What was the main driver for the increase in Southern Copper's revenue in the first quarter of 2011?

The primary drivers for the revenue increase were higher metal prices and a 12% increase in copper sales volume, bolstered by the ramp-up of production at the Buenavista mine.

What is the status of the Tia Maria project in Peru?

The Tia Maria project has been suspended by the Peruvian government following protests and activist concerns regarding water usage and pollution. Southern Copper stated that most of its investment in the project, particularly in equipment, is reallocatable to other company projects.

How is Southern Copper managing its copper price exposure for the remainder of 2011?

Southern Copper has hedged approximately 62% of its remaining 2011 copper production through swap contracts and zero-cost collars, providing a floor price and benefiting from current market prices while offering some protection against price declines.

What are the key factors affecting Southern Copper's operating costs?

Operating costs saw an increase due to higher expenses for purchased copper concentrate needed to balance smelting capacity, repair costs associated with the Buenavista ramp-up, and general cost inflation in fuel and power.

SCCO 8-K SEC Disclosure

Summary

Southern Copper Corporation (SCCO) filed an 8-K on April 27, 2011, primarily detailing its first-quarter 2011 financial and operational results. The company reported a significant year-over-year increase in sales and net income, driven by higher copper prices and increased sales volume, largely due to the ramp-up of its Buenavista mine. Despite higher operating costs, influenced by increased purchased copper concentrate and repair costs at Buenavista, the company's EBITDA also saw a substantial increase. The report also highlighted ongoing expansion projects and provided an update on the challenging situation with the Tia Maria project in Peru, where government suspension due to activist protests has put the project on hold, though the company believes its invested capital is largely reallocatable to other projects. Furthermore, SCCO addressed market conditions for copper and molybdenum, maintaining a positive outlook for copper demand. The company also provided details on its hedging strategies for copper production in 2011 and 2012. The filing also touched upon the ongoing evaluation of a proposed business combination with its parent company, Americas Mining Corporation (AMC), noting that a special committee of independent directors is reviewing the proposal with no set deadline. The company also declared a quarterly dividend of $0.56 per share.

Key Highlights

1Southern Copper reported a 31% increase in sales to $1.6 billion and a 25% increase in net income to $478 million for Q1 2011 compared to Q1 2010.
2Copper production increased by 13.7% to 124,000 tons in Q1 2011, primarily due to the ramping up of the Buenavista mine.
3EBITDA for the first quarter was $842 million, a 22% increase year-over-year.
4Operating costs increased significantly due to higher purchased copper concentrate costs and repair expenses at the Buenavista operation.
5The Tia Maria project in Peru has been suspended by the government due to protests and environmental concerns, but the company indicated that much of the invested capital is reallocatable.
6Southern Copper maintained its positive outlook for the copper market, forecasting global demand growth of 4-5% in 2011.
7The company is evaluating a proposed all-stock business combination with its parent, Americas Mining Corporation (AMC).

SOUTHERN COPPER CORP/ 8-K Report, Corporate Update (Apr 27, 2011)

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