What is the company's outlook for copper prices in 2011?

Southern Copper maintains a positive outlook for copper in 2011, expecting worldwide demand to grow by 4-5% while new production is estimated to grow only 1-2%. This is projected to create a market deficit of 400,000 to 600,000 tons, supporting high prices. However, they also note that current inventory levels might not reflect this scarcity, and price volatility is a concern.

What is the company doing to mitigate copper price volatility?

Southern Copper has implemented price protection strategies through the use of swaps and zero-cost collars. As of the filing date, approximately 28% of 2011 copper production was hedged at an average price of $4.00/lb via swaps, and 31% was hedged with zero-cost collars (floor $3.02/lb, cap $4.84/lb).

What are the key production highlights and future production targets?

Copper mined production increased by 3.5% in Q4 2010, driven by SXEW production from Buenavista and higher grades at Toquepala. For 2011, SCCO expects to increase total copper production by 26% to 630,000 tons, with Buenavista reaching full production capacity by the end of Q1 2011. Molybdenum production in 2011 is projected to be 17,000 tons, a decrease from 2010 due to lower ore grades in Peruvian operations, partially offset by higher production at La Caridad.

What is the status of the proposed business combination with Americas Mining Corporation (AMC)?

Southern Copper is evaluating a non-binding, all-stock business combination proposal from its parent company, AMC. A special committee of independent directors has been formed and has engaged advisors to assess the proposal. There is no specific deadline for this evaluation process.

SCCO 8-K SEC Disclosure

Summary

Southern Copper Corporation (SCCO) filed an 8-K on February 9, 2011, detailing events and financial performance for the fourth quarter and full year of 2010. A key focus was the company's positive outlook on copper markets, driven by strong demand from emerging economies, though they noted increasing inventories and price volatility. SCCO has implemented hedging strategies, including swaps and zero-cost collars, to mitigate price risk for its 2011 and 2012 copper production. The report also highlighted significant production increases, particularly from the Buenavista (formerly Cananea) mine, which is undergoing reconstruction and ramp-up, and achieved full SXEW production capacity in Q4 2010. Financially, SCCO reported a substantial increase in sales for both the fourth quarter and full year 2010, driven by higher metal prices and increased molybdenum sales volume. The company also announced a robust five-year capital program, with significant investment planned for 2011-2015, primarily in Mexico and Peru, focusing on expansion projects like Buenavista SXEW III and Quebalix III, and evaluating projects like Pilares. Additionally, the report touched upon the ongoing evaluation of a proposed all-stock business combination with its parent company, Americas Mining Corporation (AMC), and announced a quarterly dividend of $0.58 per share.

Key Highlights

1Southern Copper reported strong sales growth in Q4 2010 ($1.5 billion, up 32%) and full year 2010 ($5.1 billion, up 38%), driven by higher metal prices and increased molybdenum sales volume.
2Copper production increased by 3.5% in Q4 2010, largely due to SXEW production from the Buenavista mine, with full-year 2011 production expected to increase by 26% to 630,000 tons.
3The company has implemented hedging strategies, including swaps and zero-cost collars, to protect against price volatility for approximately 28% of 2011 copper production.
4SCCO announced a significant capital budget of $1.7 billion for 2011, with a five-year capital program (2011-2015) totaling billions, focused on growth projects in Mexico and Peru.
5The Buenavista (formerly Cananea) mine reconstruction is progressing, with SXEW production at full capacity and the concentrator plant expected to reach full production by the end of Q1 2011.
6A special committee of independent directors is evaluating a non-binding proposal for an all-stock business combination with parent company Americas Mining Corporation (AMC).
7The company authorized a quarterly dividend of $0.58 per share, payable on March 1, 2011.

SOUTHERN COPPER CORP/ 8-K Report, Corporate Update (Feb 10, 2011)

Summary

Key Highlights

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