SCCO

Business Context and Reporting Period

This Form 8-K, filed on February 9, 2011, reports on Southern Copper Corporation's fourth-quarter 2010 financial results and includes a transcript of the earnings conference call held on February 3, 2011. The filing also discloses ongoing discussions regarding a proposed all-stock business combination with Americas Mining Corporation (AMC), the parent company of ASARCO.

Key Financial Metrics

Capital Expenditures: The company approved a five-year capital program (2011-2015). The 2011 budget is $1.7 billion ($900 million in Mexico, $800 million in Peru). Sustaining capital is estimated between $200 million and $300 million annually once major projects are complete.

Dividends: The Board authorized a quarterly dividend of $0.58 per share, payable March 1, 2011.

Material Changes vs. Prior Period

• Revenue Growth: Q4 2010 sales increased 32% year-over-year, driven by higher metal prices and increased molybdenum sales volume. Full-year 2010 sales rose 38% to $5.1 billion.
• Profitability: Net income increased 36% to $492 million, and EBITDA rose 51% to $927 million.
• Production: Copper production increased 3.5% in Q4, primarily due to 15,700 tons of SXEW production from the Buenavista mine (formerly Cananea). Molybdenum production hit a record 20,519 tons for 2010.
• Costs: Operating costs increased 7% ($40 million) due to inflation and $30 million in ramp-up costs for the Buenavista operation. However, cash costs per pound (including by-product credits) decreased significantly from $0.32 to $0.23.

Guidance, Outlook, and Risks

Production and Financial Guidance

• 2011 Copper Production: Guided at 630,000 tons (26% increase), including 3% from third parties.
• 2011 Molybdenum Production: Guided at 17,000 tons, a reduction from 2010 due to lower ore grades in Peruvian operations.
• 2011 Cash Cost Forecast: Expected to be $0.45/lb (including credits) and $1.50/lb (excluding credits), higher than Q4 2010 due to reduced molybdenum credits spread over higher copper volume.
• Capital Spending: 2011 CapEx is set at $1.7 billion, with 2012 also projected at $1.7 billion before declining in subsequent years.

Hedging Strategy

To manage price volatility, the company has hedged approximately 59% of its 2011 copper production:

• 28% via swaps at an average price of $4.00/lb.
• 31% via zero-cost collars with a floor of $3.02/lb and a cap of $4.84/lb.

Material Events and Risks

• AMC/ASARCO Transaction: A special committee is evaluating a non-binding proposal from Americas Mining Corporation for an all-stock merger. Southern Copper shareholders would receive 1.237 AMC shares for each Southern Copper share. No timeline for a decision has been set.
• Buenavista Rehabilitation: Total repair costs are estimated at $114 million. $70.9 million was spent in 2010; $43.1 million is expected in 2011. The operation is running at 70% capacity with full production expected by end of Q1 2011.
• Regulatory and Political Risks: The company faces potential royalty regime changes in Peru due to upcoming elections. The Tia Maria project is awaiting environmental impact assessment approval, expected by end of April 2011.
• Operational Disruptions: Q4 saw temporary disruptions at La Caridad due to labor issues and technical problems at the Ilo smelter oxygen plant, though operations have normalized.

Investor Verification Checklist

• Verify the status and timeline of the proposed merger with Americas Mining Corporation (AMC) and the recommendation of the special committee.
• Confirm the environmental impact assessment approval timeline for the Tia Maria project and potential regulatory changes regarding mining royalties in Peru.
• Monitor the ramp-up progress of the Buenavista operation to ensure it reaches full capacity as projected for Q1 2011.
• Review the impact of reduced molybdenum production on 2011 cash cost guidance ($0.45/lb) versus actual performance.
• Assess the effectiveness of the hedging program (59% of 2011 production) against prevailing copper market prices.