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RELATED PARTY TRANSACTIONS: | 6 Months Ended
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Jun. 30, 2016
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 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 June 30, 2016 |  | At December 31, 2015 |
Related parties receivable current: |  |  |  |  |
Asarco LLC |  | $ | 6.1 |  | $ | — |
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates |  | 1.2 |  |  | 0.7 |
Ferrocarril Mexicano S.A. de C.V. |  | — |  | 0.2 |
Grupo Mexico |  | 4.7 |  | 0.6 |
Mexico Generadora de Energia S. de R.L. (“MGE”) |  | 14.9 |  | 13.9 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 1.2 |  | 0.3 |
Operadora de Generadoras de Energia Mexico S.A. de C.V. |  | 0.1 |  | 0.1 |
Operadora de Cinemas S.A. de C.V. |  | 0.1 |  | — |
|  | $ | 28.3 |  | $ | 15.8 |
Related parties receivable non-current: |  |  |  |  |
MGE |  | $ | 74.8 |  | $ | 111.2 |
Related parties payable: |  |  |  |  |
Asarco LLC |  | $ | 34.5 |  | $ | 20.6 |
Eolica El Retiro, S.A.P.I. de C.V. |  | 0.2 |  | 0.1 |
Ferrocarril Mexicano S.A. de C.V. |  | 0.1 |  | — |
Grupo Mexico |  | 0.8 |  | 12.0 |
MGE |  | 30.8 |  | 23.0 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 7.5 |  | 11.8 |
Boutique Bowling de Mexico S.A. de C.V. |  | — |  | 0.2 |
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 |
Breaker S.A. de C.V. and affiliates (“Breaker”) |  | 0.3 |  | 0.3 |
Higher Technology S.A.C. |  | 0.2 |  | — |
Sempertrans and affiliates |  | — |  | 0.6 |
|  | $ | 75.2 |  | $ | 69.3 |
Purchase and sale activities: Grupo Mexico and affiliates: The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in the six months ended June 30, 2016 and 2015 ($ in millions):
|  | 2016 |  | 2015 |
Purchase activity |  |  |  |  |
Asarco LLC |  | $ | 14.8 |  | $ | 14.7 |
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates |  | — |  | 0.3 |
Eolica El Retiro, S.A.P.I. de C.V. |  | 1.0 |  | 4.8 |
Ferrocarril Mexicano S.A de C.V. |  | 21.0 |  | 8.2 |
Grupo Mexico |  | 6.9 |  | 6.9 |
MGE |  | 108.7 |  | 62.9 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 42.8 |  | 18.6 |
Total purchases |  | $ | 195.2 |  | $ | 116.4 |
Sales activity |  |  |  |  |
Asarco LLC |  | $ | 34.6 |  | $ | 71.1 |
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates |  | 0.4 |  | 0.2 |
Grupo Mexico |  | 0.3 |  | — |
MGE |  | 50.1 |  | 39.0 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 0.3 |  | 0.4 |
Total sales |  | $ | 85.7 |  | $ | 110.7 |
Grupo Mexico, the parent and the majority indirect stockholder of the Company, and its affiliates provides 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 such 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 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, 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 and will continue until such time as the debt is satisfied. In the second quarter of 2016, MGE paid the Company $36.4 million reducing the debt balance to $74.8 million at June 30, 2016. This balance is recorded as a non-current related party receivable on the condensed consolidated balance sheet. Related to this loan, the Company recorded interest income of $3.1 million and $4.7 million in the first six months of 2016 and 2015, respectively. In 2012, the Company signed a power purchase agreement with MGE, whereby MGE will supply some of the Company’s Mexican operations with power through 2032. MGE completed construction of its first power plant in June 2013 and the second plant, in the second quarter of 2014. These plants are natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts. The first plant began supplying power to the Company in December 2013, and the second plant began to supply power in June 2015. MGE is supplying approximately 12% of its power output to third-party energy users. On August 4, 2014, Mexico Generadora de Energia Eolica S. de R.L. de C.V, an indirect subsidiary of Grupo Mexico, which is located in Oaxaca, Mexico, acquired Eolica El Retiro, S.A.P.I de C.V. (“Eolica el Retiro”). Eolica el Retiro is a windfarm with 37 wind turbines. In 2014, Eolica el Retiro started to sell power to IMMSA, one of our Mexican subsidiaries groups. During the first six months of 2016, approximately 11% of Eolica El Retiro’s power was sold to IMMSA, the rest of its power output was sold to third-party energy users, including the Federal Electricity Commission. The Company sold copper cathodes, rod and anodes, as well as sulfuric acid, silver, gold and lime to Asarco. In addition, the Company received fees for building rentals and maintenance services provided to Mexico Proyectos y Desarrollos, S.A. de C.V. and its affiliates and to Perforadora Mexico S.A.P.I de C.V., and for natural gas and services provided to MGE, all subsidiaries of Grupo Mexico. Companies with relationships to the controlling group: The following tables summarize the purchase and sales activities with other Larrea family companies in the six months ended June 30, 2016 and 2015 ($ in millions):
|  | 2016 |  | 2015 |
Purchase activity |  |  |  |  |
Boutique Bowling de Mexico S.A. de C.V. |  | $ | 0.2 |  | $ | — |
Mextransport |  | 1.0 |  | 0.1 |
Operadora de Cinemas S.A. de C.V. |  | 0.3 |  | — |
Total purchases |  | $ | 1.5 |  | $ | 0.1 |
Sales activity |  |  |  |  |
Boutique Bowling de Mexico S.A. de C.V. |  | $ | 0.1 |  | $ | — |
Mextransport |  | 0.2 |  | 0.1 |
Operadora de Cinemas S.A. de C.V. |  | — |  | — |
Total sales |  | $ | 0.3 |  | $ | 0.1 |
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 six months ended June 30, 2016 and 2015 ($ in millions):
|  | 2016 |  | 2015 |
Breaker |  | $ | 0.4 |  | $ | 0.5 |
Higher Technology S.A.C. |  | 0.6 |  | 0.8 |
Pigoba S.A. de C.V. |  | 0.1 |  | — |
Sempertrans and affiliates |  | — |  | 0.3 |
Servicios y Fabricaciones Mecanicas S.A.C. |  | 0.2 |  | 0.4 |
Total purchases |  | $ | 1.3 |  | $ | 2.0 |
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, 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.

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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 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 Reference 2: 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 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 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 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 6: 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 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A + Details
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