8-KOther Events

SOUTHERN COPPER CORP/ 8-K Report, Corporate Update (Aug 9, 2011)

Filed August 9, 2011For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) filed an 8-K on August 9, 2011, to provide an update on its operations and financial performance, primarily from its second quarter 2011 earnings call. The report highlights significant increases in sales and net income driven by higher metal prices and increased copper sales volumes, particularly from the Buenavista mine which is operating at full capacity. The company also discussed its outlook on metal markets, capital expenditure plans, and ongoing strategic initiatives, including a proposed business combination with its parent company, Americas Mining Corporation (AMC).

Key Highlights

  • 1Southern Copper reported a substantial 54% increase in second-quarter 2011 sales to $1.8 billion, driven by higher metal prices and a 30.2% rise in copper sales volumes.
  • 2Net income attributable to shareholders more than doubled, reaching $658 million ($0.78 per diluted share) in Q2 2011, compared to $313.4 million ($0.37 per diluted share) in Q2 2010.
  • 3Copper production increased by 28.8% year-over-year to 146,241 tons in Q2 2011, primarily due to the full capacity operation of the Buenavista mine.
  • 4The company is undertaking significant capital expenditure projects, with a total program of $5.5 billion projected from 2011-2015, including major expansions in Mexico and Peru.
  • 5Southern Copper is actively managing its currency exposure and market volatility, having increased its share repurchase program from $500 million to $1 billion and authorizing a quarterly dividend of $0.62 per share.
  • 6The proposed all-stock business combination with its parent, Americas Mining Corporation (AMC), remains under evaluation by a special committee of independent directors.
  • 7The company provided forward-looking guidance on copper production for 2011 (630,000 tons) and 2012 (approximately 660,000 tons, increasing to 850,000 tons in 2013 with project start-ups).

Frequently Asked Questions

The substantial 54% increase in revenue to $1.8 billion was primarily driven by higher metal prices and a significant 30.2% rise in copper sales volumes, largely attributable to the increased production from the Buenavista mine operating at full capacity.

The proposed all-stock business combination with its parent company, Americas Mining Corporation, is still under review by a special committee of independent directors. The company anticipates providing further updates during the third quarter of 2011.

Southern Copper has outlined a substantial capital expenditure program totaling $5.5 billion from 2011 to 2015. The company anticipates financing these expenditures primarily through its existing cash position and internally generated cash flow. For 2012, a significant CAPEX of $2.2 billion is projected.

The company highlighted risks including its ability to finalize agreements for proposed transactions, the results of due diligence, achieving expected transaction benefits, integration challenges, transaction costs, obtaining regulatory approvals, and external factors such as metal prices, unfavorable economic conditions, and changes in the legal and regulatory environment.