SOUTHERN COPPER CORP/

Southern Copper Corporation is one of the largest integrated copper producers in the world, with major production including copper, molybdenum, zinc, and silver. All of its mining, smelting, and refining facilities are located in Peru and Mexico, and it conducts exploration activities in those countries and in Argentina and Chile. The company believes it has the largest copper reserves in the world. Its Peruvian copper operations involve mining, milling, and flotation of copper ore to produce copper; the smelting of copper concentrates to produce blister and anode copper; and the refining of anode copper to produce copper cathodes. As part of this production process, it also produces significant amounts of molybdenum concentrate and sulfuric acid. Its Mexican operations are conducted through its subsidiary, Minera Mexico, which engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold, and lead.

The company believes it is one of the largest mining companies in Peru and Mexico. Competition in the copper market is based primarily on price and service basis, with price being the most important factor when supplies of copper are ample. Its products compete with other materials, including aluminum and plastics. The company's marketing strategy and annual sales planning emphasize developing and maintaining long-term customer relationships; generally, 80% to 90% of its metal production is sold under annual or longer-term contracts. It focuses on end-user customers as opposed to selling on the spot market or to trading companies.

The company generates revenue through the mining, smelting, and refining of copper, molybdenum, zinc, silver, and gold. Its operations have a high level of vertical integration, allowing it to use its facilities, employees, and equipment to manage the entire production process, including ore mining and production of refined copper rod and other products, and to execute most associated transport and logistics functions. Sales prices are determined based on the prevailing commodity prices for the quotation period according to the terms of the contract. Over the last three years, approximately 75.9% ¹ of its revenues were generated from the sale of copper; 10.9% ² from molybdenum; 5.7% ³ from silver; and 3.6% ⁴ from zinc.

The company's Peruvian operations produce copper, by-products of molybdenum, silver, and other materials. The Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, including a precious metals plant, industrial railroad, and port facilities. The Mexican open-pit operations include the La Caridad and Buenavista mine complexes and the smelting and refining plants, including a precious metals plant and a copper rod plant and support facilities. The Mexican open-pit operations produce copper and zinc, with production of by-products of molybdenum, silver, and other materials. The Mexican underground mining operations (IMMSA unit) include five underground mines that produce zinc, copper, lead, silver, and gold; and a zinc refinery.

In 2008, the Board of Directors authorized a $500 million ⁵ share repurchase program that has since been increased and is currently authorized for up to $3 billion ⁶. No repurchases have been made under this program since the third quarter of 2016. Through December 31, 2025, the company has repurchased an aggregate of 119.5 million ⁷ shares of its common stock for an aggregate cost of $2.9 billion ⁸. Since the second quarter of 2024, the Board of Directors has approved quarterly stock dividends, and a portion of these repurchased shares have been used to pay these dividends to common stockholders. In the fourth quarter of 2024, the company paid signing bonuses totaling approximately $62 million ⁹ to workers belonging to five unions. In February 2025, the company paid signing bonuses totaling approximately $6.3 million ¹⁰ to workers belonging to the remaining union.

For the fiscal year ended December 31, 2025, net sales were $10,272.2 million ¹¹, compared to $10,272.2 million ¹² in 2024. Net income attributable to SCC was $2,726.2 million ¹³ in 2025, compared to $2,726.2 million ¹⁴ in 2024. Diluted earnings per share were $3.33 ¹⁵ in 2025, compared to $3.33 ¹⁶ in 2024. Operating income was $4,701.6 million ¹⁷ in 2025, compared to $4,701.6 million ¹⁸ in 2024. Cash and cash equivalents were $2,726.2 million ¹⁹ as of December 31, 2025, compared to $2,726.2 million ²⁰ as of December 31, 2024.

The company is in the midst of a large expansion program, which may expose it to additional risks in terms of industrial accidents. The company's capital investment program is described in Item 7 of the MD&A. The company has development projects including the Tia Maria project in Peru, which has experienced delays while trying to resolve issues with community groups. The company is confident it will move forward with the Tia Maria project, but cannot assure when or that no additional costs will be incurred for community infrastructure development. Other development properties include El Pilar in Mexico and El Arco in Mexico. The company also has exploration properties including Los Chancas and Michiquillay in Peru.The company's operations require substantial amounts of fuel oil, electricity, water, and other resources. Fuel, gas, and power costs constituted approximately 26% ²¹ of total production costs in 2025 and 2024, and 29% ²² in 2023. The company relies upon third parties for its supply of energy resources. The company has energy management committees at most of its mines and is analyzing alternative sources including both traditional and renewable energy sources. The company has power purchase agreements in Peru and Mexico, including agreements with affiliates of Grupo Mexico.

The filing does not specify R&D spending levels. Capital expenditure plans are discussed in the MD&A. The company has a share repurchase program authorized for up to $3 billion ²³, with no repurchases made since the third quarter of 2016. The company has distributed a significant amount of its net income as dividends since 1996, but the dividend practice is subject to change at the discretion of the Board of Directors.

The company's financial performance is significantly affected by the market prices of the metals it produces, particularly copper, molybdenum, zinc, and silver. Historically, these prices have been subject to wide fluctuations and are affected by numerous factors beyond the company's control, including global economic and political conditions, levels of supply and demand, and actions of participants in the commodities markets. Over the last three years, approximately 75.9% ²⁴ of revenues were generated from the sale of copper. Extended significant future declines in metals prices, particularly copper, could have a material adverse impact on results of operations, financial condition, and value of assets.

The company's operations are subject to risks associated with the management of waste rock and tailings storage facilities, which present significant environmental, safety, and engineering challenges. The company's open-pit mines get deeper as they are mined, presenting geotechnical challenges including the possibility of slope failure. The company's operations in Peru and Mexico are subject to political, economic, and social uncertainties. In Peru, the company has experienced heightened political instability, and in Mexico, drug-related violence and changes to mining laws present risks. The company's Taxco mine in Mexico has been on strike since July 2007 ²⁵.

The company's financial performance is highly dependent on the price of copper and other metals, with approximately 75.9% ²⁶ of revenues from copper sales over the last three years; extended declines in metals prices could have a material adverse impact. The company's operations are subject to risks including industrial accidents, labor disputes, and natural phenomena; as of December 31, 2025, unions represented approximately 51% ²⁷ of the workforce in Peru and 71% ²⁸ in Mexico, and the Taxco mine has been on strike since July 2007 ²⁹. The company's actual reserves may not conform to estimates, and its long-term viability depends on replenishing mineral reserves. The company is controlled by Grupo Mexico, which owned 88.9% ³⁰ of its capital stock as of December 31, 2025, and whose interests may differ from minority stockholders. Changes in U.S. trade policy, including a 50% ³¹ tariff on semi-finished copper products announced on July 30, 2025, and effective August 1, 2025, could materially affect the company's business.

Management's message emphasizes that the company is one of the largest integrated copper producers in the world with the largest copper reserves. Management focuses on cost control and production enhancement to remain profitable, aiming to remain profitable during periods of low copper prices and maximize results in periods of high copper prices. The company's strategic priorities include capital spending programs, exploration efforts, and cost reduction programs. Management also emphasizes the company's commitment to community development, with over 70% ³² of its workforce hired locally, and its focus on health and safety, with all mining operations in Mexico and Peru maintaining ISO 45001 certification ³³ by the end of 2025.