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RELATED PARTY TRANSACTIONS:

12 Months Ended

Dec. 31, 2020

RELATED PARTY TRANSACTIONS:

RELATED PARTY TRANSACTIONS:

NOTE 17—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 and railroad transportation, construction services, energy supply, and other 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. Article Nine of the Amended and Restated Certificate of Incorporation of the Company prohibits the Company from engaging in a Material Affiliate Transaction that was not the subject of prior review by a committee of the Board of Directors with at least three members, each of whom is independent, and defines a Material Affiliate Transaction as a transaction or series

of related transactions between Grupo Mexico or one of its affiliates (other than the Company or its subsidiaries), on the one hand, and the Company or one of its subsidiaries, on the other hand, that involves consideration of more than $10.0 million in the aggregate. It is the Company’s policy that (i) a Material Affiliate Transaction not be entered into or continued without the review and approval by the Audit Committee or its subcommittee of related party transactions comprised of independent directors,(ii) any potential related party transaction process with aggregate consideration between $8.0 million and $10.0 million be authorized by the General Counsel and Chief Financial Officer of the Company and (iii) all related party transactions, including any Material Affiliate Transaction, be reported to the Audit Committee of the Board of Directors or to its subcommittee of related party transactions.

Receivable and payable balances with related parties are shown below (in millions):


	At December 31,
	2020			2019
Related parties receivable current:
Grupo Mexico and affiliates:
Asarco LLC	$	5.3		$	10.8
AMMINCO Apoyo Administrativo, S.A. de C.V. (“AMMINCO”)		—			0.1
Compania Perforadora Mexico S.A.P.I. de C.V. and affiliates		0.3			0.3
Grupo Mexico		2.7			2.7
Mexico Generadora de Energia S. de R.L. ("MGE")		14.4			15.3
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.		0.2			0.2
Related to the controlling group:
Boutique Bowling de Mexico S.A. de C.V.		0.2			0.1
Mexico Transportes Aereos, S.A. de C.V. ("Mextransport")		—			0.4
Operadora de Cinemas S.A. de C.V.		0.2			0.1
	$	23.3		$	30.0

Related parties receivable non-current:
Grupo Mexico and affiliates:
Asarco LLC	$	—			59.5

Related parties payable:
Grupo Mexico and affiliates:
Asarco LLC	$	13.9		$	4.3
AMMINCO		19.6			16.9
Eolica El Retiro, S.A.P.I. de C.V.		0.3			—
Ferrocarril Mexicano S.A. de C.V.		4.7			6.4
Grupo Mexico		0.9			1.1
MGE		40.8			40.2
Mexico Compania Constructora S.A de C.V.		22.9			16.0
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.		0.7			—
Related to the controlling group:
Boutique Bowling de Mexico S.A. de C.V.		0.3			0.2
Mexico Transportes Aereos S.A. de C.V. (“Mextransport”)		0.1			1.2
Operadora de Cinemas S.A. de C.V.		0.1			0.1
	$	104.3		$	86.4

Purchase and sale activity:

Grupo Mexico and affiliates:

The following table summarizes the purchase and sale activities with Grupo Mexico and its affiliates in 2020, 2019 and 2018 (in millions):


		2020			2019			2018
Purchase activity
Asarco LLC		$	233.9		$	37.6		$	37.2
AMMINCO			18.6			17.8			8.0
Eolica El Retiro, S.A.P.I. de C.V.			1.0			2.9			3.6
Ferrocarril Mexicano, S.A. de C.V.			45.8			44.1			41.7
Grupo Mexico			10.0			10.0			10.1
MGE			213.3			202.2			200.1
Mexico Compania Constructora S.A de C.V.			42.6			60.3			72.9
Grupo Mexico Servicios de Ingenieria, S.A. de C.V.			11.1			10.7			6.9
Total purchases		$	576.3		$	385.6		$	380.5
Sales activity
Asarco LLC		$	77.9		$	11.3		$	81.8
AMMINCO			0.1			0.1			0.3
Ferrocarril Mexicano, S.A. de C.V.			—			0.1			—
MGE			54.9			47.4			68.2
Total sales		$	132.9		$	58.9		$	150.3

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 and AMMINCO, a subsidiary of Grupo Mexico, for these services and expects to continue requiring these services in the future.

In 2020 and 2019, the Company donated $7.1 million and $9.6 million, respectively, 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 Compania Constructora S.A. de C.V., which are all subsidiaries of Grupo Mexico. Additionally, the Company´s Peruvian and Mexican operations paid fees for engineering services provided by Grupo Mexico Servicios de Ingenieria, S.A. de C.V., a subsidiary of Grupo Mexico.

The Company’s Mexican operations purchased copper concentrate and anodic slimes from Asarco LLC and also paid fees for tolling services. Additionally, the Company´s Mexican operations purchased power from MGE. Both companies are subsidiaries of Grupo Mexico.

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 2.3% of its power output to third-party energy users; compared to 5.2% at December 31, 2019.

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 began 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 9.6% of its power output to IMMSA; compared to 18.2% at December 31, 2019.

The Company sold copper concentrate as well as sulfuric acid, silver and gold to Asarco LLC. In addition, in 2020 and 2019, the Company´s Mexican operations received rental fees from AMMINCO. In 2018, the Company´s Mexican operations sold vehicles to AMMINCO. In 2019, the Company´s Mexican operations sold an asset to Ferrocarril Mexicano, S.A. de C.V.

In September 2019, Asarco LLC signed a promissory agreement to pay to the Company´s Mexican operations $62.0 million plus interest no later than October 31, 2021, with quarterly payments of $0.5 million. The annual interest rate of the note was Libor plus 200 basis points, which would be reviewed annually. In November 2020, Asarco repaid this agreement. Related to this agreement, the Company recorded interest income of $2.2 and $2.3 million in 2020 and 2019, respectively.

The Company also received fees for natural gas and services provided to MGE, a subsidiary of Grupo Mexico. In May 2020, MGE signed a promissory note to pay to the Company´s Mexican operations 97.2 million Mexican pesos (approximately $5.1 million) plus interest. The annual interest rate of the note was 8.28% with monthly payments. MGE repaid this note in December 2020.

Companies with relationships with the controlling group:

The following table summarizes the purchase and sales activities with other Larrea family companies in 2020, 2019 and 2018 (in millions):


		2020			2019			2018
Purchase activity
Boutique Bowling de Mexico S.A. de C.V.		$	0.4		$	0.4		$	0.3
Mextransport			3.5			2.3			12.4
Operadora de Cinemas S.A. de C.V.			0.2			0.2			0.2
Total purchases		$	4.1		$	2.9		$	12.9

Sales activity
Boutique Bowling de Mexico S.A. de C.V.		$	0.1		$	0.1		$	0.2
Empresarios Industriales de Mexico, S.A. de C.V.			—			0.2			—
Mextransport			1.7			1.8			1.2
Operadora de Cinemas S.A. de C.V.			0.1			0.1			0.1
Total sales		$	1.9		$	2.2		$	1.5

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 services provided to Boutique Bowling de Mexico S.A de C.V. and Operadora de Cinemas S.A. de C.V. The Company´s Mexican operations received fees from Mextransport for reimbursement of maintenance expenses and for rental services. In 2019, The Company´s Mexican operations received fees for security services provided to Empresarios Industriales de Mexico, S.A. de C.V. This is also a company controlled by the Larrea family.

Equity Investment in Affiliate: The Company has a 44.2% participation in Compañia Minera Coimolache S.A. (“Coimolache”), which it accounts for on the equity method. Coimolache owns Tantahuatay, a gold mine located in northern Peru.

In addition, the Company has a 30.0% participation in Apu Coropuna S.R.L. (“Apu Coropuna”), which it accounts for

on the equity method. Apu Coropuna is a company, which undertakes exploration activities in the Pucay prospect, located in Arequipa, Peru.

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

Companies with relationships with SCC executive officers:

In 2020, 2019 and 2018, the Company engaged in no purchase or sales activities with companies that have relationships with SCC executive officers.