The 2003 results were strong: net sales rose 20% to $798.4 million, operating income nearly doubled to $216.8 milliona, and net earnings reached $119.2 million ($1.49 per share, versus $0.76 in 2002). Mine copper output grew 8.1% to 826 million pounds, and the operating cash cost fell to 39.9 cents per pound (58.1 cents without by-product credits), driven largely by molybdenum by-product revenue of $147.9 million.

The balance sheet strengthened, with cash and marketable securities of $295 millionb against total debt of $349 million, and stockholders' equity of $1.315 billion. Operating cash flow was $191 million. The company's largest pending obligation is the Ilo smelter modernization, now estimated at $320 million (down from over $600 million) and due before January 2007 under a Peruvian environmental (PAMA) deadline.

Other items that matter to investors include a 3-point increase in the Peruvian tax rate to 30%, which led to a $10.1 millionc deferred tax charge; open tax disputes with the IRS and SUNAT; long-running investment-share litigation in Peru; and a February 2004 proposal from controlling shareholder Grupo Mexico to acquire Minera Mexico in exchange for new SPCC shares, which a special committee of disinterested directors was evaluating. The filing is historical. It concerns a fiscal year that ended more than two years before the filing date, so investors should treat its figures as a reference point rather than current guidance.

02—Key points

Key Highlights

  1. Net earnings rose to $119.2 million ($1.49/share) in 2003 from $60.6 million ($0.76/share) in 2002, a 96.7% increase driven by higher copper and molybdenum prices and volumes.
  2. Net sales increased 20% to $798.4 million, and operating income reached $216.8 million versus $119.0 million a year earlier.
  3. Mine copper production rose 8.1% to 826 million pounds, supported by the Toquepala concentrator expansion (capacity raised to 60,000 tons per day) and higher Cuajone ore grades.
  4. Operating cash cost fell to 39.9 cents per pound from 45.6 cents, though the cost excluding by-product credits was flat at 58.1 cents, so the improvement depends heavily on molybdenum prices.
  5. The Ilo smelter modernization estimate dropped to $320 million from more than $600 million, with completion required by January 2007; the Company has said it will fund part of it through Peruvian bonds and the rest through operations or international financing.
  6. Cash and marketable securities of $295 million exceeded total debt of $349 million, and stockholders' equity was $1.315 billion.
  7. Peru raised its corporate income tax rate to 30%, which triggered a $10.1 million deferred tax charge in Q4 2003. The effective tax rate was 41.1%.

03—Questions

Frequently Asked Questions

  1. Why did this amended 10-K/A get filed more than a year after the original?

    The amendment restates portions of Items 1, 2, 7 and 8 and presents the full report in amended form. The filing does not update the company's disclosures beyond December 31, 2003, so the information is historical and does not reflect subsequent events.

  2. What drove the large increase in 2003 earnings?

    Higher copper prices (about 10 cents per pound higher on average, with LME at $0.81 versus $0.71), higher molybdenum prices (up 41%), and higher copper sales volumes. Operating costs were partly offset by higher fuel, power and workers' participation costs.

  3. What is the risk from the Grupo Mexico proposal?

    On February 3, 2004, Grupo Mexico proposed selling its subsidiary Minera Mexico (99% of its shares) to SPCC in exchange for new SPCC shares. A special committee of disinterested directors was formed to evaluate it, and no agreement had been reached at the time of this filing. The deal would consolidate the company's two share classes into one, so minority shareholders should watch the terms closely.

  4. How exposed is the company to copper and molybdenum price swings?

    Substantially all revenue comes from copper and by-products, and sales prices are set by market forces the company cannot control. The company estimates that each $0.01 change in copper price moves annual EPS by about $0.06, and each $1.00 change in molybdenum price moves it by about $0.13. Molybdenum credits made up 13.0 cents of the 2003 cost-per-pound reduction, which makes the cost improvement sensitive to molybdenum prices.

  5. What are the main legal and tax risks?

    Former employees in Peru are pursuing claims for investment shares (formerly labor shares), and the company believes these claims are without merit. Tax disputes are open with the U.S. IRS (for the 1997-1999 and 2000-2002 audits) and with Peru's SUNAT for 1996-1999. Management said it does not expect these matters to have a material adverse effect, though the company has accrued for probable costs.

04—Continue

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