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RELATED PARTY TRANSACTIONS: | 6 Months Ended
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Jun. 30, 2014
RELATED PARTY TRANSACTIONS: |
RELATED PARTY TRANSACTIONS: | NOTE 7 — RELATED PARTY TRANSACTIONS: 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, construction services and products and services related 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. Receivable and payable balances with related parties are shown below (in millions):
|  | As of |
|  | June 30, 2014 |  | December 31, 2013 |
Related parties receivable current: |  |  |  |  |
Grupo Mexico and affiliates |  | $ | 0.9 |  | $ | 0.8 |
Mexico Generadora de Energia S. de R.L. (“MGE”) |  | — |  | 18.8 |
Compania Perforadora Mexico, S.A.P.I. de C.V. and affiliates |  | 1.0 |  | 0.7 |
Compania Minera Coimolache S.A. |  | 5.6 |  | 17.2 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 3.3 |  | 0.6 |
|  | $ | 10.8 |  | $ | 38.1 |
Related parties receivable non-current: |  |  |  |  |
MGE |  | $ | 161.2 |  | $ | 161.2 |
Related parties payable: |  |  |  |  |
Grupo Mexico and affiliates |  | $ | 6.1 |  | $ | 3.3 |
MGE |  | 9.9 |  | 14.4 |
Asarco LLC |  | 6.1 |  | 6.2 |
Higher Technology S.A.C. |  | 0.1 |  | 0.1 |
Breaker S.A. de C.V and affiliates (“Breaker”) |  | 1.1 |  | 0.3 |
Sempertrans and affiliates |  | 0.1 |  | 0.1 |
Mexico Transportes Aereos, S.A. de C.V. (“Mextransport”) |  | 0.3 |  | 0.6 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 0.1 |  | — |
Ferrocarril Mexicano, S.A. de C.V. |  | 1.2 |  | 3.3 |
|  | $ | 25.0 |  | $ | 28.3 |
Purchase and sale activities: Grupo Mexico and its affiliates: The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the six months ended June 30, 2014 and 2013 (in millions):
|  | As of June 30, |
|  | 2014 |  | 2013 |
Purchases activity |  |  |  |  |
Grupo Mexico and affiliates |  | $ | 6.9 |  | $ | 6.9 |
Asarco LLC. |  | 24.6 |  | 70.7 |
Ferrocarril Mexicano S.A de C.V. |  | 11.6 |  | 11.1 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 55.9 |  | 26.6 |
MGE |  | 91.7 |  | — |
Cia Perforadora Mexico S.A.P.I. de C.V and affiliates |  | 1.9 |  | 2.6 |
Total purchases |  | $ | 192.6 |  | $ | 117.9 |
Sales activity |  |  |  |  |
Asarco LLC |  | $ | 21.7 |  | $ | 71.8 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 0.4 |  | 0.4 |
Cia Perforadora Mexico S.A.P.I. de C.V and affiliates |  | 0.3 |  | 0.3 |
MGE |  | 48.8 |  | 0.7 |
Total sales |  | $ | 71.2 |  | $ | 73.2 |
Grupo Mexico, the 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 for these services and expects to continue paying 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 Proyectos y Desarrollos S.A. de C.V. and its affiliates, and for drilling services provided by Compania Perforadora Mexico S.A.P.I. de C.V. All of these companies are subsidiaries of Grupo Mexico. The Company’s Mexican operations purchased scrap and other residual copper mineral from Asarco, and from MGE, power. Both companies are subsidiaries of Grupo Mexico. The Company paid fees for engineering, construction and consulting services provided by subsidiaries of Mexico Proyectos y Desarrollos, S.A. de C. V, a subsidiary of Grupo Mexico. In 2005, the Company organized MGE, as a subsidiary of Minera Mexico, for the construction of two power plants to supply power to the Company’s Mexican operations. In May 2010, the Company’s Mexican operations granted a $350 million line of credit to MGE for the construction of these power plants. The line of credit was due on December 31, 2012 and carried an interest rate of 4.4%. In the first quarter of 2012, Controladora de Infraestructura Energetica Mexico, S. A. de C. V., an indirect subsidiary of Grupo Mexico, acquired 99.999% of MGE through a capital subscription of 1,928.6 million of Mexican pesos (approximately $150 million), reducing Minera Mexico’s participation to less than 0.001%. As consequence of this change in control, MGE became an indirect subsidiary of Grupo Mexico. Additionally, at the same time, MGE paid $150 million to the Company’s Mexican operations partially reducing the total debt. At December 31, 2012, the outstanding balance of $184.0 million was restructured as subordinated debt of MGE with an interest rate of 5.75%. MGE will repay its debt to the Company using a percentage of its profits until such time as the debt is satisfied. At June 30, 2014 the remaining balance of the debt was $161.2 million and was recorded as non-current related party receivable on the condensed consolidated balance sheet. Related to this loan, the Company received interest income of $4.7 million and $5.0 million in the first six months of 2014 and 2013, respectively. In 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply some of the Company’s Mexican operations with power through 2032. MGE completed construction of its first power plant in June 2013 and the second plant, in the first quarter of 2014. MGE is currently awaiting the authorization for interconnection with the Mexican electrical system to start operations at the second plant. MGE began supplying power to the Company in December 2013. It is expected that MGE will supply a portion of its power output to third-party energy users. See also Note 9 - Commitments and Contingencies, Other commitments. The Company sold copper cathodes, rod and anodes, as well as sulfuric acid, silver, gold and lime to Asarco. In addition, the Company received fees for building rental and maintenance services provided to Mexico Proyectos y Desarrollos, S.A. de C.V. and its affiliates and to Perforadora Mexico S.A.P.I de C.V., and for natural gas and services provided to MGE, all subsidiaries of Grupo Mexico. Companies with relationships with the controlling group: The following tables summarize the purchase and sales activities with other Larrea family companies in the six months ended June 30, 2014 and 2013 (in millions):
|  | As of June 30, |
|  | 2014 |  | 2013 |
Mextransport: |  |  |  |  |
Purchase activity |  | $ | 1.1 |  | $ | 1.5 |
Sales activity |  | $ | 0.1 |  | $ | 0.2 |
The Larrea family controls a majority of the capital stock of Grupo Mexico, and has extensive interests in other businesses, including 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 the lease of office space and air transportation. Companies with relationships with SCC executive officers: The following table summarizes the purchase activities with companies with relationships with SCC executive officers in the six months ended June 30, 2014 and 2013 (in millions):
|  | As of June 30, |
|  | 2014 |  | 2013 |
Higher Technology S.A.C. |  | $ | 0.8 |  | $ | 1.0 |
Servicios y Fabricaciones Mecanicas S.A.C. |  | 0.7 |  | 0.1 |
Sempertrans and affiliates |  | 0.8 |  | 0.5 |
Breaker |  | 3.6 |  | 2.0 |
Pigoba S.A. de C.V. |  | 0.1 |  | 0.1 |
Total purchases |  | $ | 6.0 |  | $ | 3.7 |
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 and Sempertrans Belchatow SP Z.O.O. 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, and from Breaker Peru S.A.C., a company in which Mr. Jorge Gonzalez, son-in-law of SCC’s Chief Executive Officer and Mr. Carlos Gonzalez, son of SCC´s Chief Executive Officer have a proprietary interest. Equity Investment in Affiliate: The Company has a 44.2% participation in Coimolache S.A. (“Coimolache”), which it accounts for on the equity method. Coimolache owns Tantahuatay, a gold mine located in the northern part of Peru. To support the cost of the development of Tantahuatay, the Company loaned $56.6 million to Coimolache. Conditions and balance of the loan as of June 30, 2014 are as follows ($ in millions):
|  | Loan |
Total loan granted |  | $56.6 |
Interest rate |  | 6 months Libor + 3% (approximately 3.35%) |
Remaining balance at June 30, 2014 |  | $5.6 |
Interest:
|  | Three months ended |  | Six months ended |
|  | June 30, |  | June 30, |
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |
Interest earned |  | $ | 0.1 |  | $ | 0.2 |  | $ | 0.2 |  | $ | 0.6 |
Additionally, on April 2, 2013, Coimolache paid to the Company $16.5 million as a return of funds expensed during the exploration stage of the Tantahuatay mine. This amount was recorded as other income in our condensed consolidated statement of income.

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- Definition The entire disclosure for related party transactions. 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 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 2: 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 Reference 3: 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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A Reference 5: 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=26873400&loc=d3e23780-122690 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph k -Article 4 Reference 7: 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 8: 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 + Details
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