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RELATED PARTY TRANSACTIONS: | 9 Months Ended
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Sep. 30, 2018
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 September 30, 2018 |  | At December 31, 2017 |
Related parties receivable: |  |  |  |  |
Grupo Mexico and affiliates: |  |  |  |  |
Mexico Generadora de Energia, S. de R.L. (“MGE”) |  | $ | 11.1 |  | $ | 16.2 |
Asarco LLC |  | 74.1 |  | 4.1 |
Grupo Mexico |  | 2.7 |  | 2.8 |
Compañia Perforadora Mexico, S.A.P.I. de C.V. and affiliates |  | 1.4 |  | 1.4 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 0.5 |  | 1.1 |
Related to the controlling group: |  |  |  |  |
Mexico Transportes Aereos, S.A. de C.V. (“Mextransport”) |  | 0.2 |  | — |
Operadora de Cinemas, S.A. de C.V. |  | 0.4 |  | 0.3 |
Boutique Bowling de Mexico, S.A. de C.V. |  | 0.3 |  | 0.2 |
|  | $ | 90.7 |  | $ | 26.1 |
|  | At September 30, 2018 |  | At December 31, 2017 |
Related parties payable: |  |  |  |  |
Grupo Mexico and affiliates: |  |  |  |  |
MGE |  | $ | 37.3 |  | $ | 38.5 |
Asarco LLC |  | 10.4 |  | 24.2 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 16.2 |  | 21.7 |
Ferrocarril Mexicano, S.A. de C.V. |  | 7.0 |  | 2.6 |
Eolica El Retiro, S.A.P.I. de C.V. (“Eolica el Retiro”) |  | 0.9 |  | 0.8 |
Grupo Mexico |  | 7.0 |  | 0.7 |
Related to the controlling group: |  |  |  |  |
Operadora de Cinemas, S.A. de C.V. |  | 0.2 |  | 0.7 |
Boutique Bowling de Mexico, S.A. de C.V. |  | 0.2 |  | 0.6 |
Mextransport |  | 0.3 |  | 0.3 |
|  | $ | 79.5 |  | $ | 90.1 |
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 nine months ended September 30, 2018 and 2017 (in millions):
|  | 2018 |  | 2017 |
Purchase activity |  |  |  |  |
Asarco LLC |  | $ | 30.0 |  | $ | 29.6 |
Eolica El Retiro, S.A.P.I. de C.V. |  | 2.2 |  | 2.4 |
Ferrocarril Mexicano, S.A de C.V. |  | 33.0 |  | 34.2 |
Grupo Mexico |  | 13.5 |  | 10.5 |
MGE |  | 144.4 |  | 168.5 |
Mexico Proyectos y Desarrollos, S.A. de C.V. and affiliates |  | 63.1 |  | 92.8 |
Total purchases |  | $ | 286.2 |  | $ | 338.0 |
Sales activity |  |  |  |  |
Asarco LLC |  | $ | 82.8 |  | $ | 94.1 |
Compania Perforadora Mexico, S.A.P.I. de C.V and affiliates |  | — |  | 0.2 |
Grupo Mexico |  | — |  | 0.1 |
MGE |  | 52.3 |  | 77.8 |
Total sales |  | $ | 135.1 |  | $ | 172.2 |
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 requiring these services in the future. In the nine months ended September 30, 2018 the Company made donations of $5.5 million to Fundacion Grupo Mexico, A.C., an organization dedicated to promoting the social and economic development of the communities close to the Company’s Mexican operations. The Company’s Mexican operations paid fees for freight services provided by Ferrocarril Mexicano, S.A de C.V. and for construction services provided by Mexico Proyectos y Desarrollos, S.A. de C.V. and its affiliates. 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, 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. The remaining balance was repaid in the third quarter of 2016. 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 has two natural gas-fired combined cycle power generating units, with a net total capacity of 516.2 megawatts and has been supplying power to the Company since December 2013. Currently, MGE is supplying 22% of its power output to third-party energy users; compared to 14% at September 30, 2017. In 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, a windfarm with 37 wind turbines. This company started operations in January 2014 and started to sell power to Industrial Minera Mexico, S.A. de C.V. and subsidiaries (IMMSA) and other subsidiaries of Grupo Mexico in the third quarter of 2014. Currently, Eolica el Retiro is supplying approximately 17% of its power output to IMMSA; compared to 27% at September 30, 2017. 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 nine months ended September 30, 2018 and 2017 (in millions):
|  | 2018 |  | 2017 |
Purchase activity |  |  |  |  |
Boutique Bowling de Mexico, S.A. de C.V. |  | $ | 0.2 |  | $ | 0.2 |
Mextransport |  | 1.1 |  | 0.4 |
Operadora de Cinemas, S.A. de C.V. |  | 0.1 |  | 0.1 |
Total purchases |  | $ | 1.4 |  | $ | 0.7 |
Sales activity |  |  |  |  |
Boutique Bowling de Mexico, S.A. de C.V. |  | $ | 0.2 |  | $ | 0.2 |
Mextransport |  | 1.2 |  | 0.3 |
Operadora de Cinemas, S.A. de C.V. |  | 0.1 |  | 0.1 |
Total sales |  | $ | 1.5 |  | $ | 0.6 |
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. In addition, the Company received fees for building rental and maintenance provided to Boutique Bowling de Mexico, S.A. de C.V., Operadora de Cinemas, S.A. de C.V and Mextransport. 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 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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