NOTE 11-BENEFIT PLANS:

Post retirement defined benefit plan:

The Company has two noncontributory defined benefit pension plans covering former salaried employees in the United States and certain former expatriate employees in Peru (the “Expatriate Plan”). Effective October 31, 2000, the Board of Directors amended the qualified pension plan to suspend the accrual of benefits.

In addition, the Company´s Mexican subsidiaries have a defined contribution benefit pension plan for salaried employees and a non-contributory defined benefit pension plan for union employees (The “Mexican Plan”). These plans are in addition to benefits granted by the Mexican Institute of Social Security.

The components of net periodic benefit costs calculated in accordance with ASC 715 “Compensation retirement benefits,” using December 31 as a measurement date, consist of the following:

	Years ended December 31,
(in millions)	2013			2012			2011
Service cost	$	1.1		$	1.0		$	0.9
Interest cost	1.0			1.1			1.2
Expected return on plan assets	(3.4		)	(3.6		)	(3.5		)
Amortization of transition assets, net	—			—			(0.1		)
Amortization of net actuarial loss	(0.7		)	(0.8		)	(1.3		)
Amortization of net loss/(gain)	0.2			0.1			0.1
Net periodic benefit cost	$	(1.8	)	$	(2.2	)	$	(2.7	)

The change in benefit obligation and plan assets and a reconciliation of funded status are as follows:

	As of December 31,
(in millions)	2013			2012
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	27.9		$	25.2
Service cost	1.1			1.0
Interest cost	1.0			1.1
Actuarial gain census	(0.3		)	(0.1		)
Benefits paid	(2.2		)	(2.0		)
Actuarial (gain)/loss	0.3			1.0
Actuarial gain assumption changes	(1.0		)	0.8
Inflation adjustment	—			0.9
Projected benefit obligation at end of year	$	26.8		$	27.9

Change in plan assets:
Fair value of plan assets at beginning of year	$	61.9		$	55.8
Actual return on plan assets	(0.2		)	4.9
Employer contributions	0.1			(0.6		)
Benefits paid	(0.9		)	(1.1		)
Currency exchange rate adjustment	(0.3		)	2.9
Fair value of plan assets at end of year	$	60.6		$	61.9

Funded status at end of year:	$	33.8		$	34.0

ASC-715 amounts recognized in statement of financial position consists of:
Non-current assets	$	33.8		$	34.0
Total	$	33.8		$	34.0

ASC-715 amounts recognized in accumulated other comprehensive income (net of income taxes of $1.5 million and $2.9 million in 2013 and 2012, respectively) consists of:
Net loss (gain)	$	(1.7	)	$	(3.7	)
Prior service cost		0.1			0.1
Total	$	(1.6	)	$	(3.6	)

The following table summarizes the changes in accumulated other comprehensive income for the years ended December 31, related to the defined benefit pension plan, net of income tax:

(in millions)	2013			2012
Reconciliation of accumulated other comprehensive income:
Accumulated other comprehensive income at beginning of plan year	$	(3.6	)	$	(3.8	)

Net loss/(gain) amortized during the year	0.4			0.5
Net loss/(gain) occurring during the year	1.5			0.3
Currency exchange rate adjustment	0.1			(0.6		)
Net adjustment to accumulated other comprehensive income (net of income taxes of $(1.3) million and $(0.5) million in 2013 and 2012, respectively)	2.0			0.2

Accumulated other comprehensive income at end of plan year	$	(1.6	)	$	(3.6	)

The following table summarizes the amounts in accumulative other comprehensive income amortized and recognized as a component of net periodic benefit cost in 2013 and 2012, net of income tax:

(in millions)	2013		2012
Net loss / (gain)	$	1.5	$	0.3
Amortization of net (loss) gain	0.4		0.5
Total amortization expenses	$	1.9	$	0.8

The assumptions used to determine the pension obligation and seniority premiums as of year-end and the net cost in the ensuing year are:

	2013		2012		2011
Expatriate Plan
Discount rate	4.25	%	3.35	%	3.95	%
Expected long-term rate of return on plan asset	4.50	%	4.50	%	4.50	%
Rate of increase in future compensation level	N/A		N/A		N/A

	2013		2012		2011
*Mexican Plan()**
Discount rate	7.10	%	6.50	%	7.50	%
Expected long-term rate of return on plan asset	7.10	%	6.50	%	7.50	%
Rate of increase in future compensation level	4.00	%	4.00	%	4.50	%

(*)These rates are based on Mexican pesos as pension obligations are denominated in pesos.

The scheduled maturities of the benefits expected to be paid in each of the next five years, and thereafter, are as follows:

Years	Expected Benefit Payments
	(in millions)
2014	$	1.7
2015	1.3
2016	1.3
2017	1.3
2018	1.3
2019 to 2023	7.4
Total	$	14.3

Expatriate Plan

The Company’s funding policy is to contribute amounts to the qualified plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974 plus such additional amounts as the Company may determine to be appropriate. Plan assets are invested in stock and bond funds.

Plan assets are invested in a group annuity contract (the “Contract”) with Metropolitan Life Insurance Company (“MetLife”). The Contract invests in the MetLife Broad Market Bond Fund (the “Bond Fund”) managed by BlackRock, Inc. (“BlackRock”), and the MetLife General Account Payment Fund (the “Money Fund”).

The Money Fund seeks to maximize current income to the extent consistent with preservation of capital and liquidity and the maintenance of a stable $1.00 per share net asset value, by investing in U.S. Dollar-denominated money market securities. The Bond Fund seeks to outperform the Barclays ® U.S. Aggregate Bond Index, net of fees, over a full market cycle. The Bond Fund invests in publicly traded, investment grade securities with a target duration within one and a half years of the Barclays ® U.S. Aggregate Bond Index.

The investment allocation decisions within the Funds, as reported to the Company by BlackRock effective December 31, 2013, were as follows:

With respect to the Bond Fund, its interest rate/yield curve position moved from neutral to short duration during the year. Within Treasuries/Agencies, BlackRock is overweight 5- and 10-year breakevens. Within Mortgages, BlackRock has a small overweight concentrated in Fannie 30-year 4.0% coupons versus 5- and 10-year Treasuries.

Within the Commercial Mortgage-Backed Securities (CMBS) sector, BlackRock maintained an overweight position to CMBS. BlackRock continues to favor liquid high-quality paper. Within Credit, BlackRock increased its underweight position. Credit remains its largest underweight and is concentrated in industrials versus financials.

Within the Asset-Backed Securities (ABS) sector, BlackRock maintains its overweight. BlackRock continues to hold subprime autos. Within the remaining sub-sectors, BlackRock favors Federal Family Education Loan Program student loans, servicer advances and dollar denominated senior UK Residential Mortgage-Backed Securities.

The Company’s policy for determining asset mix-targets includes periodic consultation with recognized third party investment consultants. The expected long-term rate of return on plan assets is updated periodically, taking into consideration asset allocations, historical returns and the current economic environment. Based on these factors the Company expects its assets will earn an average of 4.50% per annum assuming its long-term mix will be consistent with its current mix and an assumed discount rate of 4.25%. The fair value of plan assets is impacted by general market conditions. If actual returns on plan assets vary from the expected returns, actual results could differ.

Mexican Plan

Minera Mexico’s policy for determining asset mix targets includes periodic consultation with recognized third party investment consultants. The expected long-term rate of return on plan assets is updated periodically, taking into consideration assets allocations, historical returns and the current economic environment. The fair value of plan assets is impacted by general market conditions. If actual returns on plan assets vary from the expected returns, actual results could differ.

The plan assets are managed by three financial institutions, Scotiabank Inverlat S.A., Banco Santander and IXE Banco, S.A. 26% of the funds are invested in Mexican government securities, including treasury certificates and development bonds of the Mexican government. The remaining 74% is invested in common shares of Grupo Mexico.

The plan assets are invested without restriction in active markets that are accessible when required and are therefore considered as level 1, in accordance with ASC 820.

These plans accounted for approximately 30% of benefit obligations. The following table represents the asset mix of the investment portfolio as of December 31:

	2013		2012
Asset category:
Equity securities	74	%	73	%
Treasury bills	26	%	27	%
	100	%	100	%

The amount of contributions that the Company expects to pay to the plan during 2014 is $2.4 million.

Post-retirement Health Care Plan

Former Peruvian and U.S. expatriate employees: The Company adopted the post-retirement health care plan for retired salaried employees eligible for Medicare on May 1, 1996 (The Expatriate Health Plan”). The plan is unfunded.

Effective October 31, 2000, the health care plan for retirees was terminated and the Company informed retirees that they would be covered by the then in effect post-retirement health care plan of Asarco, a former shareholder of the Company and a subsidiary of Grupo Mexico, which offered substantially the same benefits and required the same contributions. Asarco is no longer managing the plan. The Company has assumed management of the plan and is currently providing health benefits to retirees. The plan is accounted for in accordance with ASC 715 “Compensation retirement benefits.”

Mexican Health Plan: Through 2007, the Buenavista unit provided health care services free of charge to employees and retired unionized employees and their families through its own hospital at the Buenavista unit. In 2011, the Company signed an agreement with the Secretary of Health of the State of Sonora to provide these services to its retired workers and their families at a lower cost for the Company but still free of charge to the retired workers. As a result of the cost savings, the plan value and the cost of the net periodic benefits have been reduced and are included in the activity in the following tables.

The components of net period benefit costs are as follows:

	Years ended December 31,
(in millions)	2013		2012			2011
Service cost	$	—	$	—		$	—
Interest cost	1.7		1.5			3.3
Amortization of transition obligation	—		—			1.3
Amortization of prior service cost/ (credit)	—		(0.3		)	(10.0		)
Net periodic benefit cost	$	1.7	$	1.2		$	(5.4	)

The change in benefit obligation and a reconciliation of funded status are as follows:

	As of December 31,
(in millions)	2013			2012
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	27.2		$	20.3
Interest cost	1.7			1.5
Actuarial loss/ (gain) — claims cost	—			(0.2		)
Benefits paid	(0.1		)	(1.5		)
Actuarial (gain)/loss	(6.8		)	5.6
Actuarial gain assumption changes	(0.2		)	0.1
Inflation adjustment	(0.1		)	1.4
Projected benefit obligation at end of year	$	21.7		$	27.2

Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions	0.1			0.1
Benefits paid	(0.1		)	(0.1		)
Fair value of plan assets at end of year	$	—		$	—

Funded status at end of year:	$	(21.7	)	$	(27.2	)

ASC-715 amounts recognized in statement of financial position consists of:
Current liabilities	$	(0.1	)	$	(0.1	)
Non-current liabilities	(21.6		)	(27.1		)
Total	$	(21.7	)	$	(27.2	)

ASC-715 amounts recognized in accumulated other comprehensive income consists of:
Net loss (gain)	$	(4.3	)	$	(0.1	)
Prior service cost (credit)	(0.1		)	(0.1		)
Total (net of income taxes of $ 3.0 million and $0.2 million in 2013 and 2012, respectively)	$	(4.4	)	$	(0.2	)

The following table summarizes the changes in accumulated other comprehensive income for the years ended December 31, related to the post-retirement health care plan, net of income tax:

	As of December 31,
(in millions)	2013			2012
Reconciliation of accumulated other comprehensive income:
Accumulated other comprehensive income at beginning of plan year	$	(0.3	)	$	(3.4	)

Net loss/(gain) occurring during the year	(4.1		)	3.2
Amortization of transition obligation	—			0.2
Currency exchange rate adjustment	—			(0.3		)
Net adjustment to accumulated other comprehensive income (net of income taxes of $ 2.8 million and $(2.4) million in 2013 and 2012, respectively)	(4.1		)	3.1

Accumulated other comprehensive income at end of plan year	$	(4.4	)	$	(0.3	)

The following table summarizes the amounts in accumulative other comprehensive income amortized and recognized as a component of net periodic benefit cost in 2013 and 2012, net of income tax:

	As of December 31,
(in millions)	2013			2012
Net loss / (gain)	$	(4.1	)	$	3.2
Amortization of transition obligation	—			0.2
Total amortization expenses	$	(4.1	)	$	3.4

The discount rates used in the calculation of other post-retirement benefits and cost as of December 31 were:

	2013		2011		2010
Expatriate health plan
Discount rate	4.25	%	3.35	%	3.95	%
Mexican health plan
Weighted average discount rate	7.1	%	6.50	%	7.50	%

The benefits expected to be paid in each of the next five years, and thereafter, are as follows:

Year	Expected Benefit Payments
	(in millions)
2014	$	1.4
2015	1.5
2016	1.6
2017	1.7
2018	1.8
2019 to 2023	10.5
Total	$	18.5

Expatriate Health Plan:

For measurement purposes, a 6.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2013. The rate is assumed to decrease gradually to 4.6%.

Assumed health care cost trend rates can have a significant effect on amounts reported for health care plans. However, because of the size of the Company’s plan, a one percentage-point change in assumed health care trend rate would not have a significant effect.

Mexican Health Plan

For measurement purposes, a 4.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2013 and remains at that level thereafter.

An increase in other benefit cost trend rates have a significant effect on the amount of the reported obligations, as well as component cost of the other benefit plan. One percentage-point change in assumed other benefits cost trend rates would have the following effects:

	One Percentage Point
(in millions)	Increase		Decrease
Effect on total service and interest cost components	$	1.4	$	1.3
Effect on the post-retirement benefit obligation	$	18.1	$	22.4