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RELATED PARTY TRANSACTIONS: | 6 Months Ended
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Jun. 30, 2011
RELATED PARTY TRANSACTIONS: |
RELATED PARTY TRANSACTIONS: |
NOTE 10 — RELATED PARTY TRANSACTIONS: Receivable and payable balances with related parties are shown below (in millions):
|  | As of |
|  | June 30, 2011 |  | December 31, 2010 |
Affiliate receivable: |  |  |  |  |
Grupo Mexico, S.A.B de C.V. and affiliates |  | $ | 0.8 |  | $ | 32.7 |
Mexico Proyectos y Desarrollos S.A de C.V. and affiliates |  | 3.3 |  | — |
Asarco LLC |  | 0.3 |  | — |
|  | $ | 4.4 |  | $ | 32.7 |
Affiliate payable: |  |  |  |  |
Grupo Mexico S.A.B. de C.V. and affiliates |  | $ | 2.6 |  | $ | 2.3 |
Ferrocarril Mexicano S.A. de C.V. |  | 1.3 |  | 0.1 |
Mexico Transportes Aereos S.A de C.V. (“Mextransport”) |  | 0.5 |  | 0.4 |
Mexico Productos Automotrices S.A. de C.V. |  | 0.3 |  | — |
Mexico Proyectos y Desarrollos S.A de C.V. and affiliates |  | — |  | 0.9 |
Consorcio Tricobre |  | — |  | 0.5 |
Higher Technology S.A.C. |  | — |  | 0.1 |
Breaker S.A. de C.V |  | 0.9 |  | 0.3 |
Pigoba S.A. de C.V |  | — |  | 0.1 |
Other |  | — |  | — |
|  | $ | 5.6 |  | $ | 4.7 |
The Company has entered into certain transactions in the ordinary course of business with parties that are controlling shareholders or their affiliates. These transactions include the lease of office space, air transportation and construction services and products and services relating to mining and refining. The Company lends and borrows funds among affiliates for acquisitions and other corporate purposes. These financial transactions bear interest and are subject to review and approval by senior management, as are all related party transactions. It is the Company’s policy that the Audit Committee of the Board of Directors shall review all related party transactions. The Company is prohibited from entering or continuing a material related party transaction that has not been reviewed and approved or ratified by the Audit Committee. Purchase Activity: The following table summarizes the purchase activity with related parties in the six months ended June 30, 2011 and 2010 (in millions):
|  | Six months ended June 30, |
|  | 2011 |  | 2010 |
Grupo Mexico and affiliates: |  |  |  |  |
Grupo Mexico Servicios, S.A de C.V |  | $ | 7.0 |  | $ | 6.9 |
Asarco LLC |  | 7.7 |  | — |
Ferrocarril Mexicano, S.A de C.V. |  | 4.1 |  | 1.6 |
Mexico Constructora Industrial S.A. de C.V. |  | 14.1 |  | — |
Compania Perforadora Mexico S.A.P.I. de C.V and affiliates |  | 0.4 |  | — |
Consorcio Tricobre |  | 0.5 |  | 1.4 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 1.8 |  | 8.8 |
Other Larrea family companies: |  |  |  |  |
Mexico Compania de Productos Automotrices, S.A. de C.V. |  | 0.2 |  | 1.1 |
Mextransport |  | 1.3 |  | 1.0 |
Companies with relationships to SCC executive officers families: |  |  |  |  |
Higher Technology S.A.C. |  | 0.9 |  | 1.5 |
Servicios y Fabricaciones Mecanicas S.A.C. |  | 0.2 |  | 0.2 |
Sempertrans France Belting Technology |  | 0.2 |  | 0.4 |
PIGOBA, S.A. de C.V. |  | 0.1 |  | 0.1 |
Breaker, S.A. de C.V. |  | 2.9 |  | 0.3 |
Total purchased |  | $ | 41.4 |  | $ | 23.3 |
Grupo Mexico, the Company’s ultimate parent and the majority indirect stockholder of the Company, and its affiliates provide various services to the Company. These services are primarily related to accounting, legal, tax, financial, treasury, human resources, price risk assessment and hedging, purchasing, procurement and logistics, sales and administrative and other support services. The Company pays Grupo Mexico Servicios S.A de C.V., a subsidiary of Grupo Mexico, for these services. The Company expects to continue to pay for these services in the future. The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano S.A de C.V., for construction services provided by Mexico Constructora Industrial and its affiliates and for drilling services provided by Compania Perforadora Mexico S.A.P.I. de C.V., these three companies are subsidiaries of Grupo Mexico. The Company’s Peruvian operations paid fees for engineering and consulting services provided by Consorcio Tricobre, a Peruvian company in which Servicios de Ingenieria Consutec, S.A. de C. V., an indirect subsidiary of Grupo Mexico, has 42.7% participation. The Larrea family controls a majority of the capital stock of Grupo Mexico, and has extensive interests in other businesses, including oil drilling services, construction, aviation and real estate. The Company engages in certain transactions in the ordinary course of business with other entities controlled by the Larrea family relating to mining and refining services, the lease of office space and air transportation and construction services. In connection with this, the Company paid fees for maintenance services and sale of vehicles provided by México Compania de Productos Automotrices, S.A. de C.V., a company controlled by the Larrea family, and which is currently in liquidation. Additionally, in 2007, the Company’s Mexican subsidiaries provided guaranties for two loans obtained by MexTransport, a company controlled by the Larrea family, from Bank of Nova Scotia in Mexico. One of these loans has been repaid and the remaining loan requires semi-annual repayments. Conditions and balance as of June 30, 2011 are as follows:
|  | Loan Open |
Original loan balance (in millions) |  | $ | 8.5 |
Maturity |  | August 2013 |
Interest rate |  | Libor + 0.15 | %
Remaining balance at June 30, 2011 (in millions) |  | $ | 3.2 |
MexTransport provides aviation services to the Company’s Mexican operations. The guaranty provided to MexTransport is backed up by the transport services provided by MexTransport to the Company’s Mexican subsidiaries. If MexTransport defaults on the loan, SCC’s subsidiaries would have to satisfy the guaranty and repay to the bank the remaining balances, plus interest. The Company paid fees to MexTransport for aviation services. The Company purchased industrial materials from Higher Technology S.A.C. and paid fees for maintenance services provided by Servicios y Fabricaciones Mecanicas S.A.C. Mr. Carlos Gonzalez, the son of SCC’s Chief Executive Officer, has a proprietary interest in these companies. The Company purchased industrial material from Sempertrans France Belting Technology, in which Mr. Alejandro Gonzalez is employed as a sales representative. Also, the Company purchased industrial material from PIGOBA, S.A. de C.V., a company in which Mr. Alejandro Gonzalez has a proprietary interest. Mr. Alejandro Gonzalez is the son of SCC’s Chief Executive Officer. The Company purchased industrial material and services from Breaker, S.A. de C.V., a company in which Mr. Jorge Gonzalez, son-in-law of SCC’s Chief Executive Officer, has a proprietary interest. In 2011, the Company paid fees to Asarco, a subsidiary of Grupo Mexico, for tolling services provided to the Company’s Mexican operations. Also, in the second quarter of 2010 the Company recovered from Asarco $7.7 million related to a previously written-off net accounts receivable position. This recovery was recorded in the condensed consolidated statement of earnings as follows: $5.0 million in cost of sales, $1.6 million in other income and $1.1 million as interest income. Sales Activity: The Company sold copper cathodes, rod and anodes, as well as sulfuric acid and lime to Asarco. The following table summarizes the sales activity in the three and six months ended June 30, 2011 (in millions):
|  | 2011 |  | 2010 |
First quarter |  | $ | 17.9 |  | $ | — |
Second quarter |  | 34.6 |  | 5.1 |
Total |  | $ | 52.5 |  | $ | 5.1 |
It is anticipated that in the future the Company will enter into similar transactions with these same parties.

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- Definition The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 3A -Section 04 -Paragraph b Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 57 -Paragraph 1-4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 4 -Section 08 -Paragraph k Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 + Details
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