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 and 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):

	At March 31, 2016		At December 31, 2015
Related parties receivable current:
Asarco LLC	$	14.8	$	—
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates	0.8		0.7
Ferrocarril Mexicano S.A. de C.V.	—		0.2
Grupo Mexico	1.2		0.6
Mexico Generadora de Energia S. de R.L. (“MGE”)	29.3		13.9
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	0.2		0.3
Operadora de Cinemas S.A. de C.V.	0.1		—
Operadora de Generadoras de Energia Mexico S.A. de C.V.	0.1		0.1

	$	46.5	$	15.8


Related parties receivable non-current:
MGE	$	111.2	$	111.2


Related parties payable:
Asarco LLC	$	25.9	$	20.6
Boutique Bowling de Mexico S.A. de C.V.	—		0.2
Breaker S.A. de C.V. and affiliates (“Breaker”)	0.3		0.3
Eolica El Retiro, S.A.P.I. de C.V.	0.5		0.1
Ferrocarril Mexicano S.A. de C.V.	0.7		—
Grupo Mexico	0.2		12.0
MGE	68.3		23.0
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	4.0		11.8
Mexico Transportes Aereos S.A. de C.V. (“Mextransport”)	0.5		0.5
Operadora de Cinemas S.A. de C.V.	0.3		0.2
Sempertrans and affiliates	—		0.6

	$	100.7	$	69.3

Purchase and sale activity:

Grupo Mexico and affiliates:

The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the three months ended March 31, 2016 and 2015 (in millions):

	2016		2015
Purchase activity
Asarco LLC	$	6.2	$	7.7
Compania Perforadora Mexico S.A.P.I. de C.V and affiliates	—		0.3
Eolica El Retiro, S.A.P.I. de C.V.	0.5		3.9
Ferrocarril Mexicano S.A de C.V.	9.7		3.3
Grupo Mexico	8.6		3.4
MGE	56.7		37.8
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	8.4		10.6

Total purchases	$	90.1	$	67.0


Sales activity
Asarco LLC	$	19.5	$	35.9
Compania Perforadora Mexico S.A.P.I. de C.V and affiliates	0.1		0.1
Grupo Mexico	0.1		—
MGE	33.0		22.2
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates	—		0.2

Total sales	$	52.7	$	58.4

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 requiring these 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 Desarrollo 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 LLC, and power from MGE. Both companies are subsidiaries 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 the power plants. That 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 is repaying its debt to the Company using a percentage of its profits until such time as the debt is satisfied. At March 31, 2016 the remaining balance of the debt was $111.2 million and was recorded as non-current related party receivable on the condensed consolidated balance sheet. Related to this loan the Company recorded interest income of $1.6 million and $2.3 million in the first quarter of 2016 and 2015, 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 second quarter of 2014. These plants are natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts. MGE has the authorization for the interconnection with the Mexican electrical system to start operations in the second plant. The first plant began supplying power to the Company in December 2013, and the second plant began to supply power in June 2015. MGE is supplying approximately 12% of its power output to third-party energy users.

On August 4, 2014, Mexico Generadora de Energia Eolica S. de R.L. de C.V, an indirect subsidiary of Grupo Mexico, located in Oaxaca, Mexico; acquired Eolica El Retiro, S.A.P.I de C.V. Eolica El Retiro is a windfarm that has 37 wind turbines. This company started operations in January 2014 and started to sell power to IMMSA and other subsidiaries of Grupo Mexico in the third quarter of 2014. During the first quarter of 2016, approximately 12% of Eolica El Retiro’s power was sold to IMMSA, the rest of its power output to third-party energy users, including the Federal Electricity Commission (Comision Federal de Electricidad or the “CFE”).

The Company sold copper cathodes, rod and anodes, as well as sulfuric acid, silver, gold and lime to Asarco LLC. 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 to the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in the three months ended March 31, 2016 and 2015 (in millions):

	2016			2015
Purchase activity
Boutique Bowling de Mexico S.A. de C.V.	$	0.2		$	—
Mextransport	—			0.1
Operadora de Cinemas S.A. de C.V.	0.3			—

Total purchases	$	0.5		$	0.1


Sales activity
Boutique Bowling de Mexico S.A. de C.V.	$	(*	)	$	—
Mextransport	—			0.1
Operadora de Cinemas S.A. de C.V.	(*		)	—

Total sales	$	—		$	0.1

(*) amount is lower than $0.1 million

The Larrea family controls a majority of the capital stock of Grupo Mexico, and has extensive interests in other businesses, including transportation, real estate and entertainment. 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, air transportation and entertainment.

The Company’s Mexican operations paid fees for entertainment services provided by Boutique Bowling de Mexico S.A de C.V. and Operadora de Cinemas S.A. de C.V. Both companies are controlled by the Larrea family.

MexTransport provides aviation services to the Company’s Mexican operations. This is a company controlled by the Larrea family.

Companies with relationships to SCC executive officers:

The following table summarizes the purchase activities with companies with relationships to SCC executive officers in the three months ended March 31, 2016 and 2015 (in millions):

	2016		2015
Purchase activity
Breaker	$	0.4	$	0.3
Higher Technology S.A.C.	0.2		0.3
Pigoba, S.A. de C.V.	0.1		—
Sempertrans and affiliates	—		0.2
Servicios y Fabricaciones Mecanicas S.A.C.	0.2		0.2

Total purchases	$	0.9	$	1.0

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, son of SCC’s Chief Executive Officer, has a proprietary interest in these companies.

The Company purchased industrial material from Sempertrans and its affiliates, which employed Mr. Alejandro Gonzalez as a sales representative, through August 4, 2015. 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 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 Compania Minera 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.

It is anticipated that in the future the Company will enter into similar transactions with these same parties.