The following discussion provides information that management believes is relevant to an assessment and understanding of the condensed consolidated financial condition and results of operations of Southern Copper Corporation and its subsidiaries (collectively, "SCC", "the Company", "our", and "we"). This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report. Additionally, the following discussion and analysis should be read in conjunction with the Management Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements included in Part II of our annual report on Form 10-K for the year ended December 31, 2020.





EXECUTIVE OVERVIEW



Business: Our business is primarily the production and sale of copper. In the process of producing copper, a number of valuable metallurgical by-products are recovered, which we also produce and sell. Market forces outside of our control largely determine the sale prices for our products. Our management, therefore, focuses on value creation through copper production, cost control, production enhancement and maintaining a prudent capital structure to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our aim is to remain profitable during periods of low copper prices and to maximize financial performance in periods of high copper prices.

We are one of the world's largest copper mining companies in terms of production and sales and our principal operations are in Peru and Mexico. We also have exploration programs in Chile, Argentina and Ecuador. In addition to copper, we produce significant amounts of other metals, either as a by-product of the copper process or through a number of dedicated mining facilities in Mexico.

Outlook: Various key factors will affect our outcome. These include, but are not limited to, the following:

Sales structure: In the first quarter of 2021, approximately 83.6% of our ? revenue came from the sale of copper; 6.7% from molybdenum; 5.5% from silver;

1.4% from zinc; and 2.8% from various other products, including gold, sulfuric


  acid and other materials.



Copper: In the first quarter of 2021, the LME copper price increased from an ? average of $3.25 per pound in the fourth quarter of 2020 to $3.85 (+18.5%).

Currently, we are seeing prices over $4.30 per pound, which bodes a

positive outlook for the 2021 copper market. We believe the following factors are influencing the market:

? The automobile industry's global recovery was reflected in an 89% increase in

production in the first quarter of 2021.

The $2.0 trillion infrastructure package announced by the U.S. President will

? significantly increase the demand for copper, which is a fundamental element at

green energy facilities.

The combined inventories of the LME, Comex, Shanghai and Bonded warehouses

? remain at relatively low levels, particularly given the number days of

consumption considered.

The most important market intelligence houses for the copper market are

? expecting a market deficit this year due to a significant recovery in demand,

which should be between 3.5% and 5.5%.

Molybdenum: Represented 6.7% of our sales in the first quarter of 2021 and is ? currently our most significant by-product. Molybdenum prices averaged $11.19

per pound in the first quarter of 2021, compared to $9.56 in the same period of

2020. This represented a 17.1% increase.

Molybdenum is mainly used in the production of special alloys for stainless steel that require significant hardness and corrosion and heat resistance. A new use for this metal is in lubricants and sulfur filtering of heavy oils and shale gas production.





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Silver: Represented 5.5% of our sales in the first quarter of 2021. We believe ? that the prices for silver will be supported by its level of industrial use and

the fact that, like gold, it represents value shelter in times of economic


  turmoil.



Zinc: Represented 1.4% of our sales in the first quarter of 2021. We consider ? zinc has very good long term fundamentals due to high levels of industrial

consumption and expected production.

? Production: In 2021 and 2022, we expect to produce 943,000 tons of copper given

that production during these

periods will be affected by a temporary reduction in ore grade and recovery at our Peruvian operations.

We expect our copper production to recover by 2023 and reach 1,031,000 tons of production as we get Peruvian

production back on track and generate new production on our Pilares, El Pilar and Buenavista-Zinc Concentrator

projects.

We also expect to produce 21.4 million ounces of silver in 2021, in line with 2020 production. In 2021, we expect to

produce 76,200 tons of zinc from our mines, up 10.5% from 2020 production level. Additionally, we expect to produce 26,800 tons of molybdenum, which represents a decrease of 11.3% compared to 2020 production levels.

Capital Investments: In the first quarter of 2021, we spent $232.6 million on ? capital investments; this represented an increase of 130.3% with regard to the

figure registered for the same period in 2020, and represented 30.5% of net


  income.




CYBERSECURITY EVENT


On March 1, 2021, at approximately 02:00 hours Mexico City time, we experienced a Ransomware cyber-attack, which was operated by humans. Therefore, our antivirus software could not contain it. This cyber-attack encrypted a total of 479 servers, 367 of which were located in Mexico and 112 in the United States. It also encrypted 303 pieces of personal equipment, 257 of which were located in Mexico and 46 in the United States. However, due to the quick response of our IT team, our Enterprise Resource Planning software was not affected by the aforementioned attack.

After the attack we immediately began a remediation and recovery process, and as of the reporting date the affected servers have been completely restored. So far, the forensic investigation has not identified any concrete evidence of information stolen during the attack. We are implementing an information security strategy to ensure business continuity based on processes (controls and corporate governance framework), technology and human capital (organizational culture). The areas of compliance, internal control, information technology and internal audit are working together to integrate the reference frameworks, the risk management models and the necessary controls to implement the strategy and programs of information security.

As of March 31, 2021, we have recorded $0.1 million in costs related to this incident, but we expect to incur additional costs derived from the strategy and controls being implemented.





COVID-19


In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on a rapid increase in global transmission rates. The full impact of the COVID-19 outbreak will continue and the magnitude of the impact on the Company's financial condition, liquidity and future operating results is uncertain. Senior Management is actively monitoring the global situation´s effect on the Company´s financial condition, liquidity, operations, suppliers, industry and workforce and is focusing principally on the health, safety and well-being of our employees, their families and the communities where we have operations. As of March 31, 2021, there have been no major delays in the supply of the materials and services critical for operations and sales. In addition, the supply of non-critical materials and services for the operations has been restored. Additionally, shipments of products and collections experienced no known major delays in the first quarter of 2021.





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As of March 31, 2021, we see a positive trend in copper price that closed at $4.01 per pound (LME) after the drop to $2.18 per pound that it experienced at the end of the first quarter of 2020. Considering the market outlook previously described, we have a positive view for the 2021 copper market.

The Company maintains a solid financial position and performance level. We believe this has allowed and will continue to allow us to deal with the effects of the pandemic in a way that prevents adverse material effects on our operations and financial results. The table below compares some of our financial information as follows:





                                        Mar-21   Dec-20   Mar-20
($ in millions, except ratios)
Cash and cash equivalents              2,267.3  2,183.6  2,051.6
Accounts receivable                    1,324.4  1,136.6    789.7
Total assets                          17,218.4 16,946.5 16,212.1
Long term debt                         6,545.1  6,544.2  6,541.8
Sales                                  2,532.5  7,984.9  1,719.7

RATIOS

Current assets to current liabilities 3.66 3.49 2.98 Accounts receivable turnover (1) 1.91 7.03 2.18 Total debt ratio (2)

                      0.38     0.39     0.43
Net income margin (3)                    30.2%    19.7%    12.5%


(1) Represents net sales divided by accounts receivable.

(2) Represents total debt divided by total assets.

(3) Represents net income divided by net sales, as a percentage.

Governmental authorities in Mexico and Peru have declared that essential economic activities must continue during the COVID-19 health emergency. These activities include industrial mining and/or any other activity necessary to ensure the provision of essential services such as electricity; provide elements to install medical and hospital infrastructure; and manufacture health-related supplies and technological equipment. We believe that industrial mining stands as the most efficient and timely supplier of inputs that are critical to the productive chain to fight the pandemic.

Given the nature of mining operations, which are highly automated, conducted in remote locations and with mandatory use of personal safety equipment at all the mines, it is easier to implement and comply with COVID-19 protective measures, such as physical isolation and control of access to facilities. Industrial mining uses advanced and reliable machinery and does not require high physical concentration of employees. In many cases, workers fulfill their duties maintaining distances of more than 100 meters from their closest coworkers.

At the present time, our operations are in compliance with all sanitary and government regulations and maintain proper environmental safeguards. Our COVID-19 emergency protocol has reinforced preventive measures such as disinfecting, clinical monitoring before work, cleaning and sanitizing of work areas and respect for social distancing. We have also restricted the access of contractors, suppliers and personnel to our facilities if visits are not indispensable and enforced multiple actions to limit workforce exposure to COVID-19 by imposing travel restrictions, prohibiting face-to-face meetings and urging frequent hand washing, as well as adhering to all other health, safety and social distancing measures required by governmental authorities. At March 31, 2021, approximately 95% of the workforce in Mexico was working on site or at home under strict safety measures; the remaining 5% of the workforce was not working, including all individuals at high risk due to age and/or preexisting medical conditions. At our Peruvian operations, approximately 80% of the workforce was working onsite or at home under strict safety measures while the remaining 20% was not working, including all individuals at high risk due to age and/or preexisting medical conditions.





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KEY MATTERS

Below, we discuss several matters that we believe are important to understand the results of our operations and financial condition. These matters include, (i) our earnings, (ii) our production, (iii) our "operating cash costs" as a measure of our performance, (iv) metal prices, (v) business segments, (vi) the effect of inflation and other local currency issues, and (vii) our capital investment and exploration program.

Earnings: The table below highlights key financial and operational data of our Company for the three months ended March 31, 2021 and 2020 (in millions, except copper price, percentages and per share amounts):






                                             Three months ended March 31,
                                    2021         2020       Variance     % Change
Copper price LME                       3.85         2.56         1.29        50.4 %
Pounds of copper sold                 529.6        554.5       (24.9)       (4.5) %
Net sales                         $ 2,532.5    $ 1,719.7    $   812.8        47.3 %
Operating income                  $ 1,351.6    $   533.3    $   818.3       153.4 %
Net income attributable to SCC    $   763.8    $   214.8    $   549.0       255.6 %
Earnings per share                $    0.99    $    0.28    $    0.71       253.6 %
Dividends per share               $    0.60    $    0.40    $    0.20        50.0 %



Net sales in the first quarter of 2021 were 47.3% higher than in the same period of 2020, which was primarily attributable to higher metal prices for copper (+50.4% LME), silver (+55.8%), molybdenum (+17.1%) and zinc (+28.9%). This was slightly offset by lower sales volume of copper (-4.5%), molybdenum (-0.1%), silver (-0.2%) and zinc (-36.1%).

Net income attributable to SCC in the first quarter of 2021 was 255.6% higher than in the same period of 2020. This growth was mainly attributable to the increase in metal prices mentioned above and to stable operating costs (-0.5%).

Production: The table below highlights our mine production data for the three months ended March 31, 2021 and 2020:






                                      Three months ended March 31,
                                  2021     2020     Variance    % Change

Copper (in million pounds) 525.6 533.5 (7.9) (1.5) % Molybdenum (in million pounds) 15.9 15.8 0.1 0.2 % Silver (in million ounces) 5.0 5.3 (0.3) (6.3) % Zinc (in million pounds)

           36.3     42.5       (6.2)      (14.5) %




The table below highlights our copper production data for the three months ended
March 31, 2021 and 2020:


                                  Three Months Ended March 31,
Copper (in million pounds):   2021     2020     Variance    % Change
Toquepala                     128.5    133.5       (5.0)       (3.8) %
Cuajone                        87.5     89.1       (1.6)       (1.8) %
La Caridad                     72.3     73.6       (1.3)       (1.8) %
Buenavista                    231.9    232.3       (0.4)       (0.2) %
IMMSA                           5.4      5.0         0.4         8.0 %
Total mined copper            525.6    533.5       (7.9)       (1.5) %



Mined copper production in the first quarter of 2021 fell slightly by 1.5% to situate at 525.6 million pounds compared to 533.5 million pounds in the first quarter of 2020. This was mainly attributable to:

? Lower production at our Peruvian and Mexican operations due to lower ore

grades. This was slightly offset by

? Higher production at our IMMSA operations due to higher ore grades.






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Molybdenum production increased 0.2% in the first quarter of 2021 with regard to the levels registered in the first quarter of 2020. This was attributable to an increase in production at our Peruvian mines (+10.1%) due to higher grades and recoveries and to growth in production at the La Caridad mine (+1.2%). This effect was partially offset by a decrease in production at the Buenavista mine (-21.9%) due to lower grades.

Silver mine production decreased 6.3% in the first quarter of 2021 due to a drop in production at the Toquepala (-9.0%), Buenavista (-13.4%) and IMMSA (-9.4%) operations. This was offset by higher production at Cuajone (+13.7%) and La Caridad (+8.6%) mines.

Zinc production decreased 14.5% in the first quarter of 2021 compared with the same period of 2021. This decrease was mainly attributable to lower production at Santa Barbara, Charcas and San Martin mines.

Operating Cash Costs: An overall benchmark used by us and a common industry metric to measure performance is operating cash costs per pound of copper produced. Operating cash cost is a non-GAAP measure that does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies. This non-GAAP information should not be considered in isolation or as substitute for measures of performance determined in accordance with GAAP. A reconciliation of our operating cash cost per pound of copper produced to the cost of sales (exclusive of depreciation, amortization and depletion) as presented in the consolidated statement of earnings is presented under the subheading, "Non-GAAP Information Reconciliation" on page 54. We disclose operating cash cost per pound of copper produced, both before and net of by-product revenues.

We define operating cash cost per pound of copper produced before by-product revenues as cost of sales (exclusive of depreciation, amortization and depletion), plus selling, general and administrative charges, treatment and refining charges net of sales premiums; less the cost of purchased concentrates, workers' participation and other miscellaneous charges, including royalty charges, and the change in inventory levels; divided by total pounds of copper produced by our own mines.

In our calculation of operating cash cost per pound of copper produced, we exclude depreciation, amortization and depletion, which are considered non-cash expenses. Exploration is considered a discretionary expenditure and is also excluded. Workers' participation provisions are determined on the basis of pre-tax earnings and are also excluded. Additional exclusions from operating cash costs are items of a non-recurring nature and the mining royalty charge as it is based on various calculations of taxable income, depending on which jurisdiction, Peru or Mexico, is imposing the charge. We believe these adjustments will allow our management and stakeholders to see a presentation of our controllable cash cost, which we believe is one of the lowest of all copper-producing companies of similar size.

We define operating cash cost per pound of copper produced net of by-product revenues as operating cash cost per pound of copper produced, as defined in the previous paragraph, less by-product revenues and net revenue (loss) on sale of metal purchased from third parties.

In our calculation of operating cash cost per pound of copper produced, net of by-product revenues, we credit against our costs the revenues from the sale of all our by-products, including, molybdenum, zinc, silver, gold, etc. and the net revenue (loss) on sale of metals purchased from third parties. We disclose this measure including the by-product revenues in this way because we consider our principal business to be the production and sale of copper. As part of our copper production process, much of our by-products are recovered. These by-products, as well as the processing of copper purchased from third parties, are a supplemental part of our production process and their sales value contribute to covering part of our incurred fixed costs. We believe that our Company is viewed by the investment community as a copper company, and is valued, in large part, by the investment community's view of the copper market and our ability to produce copper at a reasonable cost.

We believe that both of these measures are useful tools for our management and our stakeholders. Our cash costs before by-product revenues allow us to monitor our cost structure and address areas of concern within operating management. The measure operating cash cost per pound of copper produced net of by-product revenues is a common measure used in the copper industry and is a useful management tool that allows us to track our performance and better allocate our resources. This measure is also used in our investment project evaluation process to determine a project's potential



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contribution to our operations, its competitiveness and its relative strength in different price scenarios. The expected contribution of by-products is generally a significant factor used by the copper industry to determine whether to move forward or not in the development of a new mining project. As the price of our by-product commodities can have significant fluctuations from period to period, the value of its contribution to our costs can be volatile.

Our operating cash cost per pound of copper produced, before and net of by-product revenues, is presented in the table below for the three months ended March 31, 2021 and 2020:





              Operating cash cost per pound of copper produced (1)

              (In millions, except cost per pound and percentages)


                                                Three Months Ended March 31,
                                        2021         2020        Variance     % Change
Total operating cash cost before
by­product revenues                   $   771.3    $   732.9    $     38.4         5.2 %
Total by­product revenues             $ (393.7)    $ (332.2)    $   (61.5)        18.5 %
Total operating cash cost net of
by­product revenues                   $   377.6    $   400.7    $   (23.1)       (5.8) %

Total pounds of copper produced(2) 510.8 517.9 (7.1) (1.4) % Operating cash cost per pound before by­product revenues

$    1.51    $    1.42    $     0.10         6.7 %

By­products per pound revenues $ (0.77) $ (0.64) $ (0.13) 20.1 % Operating cash cost per pound net of by­product revenues

$    0.74    $    0.77    $   (0.03)       (3.9) %


(1) These are non-GAAP measures. Please see page 54 for reconciliation to GAAP

measure.

(2) Net of metallurgical losses.

As seen in the table above, our per pound cash cost before by-product revenues in the first quarter of 2021 was 6.7% higher compared with the same period of 2020. This increase is mainly attributable to an increase in production costs and to the unit cost effect of lower production. Our cash cost per pound net of by-product revenues for 2021 decreased 3.9% when compared with the same period of 2020. This was mainly attributable to a significant increase in by-product revenues.

Metal Prices: The profitability of our operations is dependent on, and our financial performance is significantly affected by, the international market prices for the products we produce, especially for copper, molybdenum, zinc and silver.

We are subject to market risks arising from the volatility of copper and other metal prices. For the remaining nine months of 2021, assuming that expected metal production and sales are achieved, tax rates remain unchanged and no effects are generated by potential hedging programs, metal price sensitivity factors would indicate the following change in estimated net income attributable to SCC resulting from metal price changes:






                                            Copper      Molybdenum       Zinc         Silver
Change in metal prices (per pound
except silver-per ounce)                   $    0.10    $      1.00    $    0.10    $     1.00

Change in net earnings (in millions) $ 124.2 $ 36.6 $ 12.3 $ 13.6

Business Segments: We view our Company as having three reportable segments and manage it on the basis of these segments. These segments are (1) our Peruvian operations, (2) our Mexican open-pit operations and (3) our Mexican underground operations, known as our IMMSA unit. Our Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities that service both mines. The Peruvian operations produce copper, with significant by-product production of molybdenum, silver and other material. Our Mexican open-pit operations include La Caridad and Buenavista mine complexes, the smelting and refining plants and support facilities, which service both mines. The Mexican open pit operations produce copper, with significant by-product production of molybdenum, silver and other material. Our IMMSA unit includes five underground mines that produce zinc, lead, copper, silver and gold, and several industrial processing facilities for zinc, copper and silver.





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Segment information is included in our review of "Results of Operations" in this item and also in Note 13 "Segment and Related Information" of our condensed consolidated financial statements.

Inflation and Exchange Rate Effect of the Peruvian Sol and the Mexican Peso: Our functional currency is the U.S. dollar and our revenues are primarily denominated in U.S. dollars. Significant portions of our operating costs are denominated in Peruvian sol and Mexican pesos. Accordingly, when inflation and currency devaluation/appreciation of the Peruvian currency and Mexican currency occur, our operating results can be affected. In recent years, we believe such changes have not had a material effect on our results and financial position. Please see Item 3. "Quantitative and Qualitative Disclosures about Market Risk" for more detailed information.

Capital Investment Programs: We made capital investments of $232.6 million in the three months ended March 31, 2021, compared to $101.0 million in the same period of 2020. In general, the capital investments and investment projects described below are intended to increase production, decrease costs or address social and environmental commitments.

Set forth below are descriptions of some of our current expected capital investment programs. We expect to meet the cash requirements for these projects from cash on hand, internally generated funds and from additional external financing, including funding received in September 2019. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy, market conditions or the COVID-19 pandemic.





Projects in Mexico:


Buenavista Zinc - Sonora: This project is located within the Buenavista facility and includes the development of a new concentrator to produce approximately 100,000 tons of zinc and 20,000 tons of copper per year. We have completed the basic engineering study and the detailed engineering study has reached 89% completion. In order to continue with the project, stronger preventive measures to combat COVID-19 have been put in place. Purchase orders have been placed for major equipment, some of which is currently being manufactured. As part of this process, the mill manufacturing process has been completed and the respective elements are being shipped. The project has all the necessary permits. The project´s budget is $413 million, and we expect to initiate operations in 2023. When completed, we anticipate that this new facility will double the Company's zinc production capacity and will provide 490 direct jobs and 1,470 indirect jobs.

Pilares - Sonora: This project, located six kilometers from La Caridad, will be developed as an open-pit mine operation with an annual production capacity of 35,000 tons of copper in concentrate. The ore will be transported from the pit to the primary crushers of the La Caridad copper concentrator through a new 25-meter wide off-road facility for mining trucks, which is under construction, and will significantly improve the overall mineral ore grade (combining the 0.78% expected from Pilares with 0.34% from La Caridad). The budget for Pilares is $159 million and we expect the project to begin production in the first quarter of 2022.

El Pilar - Sonora: This is a low-capital intensity copper development project strategically located in Sonora, Mexico, approximately 45 kilometers from our Buenavista mine. Its copper oxide mineralization contains estimated proven and probable reserves of 281 million tons of ore with an average copper grade of 0.301%. El Pilar will operate as a conventional open-pit mine with an annual production capacity of 36,000 tons of copper cathodes. This operation will use highly cost efficient and environmentally friendly SX-EW technology. We estimate a development investment of approximately $310 million. The results from experimental pads in leaching process have confirmed adequate levels of copper recovery. We expect this project to start production in 2023 with an expected mine life of 13 years. The Company has started the project basic engineering and site species collection.

The San Martin mine recovery program. After eleven years of illegal stoppage, we resumed control of the San Martin mine in August 2018. The San Martin facilities deteriorated during this period but we made a major renovation and restarted operations during the second quarter of 2019. Currently, the mine has 200,000 tons of ore and the concentrator has initiated production. In 2020, we produced 14,361 tons of zinc, 2.8 million ounces of silver, 3,601 tons of copper, and 1,425 tons of lead. As of March 2021, the Company has almost completed the rehabilitation plan to restore operations at the San Martin mine with a total expense of approximately $87.8 million and has reached full operating capacity.



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Projects in Peru:


Quebrada Honda dam expansion - Tacna: This project aims to enlarge the main and lateral dams in Quebrada Honda and includes the relocation of some facilities due to dam growth and implementation of other facilities for water recovery, among other factors. As of March 31, 2021, the engineering study was complete. The majority of the main equipment and materials have been procured and are arriving according to schedule. Construction is in progress with work on three fronts. This project has a total budget of $140.0 million, of which we had invested $46.4 million as of March 31, 2021.

Tia Maria - Arequipa: On July 8, 2019, we were granted the construction permit for this 120,000 ton annual SX-EW copper greenfield project with a total capital budget of $1,400 million. The Government awarded the permit after completing an exhaustive review process, complying with all established regulatory requirements and addressing all observations raised. The challenges surrounding the construction permit were overcome when on October 30, 2019, the Mining Council of the Peruvian Ministry of Energy and Mines ratified the construction permit for the Tia Maria project.

The Company has been consistently working to promote the welfare of the Islay province population. As part of these efforts, we have implemented successful social programs in education, healthcare and productive development to improve the quality-of-life in the region. We also have promoted agricultural and livestock activities in the Tambo Valley and supported growth in manufacturing, fishing and tourism in Islay.

On January 7, 2021, the mayor of the Islay province (Arequipa, Peru) awarded a City Diploma to SPCC in recognition of the Company's efforts to assist the population of Islay during the COVID-19 pandemic. SPCC provided medical assistance, tests, oxygen, personal protection equipment and food stuffs to the population in the area of influence of the Tia Maria project.

We consider that the initiation of construction activities at Tia Maria will generate significant economic opportunities for the Islay province and the Arequipa region. During the construction and operation phase, we will make it a priority to hire local labor to fill the 9,000 jobs (3,600 direct and 5,400 indirect) that we expect to generate during Tia Maria's construction phase. When operating, we expect Tia Maria to directly employ 600 workers and indirectly provide jobs for another 4,200. Additionally, from day one of our operations, we will generate significant contributions to revenues in the Arequipa region via royalties and taxes.

This greenfield project, located in Arequipa, Peru, will use state of the art SX-EW technology with the highest international environmental standards. SX-EW facilities are the most environmentally friendly in the industry due to their technical process with no emissions released into the atmosphere.





Potential projects


We have a number of other projects that we may develop in the future. We continuously evaluate new projects on the basis of our long-term corporate objectives, expected return on investment, environmental concerns, required investment and estimated production, among other considerations. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy, market conditions or the COVID-19 pandemic.

El Arco - Baja California: This is a world-class copper deposit located in the central part of the Baja California peninsula, with ore reserves of over 2.4 billion tons with an ore grade of 0.422%, 0.3 billion tons of leach material with an ore grade of 0.288% and 0.11 grams of gold per ton. This project envisions an open-pit mine with a combined concentrator and SX-EW operations, with an estimated production capacity of 190,000 tons of copper and 105,000 ounces of gold annually. The project has an estimated capital budget of $2.9 billion. The Company has started the baseline study and it is reviewing the basic engineering analysis to request the environmental impact permit. We are currently in the final stage of the land acquisition process for the project.

Los Chancas - Apurimac: This greenfield project, located in Apurimac, Peru, is a copper and molybdenum porphyry deposit. Current estimates indicate the presence of 545 million tons of mineralized material with a copper content of 0.59%, molybdenum content of 0.04% and 0.039 grams of gold per ton, as well as 181 million tons of mineralized leachable material with a total copper content of 0.357%. Los Chancas project envisions an open-pit mine with a



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combined operation of concentrator and SX-EW processes to produce 130,000 tons of copper and 7,500 tons of molybdenum anually. The estimated capital investment is $2,600 million and the project is expected to be in operation in 2027. In 2019, we continued to engage in social and environmental improvements for the local communities. In 2020,

we continued to work on these activities and plan to conclude the environmental impact assessment for the project in

2021.

Michiquillay Project - Cajamarca: On June 12, 2018, Southern Copper signed a contract and made an initial payment of $12.5 million for the acquisition of the Michiquillay project in Cajamarca, Peru. The Company has created a multidisciplinary management team to plan the development of this project. As part of this plan, the Company has established contact with the local and regional authorities and communities in order to promote programs for the sustainable development of the area. In 2020, we continued to develop social and environmental programs for the local communities. In February 2021, we completed a semi-detailed environmental impact assessment and submitted it to the Peruvian authorities for approval. This will allow us to begin a 50,000 meter diamond drilling program in 2021 to verify and update the project´s estimated mineralized materials.

Michiquillay is a world class mining project with estimated mineralized material of 1,150 million tons with an estimated copper grade of 0.63%. When developed, we expect Michiquillay to produce 225,000 tons of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years, at a competitive cash-cost. We estimate an investment of approximately $2.5 billion will be required and expect production start-up by 2028 and that Michiquillay will become one of Peru´s largest copper mines. The project will create significant business opportunities in the Cajamarca region, generate new jobs for the local communities and contribute with taxes and royalties to the local, regional and national governments.

The above information is based on estimates only. We cannot make any assurances that we will undertake any of these projects or that the information noted is accurate.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")

We are committed to improving our ESG record by adopting best practices. In this regard, our sustainable development policies were recently updated. These policies, applicable to SCC and its subsidiaries, formalize our vision, commitments and objectives to promote sustainable development and generate shared value for our stakeholders. For further information on our disclosure on Human Capital Resources, see the section included in Part I, Item 1 of our Annual report on Form 10-K for the year ended December 31, 2020. Also, see our disclosure on our COVID-19 response, environmental disclosure and support of our local communities elsewhere in this report.

In 2020, and for the second consecutive year, SCC was listed on SCC Dow Jones Sustainability Index MILA. Additionally, our score on S&P Global's annual sustainability assessment increased to 50 points during the same period; this represents a 5-point increase over 2019's level.

In Peru, in coordination with the Peruvian government and our main oxygen supplier, we have adapted our Ilo Oxygen Plant N°2 in record time to produce 140 tons per week of liquid oxygen. The production is being used to supply hospitals and medical facilities in Peru's central and southern regions, where medicinal oxygen is extremely scarce. We have committed to donating 2,500 tons of liquid oxygen, which is the equivalent of 194,000 oxygen tanks of 10 cubic meters each. As of March 31, 2021, we had delivered 1,346 tons of liquid oxygen, or 53% of the committed donation.

In addition to this effort, in March 2021 we donated two mobile oxygen plants, each with a capacity of 720 cubic meters per day of medical oxygen. These plants will be transported to towns that lack sufficient oxygen supplies to fight against COVID-19.

In 2020, the 3,667 students from 11 educational centers sponsored by us in Mexico and Peru were able to continue their school programs remotely. To cope with the global pandemic, our programs, which are developed under the Community Development Model, migrated to virtual platforms. Last year, 4,634 online workshops were held, consolidating a community of over 290 thousand users on social networks, which represents an increase of 63% compared to 2019. In the first quarter of 2021, we continued to roll out remote school programs to provide education to 3,756 school-age



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children. Alongside these efforts, we offered virtual workshops to the community, which have been reproduced more than 10 million times since the beginning of the pandemic.

Last year was marked by a good performance in terms of occupational safety since no fatalities were registered, and accident rates and lost days in the mining division dropped by 44% and 78% respectively compared to 2019. Minera México obtained, for the second consecutive year, three of the six distinctions ("Casco de Plata") awarded by the Mining Chamber of Mexico for occupational health and safety performance. The survey conducted by the Mining Chamber of Mexico, which determines award recipients, includes approximately 120 mining companies of different sizes that are grouped into diverse categories, such as open and underground mining, smelting and refining.





CLIMATE CHANGE


Peruvian operations: On April 17, 2018, the Peruvian government enacted Law N. 30754, establishing a Climate Change Framework. Through this law, promoting public and private investments in climate change management is declared to be of national interest. The law proposes to create an institutional framework to address climate change in Peru, outlining new measures, particularly with respect to climate change mitigation. It includes, for example, provisions regarding: increasing carbon capture and use of carbon sinks; afforestation and reforestation practices; land use changes; and sustainable systems of transportation, solid waste management, and energy systems. This is the first climate change framework law in Latin America to incorporate obligations from the Paris Agreement. Regulations to this law were enacted by Supreme Decree 013-2019, which was published on December 31, 2019 and are applicable to all Peruvian institutions and agencies. It is expected that further Peruvian regulations will be applicable to non-governmental entities. The Company anticipates initiating a multi-year process to adopt applicable reporting recommendations of the Task-Force on Climate Related Financial Disclosures (TCFD) once new Peruvian climate change regulations applicable to non-governmental entities are implemented. The Company is committed to the environment and to managing climate-related impacts. The Company's focus is to seek continuous improvement in the responsible use of natural resources while complying with strict applicable legal standards for prevention, mitigation, control and remediation of environmental impacts. Implementing continuous improvement in the Company's processes improves efficiency in the use and consumption of energy, water, and other natural resources.

Mexican operations: Grupo Mexico, the indirect parent of SCC has issued sustainability reports under the Global Reporting Initiative (GRI) for more than 10 years. Grupo Mexico also participates in different Mexican and international reporting programs such as the Greenhouse Gases (GHG) Mexico Program and CDP (formerly the Carbon Disclosure Project). In 2013, GHG and CDP signed a memorandum of understanding to work on aligning their reporting frameworks. Grupo Mexico's 2018 CDP questionnaire included responses to the Task Force on Climate-Related Disclosure or TCFD concerns. In compliance with the 2012 Mexican Climate Change Law, Grupo Mexico's GHG emissions are reported and verified independently. Grupo Mexico's Sustainability Reports, which disclose inventories of GHG emissions, can be found at "https://www.gmexico.com/en/Pages/development.aspx". On October 18, 2017, Grupo Mexico was selected to join the S&P Sustainability Indices MILA Pacific Alliance (DJSI MILA). In 2017, this regional sustainability index included 42 leading companies in sustainability from the countries that form part of the Pacific Alliance: Mexico, Chile, Colombia and Peru.





ACCOUNTING ESTIMATES


Our discussion and analysis of financial condition and results of operations, as well as quantitative and qualitative disclosures about market risks, are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We make our best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: ore reserves, revenue recognition, ore stockpiles on leach pads and related amortization, estimated impairment of assets, asset retirement obligations, determination of discount rates related to the



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financial lease liabilities, classification of operating leases versus financial leases, valuation allowances for deferred tax assets, unrecognized tax benefits and fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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