10-QPeriod: Q2 FY2010

SOUTHERN COPPER CORP/ Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 3, 2010For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a significant increase in financial performance for the six months ended June 30, 2010, compared to the same period in 2009. This surge was primarily driven by a substantial rise in average copper prices, which were approximately 75.5% higher year-over-year, along with favorable price movements for key by-products like molybdenum, zinc, and silver. Net sales increased by 65.4% to $2.39 billion, and net income attributable to SCCO more than doubled, reaching $696.6 million from $253.7 million in the prior year. The company also made significant operational progress, notably regaining control of its Cananea mine in June 2010 after a prolonged stoppage, with efforts underway to restore full production capacity by early 2011. Looking ahead, SCCO announced an ambitious $3.8 billion capital investment program in Sonora, Mexico, aimed at expanding production and improving cost competitiveness, including a major expansion of the Cananea mine. Furthermore, the company received a non-binding proposal for an all-stock business combination with its parent company, Americas Mining Corporation (AMC), which is currently under evaluation by a special committee of independent directors.

Financial Highlights

51 data points
Beta

Net Income

$313.40M

EPS (Diluted)

$0.37

Total Assets

$7.45B

Cash & Equivalents

$2.14B

Free Cash Flow

$434.83M

Financial Statements
Beta
Cost of Revenue$531.48M
Gross Profit$575.20M
SG&A Expenses$21.96M
Operating Expenses$632.82M
Operating Income$540.40M
Net Income$313.40M
EPS (Basic)$0.37
EPS (Diluted)$0.37
Shares Outstanding (Basic)850.00M
Shares Outstanding (Diluted)850.00M

Key Highlights

  • 1Net sales surged by 65.4% to $2.39 billion for the six months ended June 30, 2010, driven by higher commodity prices.
  • 2Net income attributable to SCCO more than doubled to $696.6 million, reflecting strong operational performance and favorable market conditions.
  • 3Average LME copper prices increased by 75.5% to $3.23 per pound in the first six months of 2010 compared to the same period in 2009.
  • 4Southern Copper regained control of the Cananea mine on June 6, 2010, after a nearly three-year stoppage, with a plan to restore full capacity by February 2011.
  • 5A significant new 5-year, $3.8 billion capital investment program was announced for Sonora, Mexico, focused on production expansion and cost competitiveness, including a major expansion of the Cananea mine.
  • 6The company received a non-binding proposal from its parent, Americas Mining Corporation (AMC), for an all-stock business combination, which is under review by independent directors.

Frequently Asked Questions

The primary driver was a significant increase in commodity prices, particularly for copper, which saw an average price rise of 75.5% in the first six months of 2010 compared to the same period in 2009. Higher prices for by-products like molybdenum, zinc, and silver also contributed significantly to the improved results.

Regaining control of the Cananea mine on June 6, 2010, after a nearly three-year stoppage due to labor disputes, is a critical operational milestone. It allows the company to resume production, repair damages estimated at $114 million, and eventually achieve full capacity by February 2011, contributing substantially to future output and revenues. This also unlocks the previously delayed expansion programs for the mine.

The announced 5-year, $3.8 billion investment program in Sonora, Mexico, is designed to expand production and enhance cost competitiveness. Key components include a major expansion of the Cananea mine's annual copper production capacity by 150% to 450,000 tons, the development of a molybdenum plant, a new copper smelter and refinery, a power plant, and the development of the Pilares mine.

Americas Mining Corporation (AMC), Southern Copper's parent company, has proposed an all-stock business combination where public stockholders of Southern Copper would exchange their shares for common shares of AMC. AMC's stock would be listed on both the NYSE and the Lima Stock Exchange. The Board of Directors is forming a special committee of independent directors to evaluate this proposal.