Grupo México Is Our Ongoing Investments Throughout Our Economic Cycles

20 13 ANNUAL REPORT

MAKING PROGRESS TOWARDS GROWTH

GRUPO MÉXICO S.A.B. DE C.V.

EDIFICIO PARQUE REFORMA

CAMPOS ELÍSEOS 400 COL. LOMAS DE CHAPULTEPEC C.P. 11000 MÉXICO, D.F. TEL.: 52 (55) 1103 5000 www.gmexico.com CONTENTS

HIGHLIGHTS 02

LETTER TO INVESTORS 05

FINANCIAL ANALYSIS & DISCUSSION GRUPO MÉXICO 10

MINING DIVISION: AMERICAS MINING CORPORATION 26

GEOGRAPHIC LOCATION 28

HIGHLIGHTS 31

BYPRODUCTS 37

PROJECTS AND INVESTMENTS 47

EXPLORATIONS 53

HEALTH & SAFETY 63

TRANSPORTATION DIVISION: INFRAESTRUCTURA Y TRANSPORTES MÉXICO 68

GEOGRAPHIC LOCATION 70

HIGHLIGHTS 72

INFRASTRUCTURE DIVISION: MÉXICO PROYECTOS Y DESARROLLO 78

GEOGRAPHIC LOCATION 80

HIGHLIGHTS 82

GRUPO MÉXICO FOUNDATION 94

SOCIAL RESPONSIBILITY & ENVIRONMENTAL ACTIONS 110

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS 126 HIGHLIGHTS

Variance % Variance % 2010 * 2011 * 2012 2013 2013 / 2012 2010 * 2011 * 2012 2013 2013 / 2012

Sales ** Cash Flow (millions US$) Copper (tons) 701,708 790,103 832,752 799,159 (4) From Operations 3,072 2,946 2,732 2,783 2 Zinc (tons) 93,964 90,663 93,392 99,127 6 Dividends Paid (793) (1,464) (1,546) (729) (53) Silver (thousands of ounces) 19,584 17,411 18,375 16,429 (11) Taxes Paid 907 1,538 1,219 964 (21) Gold (ounces) 69,690 60,748 63,127 51,058 (19) Applied to Financing Activities 452 (489) 1,712 20 99 Molybdenum (tons) 20,508 18,632 18,220 19,940 9 Allocated to Investments (916) (1,779) (1,806) (2,858) 58 Cash Flow after Investments and Financing Activities 1,815 (786) 1,054 (784) 174 Average Prices (US$) Copper (COMEX) (pound) 3.43 4.01 3.61 3.34 (7) Stock Information *** (thousands) Zinc (LME) (pound) 0.98 0.99 0.88 0.87 (1) Total Shares Outstanding 7,785,000 7,785,000 7,785,000 7,785,000 - Silver (COMEX) (ounce) 20.18 35.18 31.19 23.82 (24) EBITDA per Share 0.50 0.67 0.64 0.53 (17) Gold (LF) (ounce) 1,224.66 1,568.58 1,668.82 1,411.03 (15) Cash Flow per Share 0.35 0.45 0.45 0.36 (20) Molybdenum (MW DEALER OXIDE) (pound) 15.61 15.33 12.62 10.26 (19) Earnings per Share 0.21 0.32 0.31 0.24 (23) Book Value 0.77 0.93 1.07 1.21 14

Railroad Division Statistics Financial Ratios Net tons/km (millions of tons) 52,117 52,182 51,344 51,054 (1) Operating Margin 41% 44% 40% 35% (13) Cars loaded (thousands of units) 1,078.2 1,140.3 1,107.4 1,114.2 1 EBITDA Margin 47% 50% 49% 44% (10) Current Assets to Current Liabilities (times) 2.8 3.5 4.3 4.3 - Balance Sheet (millions US$) Total Liabilities to Total Assets 49% 43% 47% 44% (6) Current Assets 6,003 5,566 6,359 5,341 (16) Debt/Total Equity Capital + Debt 35% 30% 36% 34% (6) Fixed Assets 7,370 7,862 9,282 11,682 26 EBITDA/Interest (times) 12.22 17.56 16.46 12.29 (25) Total Assets 14,598 15,201 19,559 20,407 4 Financial Liabilities 4,096 3,801 5,584 5,811 4 Employees 25,891 26,989 29,154 29,980 3 Total Liabilities 7,113 6,464 9,469 8,933 (6) Total Equity Capital 7,485 8,737 10,090 11,474 14 Annual Inflation Mexico 4% 4% 4% 4% - Earnings (millions US$) United States 1% 3% 2% 1% (50) Total Sales 8,338 10,443 10,183 9,357 (8) Peru 2% 5% 3% 3% - Cost of Sales 4,226 5,105 5,004 5,127 2 Taxes Incurred 964 1,408 1,356 957 (29) Average Exchange Rates EBITDA 3,921 5,193 5,006 4,139 (17) Mexico (peso/dollar) 12.64 12.43 13.17 12.77 (3) Net Profit 1,627 2,472 2,402 1,845 (23) Peru (sol/dollar) 2.83 2.75 2.64 2.70 2

Expressed according to US GAAP * Proforma financial statements, including Ferrosur * * Throughout this report, all tons are metric and all ounces are troy *** Referring to 7,785,000,000 shares

02 03 LETTER TO INVESTORS

Throughout 2013, we delivered positive results, despite a complex macroeconomic environment caused by the prolonged debt crisis in the eurozone, the lack of a defined fiscal policy in the United States, stagnation in the growth of developed economies, and less growth in China and the emerging economies.

Consolidated sales in 2013 were US$9.357 billion, 8% below 2012, due to lower metals prices, principally in copper (-8%), silver (-24%), and molybdenum (-19%). The negative effect of this was partially mitigated by important growth in the Infrastructure Division (36%), due to strong capital expenditures in previous years, and in the Transportation Division (11%), as a result of a better mix of traffic and increased volumes transported.

One of the strategic and competitive factors that distinguishes Grupo México is our ongoing investments throughout our economic cycles. After 77 years in business, we clearly understand the cyclical nature of metals prices and the prudence with which we need to conduct our investment programs. In 2013, for the third year in a row, we set a new record in capital expenditures: US$2.858 billion, 34% more than in 2012, and three times the capital invested five years ago. Our investments will help to expand our copper production, reduce costs, increase the productivity of our Transportation Division, and improve the efficiency of our processes and development of the Infrastructure Division.

In 2013, the “Chihuahua” platform reported productivity of 99.4%, the highest of all the ocean platforms working for PEMEX. Infrastructure Division, Grupo México.

04 05 Our investments, totaling US$3.40 billion, in Buenavista will make this mine the second largest in the world in terms of production, 495,000 tons by 2016. Buenavista Mine. Sonora, Mexico.

In the Mining Division, copper production was 792,473 tons, 4% below that for 2012, primarily The Infrastructure Division reported good operating performance in 2013, with record sales due to flooding at our Buenavista mine, which has now been fully resolved. Despite this, we of US$306 million, representing a 37% growth over 2012. In 2013, PEMSA achieved re- progressed favorably with the execution of our growth projects. During the year, we success- cord efficiency and our first 250MW combined cycle power plant started operations. This fully started operations at our first molybdenum plant at Buenavista, which contributed to our resulted in a year-over-year growth of 102% in operating profit and 71% in EBITDA, both record production of 19,897 tons of molybdenum, completed the Expansion of the Concentra- record figures. In 2013, we continued to invest in our wind farm in the state of Oaxaca, tor, and reopened the Molybdenum Plant at Mission, which improved ASARCO’s recovery and which will add 74 megawatts (MW) of self-supply power and is expected to launch oper- copper cash cost. ations in the first half of 2014. Our energy projects reflect, once again, our commitment to sustainability and the environment as well as our ongoing efforts to improve operating 2013 was an excellent year for our Transportation Division, as despite the heavy rains experienced efficiency and control costs. this year and the low importation of grain during the first three quarters, revenue increased 11%. The investments made in locomotives and infrastructure consolidated us as the largest trans- Grupo México’s financial situation continues to be very solid. Fitch and Standard & Poor’s ratified porter of automobiles in the country, moving 70% of the production from the plants we serve. their investment grade ratings (BBB+ and BBB) for both Grupo México and our subsidiaries, a In addition, in the Agriculture segment, we transported a record 5.5 million tons of local crops. clear reflection of a solid financial structure and cost discipline.

06 07 With our investment program, we’ve managed to have a positive impact on the communities where we operate. We’ve created many direct and indirect jobs; our Buenavista project alone created 10,000 new jobs in the state of Sonora. Contributing to the development of the infrastructure and the communities in all the regions where we have operations has been a priority for Grupo México. This reaffirms our commitment to our investors, our communities, and the sustainability of our operations.

Each year, Grupo México becomes a more able, flexible, and competitive organization in all our segments and lines of business. As has been the case throughout our history, we remain committed to ensuring prudent and orderly long-term sustained growth. Reflecting on Grupo México’s 77 years, we recognize that our achievements would not have been possible without the support of our people and our investors. We close this year with very satisfactory results, reaffirming our commitment to continue generating value for our investors.

GERMÁN LARREA MOTA VELASCO Chairman of the Board

Grupo México stock is an investment instrument that has returned, and will continue to return, good results. The EBITDA margin has risen from 16% in 2002 to 43% in 2013. New SX/EW Plant in Buenavista. Sonora, Mexico.

08 09 O1 FINANCIAL ANALYSIS AND DISCUSSION US$9.357 BILLION SALES IN 2013

With the expansion of the Buenavista Mine, we have created more than 10,000 jobs. Buenavista del Cobre Mine. Sonora, Mexico.

010 011 FINANCIAL ANALYSIS AND DISCUSSION

Grupo México’s consolidated investment program in 2013 a record US$2.858 billion, compared with the US$2.117 billion invested in 2012, an increase of 35%.

Consolidated Highlights for Grupo México

During 2013, although the mining industry fundamentals Meanwhile, the cost of sales increased slightly compared remained solid, metals prices were affected primarily by with 2012, principally due to the increase in diesel prices the uncertainty surrounding economic growth in China (the greatest cost for our Transportation Division), the costs and the US. Prices for our principal metals dropped con- associated with the start-up of the first 250MW power siderably compared with the previous year: Copper (-8%), plant, and the importation of the new Tabasco platform. Molybdenum (-18%), and Silver (-24%). Despite this environment, the consolidated sales for the group fell only 8%. This resulted in a 17% decrease in EBITDA, compared with Copper sales were down 4%, affected mainly by flooding 2012, placing the EBITDA margin at 44%, in contrast to at Buenavista during the second quarter of 2013, which the previous year’s 49%. has now been resolved. The drop in sales in the Mining Division was partially countered by the 11% increase in Consolidated net earnings in 2013 were US$1.845 billion, sales in the Transportation Division and the 37% increase a decrease of 27% compared with the previous year, rep- in the Infrastructure Division. resenting 20% of sales.

One of the 8 drills that are part of the new equipment at our Buenavista Mine to increase production 175% by 2016. Buenavista Mine. Sonora, Mexico.

12 13 FINANCIAL HIGHLIGHTS FOR GRUPO MÉXICO TOTAL SALES BY DIVISION

US$ January - December Variance Volume in tons US$ thousands Sales (Thousands) 2012 2013 $ % 2012 2013 Var. % 2012 2013 Var. %

Sales 10,182,920 9,357,045 (825,875) (8.1) Mining Division

Cost of Sales 4,941,758 5,069,279 127,521 2.6 Copper 832,751 799,522 (4) 6,703,071 5,957,435 (11)

Operating Income 4,050,839 3,295,633 (755,205) (17.3 ) Silver (thousands of ounces) 18,375 16,429 (11) 560,378 396,512 (29) EBITDA 5,006,326 4,138,546 ( 867,780 ) (17.3 ) Molybdenum 18,220 19,940 9 450,449 389,167 (14)

Zinc 93,392 99,127 6 195,988 201,418 3 EBITDA Margin (%) 49.2% 44.2% Sulfuric Acid 1,931,851 1,808,039 (6) 235,700 166,967 (29)

Net Earnings 2,401,507 1,844,933 (556,374) (23.2) Gold (ounces) 63,127 51,058 (19) 105,430 72,884 (31) Lead 21,063 22,051 5 38,992 45,393 16

Profit Margin (%) 23.6% 19.7% Other Metals 60,892 49,678 (18) Investments / Capex 2,117,799 2,858,111 740,312 35.0

Transportation Division 1,107,389* 1,114,152* 1 1,661,324 1,836,022 11

Infrastructure Division 170,697 236,569 39 CAPITAL EXPENDITURES Grupo México’s consolidated investment program was a record US$2.858 billion in 2013, compared to the US$2.117 Total Sales 10,182,920 9,352,045 (8) billion invested in 2012, reflecting an increase of 35%.

* Cars loaded (thousands of units) In the Mining Division, US$1.871 billion were invested in our Buenavista mine. This expansion is progressing on schedule and on budget, and by 2016 we expect to reach production levels of 1.306 million tons to solidify our leading position in the market as a low cost copper producer. In the Infrastructure Division, US$566 million were invested primarily in the acquisition of the “Tabasco” platform, which In the Transportation Division, a record US$414 million were invested to increase and improve the railroad infrastructure, is expected to start operations in the third quarter of 2014, and the construction of the second 250MW self-supply construct and expand sidings, and reduce congestion on our track network to increase average speeds and achieve combined cycle power plant, ensuring the Mining Division’s power consumption at a more competitive price and with substantial savings. clean energy.

14 15 Copper 64% Transportation Division 20% Silver 4% Molybdenum 4% Infrastructure Division 3% Zinc 2% Sulfuric Acid 2% Gold 1% DIVIDENDS Other Metals 1% The average dividend yield since 2005 has been in excess of 5%, an excellent rate of return for our investors. Lead 0%

CONSOLIDATED DEBT At December 31, 2013, the total consolidated debt was US$5.810 billion, which taking into account a cash and banks balance of US$2.588 billion, represents net debt of US$3.222 billion. Grupo México continues its commitment to maintaining a solid balance with a low leverage level, reporting a total debt to EBITDA of 1.4x.

In the Infrastructure Division, on October 29, we closed the US$175 million financing for the “Tabasco” platform. Also, in SALES SHARE BY PRODUCT 2013 November 20 we closed the $1.245 billion peso 15-year financing for the wind farm.

Mexico 36% United States 26% Latin America 16% Europe 11% Asia 10%

The railroad contributes significantly to reducing pollution, as one train is equivalent to more than 300 trucks traveling on the SALES SHARE BY REGION highways; it also reduces vehicle traffic and the number of highway accidents. Transportation Division. Grupo México. 2010 8.338 2011 10.443 2012 10.183 2013 9.357

TOTAL SALES (US$ MILLIONS)

16 17 Thanks to our investments in the Transportation Division, we now have a fleet of 780 locomotives, the largest in Latin America. Transportation Division. Grupo México.

DEBT MATURITIES PERFORMANCE OF GRUPO MÉXICO STOCK The total consolidated debt of Grupo México has an amortization schedule with a very healthy structuring of maturities. The GMéxico share fell 9% in 2013, due to the drop in metals prices. GMéxico is one of the most important stocks on the The next significant maturity is for US$985 million in 2035, and the average debt term is 19 years. The maturity schedule Mexican Stock Exchange (BMV), being the fourth largest company on the BMV in terms of market cap, the fifth most traded is as follows: share, representing 6.51% of the IPC.

6.000 5,032%

1.400 1,179 5.000 1.200 1,092 1.000 985 4.000 800

600 498 450 3,000 400 387 344 294 200 151 66 59 62 65 2,000 51 50 52 40 43 45 50 55 57 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 1.000 666% MINING DIVISION TRANSPORTATION DIVISION INFRASTRUCTURE DIVISION 509% 0.00

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

IPyC GMéxico 3 MONTHS COPPER

18 19 The 400 foot jack-up “Campeche” platform, with a drilling capacity of 35,000 feet into the ocean floor, will be arriving in November 2014 to start operations. Dalian Shipyard, China.

CREDIT PROFILE Moody´s Standard & Poor´s Fitch Ratings During 2013, Fitch and Standard & Poor’s ratified their ratings of BBB+ and BBB, respective- Grupo México ly, for Grupo México, with a stable outlook. International Rating - BBB BBB+

Americas Mining Corporation The ratings agencies noted the Company’s low cost structure, geographical diversification, International Rating - BBB BBB+ position as the fourth largest copper producer globally, vertical integration, long life reserves, and also our solid financial position and efficiency in the allocation of capital expenditures. Southern Copper Corporation International Rating Baa2 BBB BBB+ Issuer Rating Baa2 BBB BBB+

Minera México International Rating Baa2 BBB BBB+ Secured Note Baa2 BBB BBB+

México Generadora de Energía GRUPO MÉXICO IS THE 4th LARGEST COMPANY International Rating Baa2 BBB - ON THE MEXICAN STOCK EXCHANGE IN TERMS OF MARKET CAP. Issuer Rating Baa2 BBB -

Ferromex Long-Term Local Rating - MXAA+ AA+(Mex)

20 21 GRUPO MÉXICO INCLUDED IN THE IPC SUSTAINABILITY INDEX Grupo México is honored to remain on the BMV’s IPC Sustainability Index, demonstrating the importance and commitment of the Company to social responsibility, environmental sustainability, and corporate governance.

For the third consecutive year, in December 2013, GMéxico received one of the highest sustainable company ratings, according to the Mexican Stock Exchange (BMV) methodology. Conse- quently, it continues to be included on the BMV’s IPC Sustainability Index, acknowledging that it has adopted strict environmental, social responsibility, and corporate governance criteria.

The 70 most traded companies were analyzed to develop the “IPC Sustainability Index”, meeting the criteria for evaluation based on corporate governance, environmental issues, and social responsibility. Two research providers conducted the evaluation, the British firm EIRIS (Empowering Responsible Investment) and Universidad Anáhuac del Sur in Mexico. The companies included The start-up of operations of the combined in the Index were compared using the average rating EIRIS publishes after evaluating over 3,000 cycle power plants will bring important savings companies worldwide. of more than US$50 million annually in the Mining Division’s energy costs, while generating significant revenues and returns on investment With this, we reiterate our commitment to sustainability since only through responsible manage- for our Infrastructure Division. Sonora, Mexico. ment can we ensure long-term growth and success for our business.

22 23 CORPORATE STRUCTURE

GRUPO MÉXICO STOCK HAS BEEN TRADED SINCE 1966

MINING TRANSPORTATION INFRASTRUCTURE

Americas Mining Corporation Infraestructura y Transportes México México Proyectos y Desarrollo (AMC) (ITM) (MPD) 100% 74.9% 100%

25.1%

Southern Infraestructura Grupo Ferroviario Copper Asarco y Transportes Mexicano Corporation Ferroviarios

82.3% 100% 100% 74% 26%

Mexico Division Peru Division Ferrosur Ferromex Perforadora México Compañía México México Constructora Generadora e Ingeniería de Energía 100% 99% 100% 100% 100% 100% 100% In 2013, our Texas Pacific line increased its volumes 180%, thanks to the Among the world’s largest producers of The largest & most profitable railroad 77 years experience in Copper, Molybdenum, Silver & Zinc. With the company in Mexico (64% market share). infrastructure & construction transportation of raw materials for shale largest copper reserves in the world. projects. gas extraction. Transportation Division. Grupo México.

24 25 O2 MINING DIVISION

US $ 3.411 BILLION EBITDA IN 2013

We are the Mining Company with the greatest organic growth in copper production in the world, estimating a CAGR of 8.3% between 2013 and 2018. Mining Division. Grupo México.

26 27 GEOGRAPHIC LOCATION MINING DIVISION - GRUPO MÉXICO

RAY MINERA MÉXICO SILVER BELL HAYDEN AMARILLO TUCSON MINES: SMELTERS, REFINERIES SMELTERS, REFINERIES MISSION & OTHER PLANTS: & OTHER PLANTS: AGUA PRIETA BUENAVISTA DEL COBRE LA CARIDAD MEXICANA DE COBRE MEXICANA DE COBRE ILO BUENAVISTA La Caridad, Sonora La Caridad, Sonora Copper Smelter EL ARCO PILARES Copper, Molybdenum, Gold & Silver Copper Smelter Sulfuric Acid Plant NUEVA ROSITA SANTA Copper Electrolyte Refinery Copper Electrolyte Refinery EULALIA SANTA BUENAVISTA DEL COBRE Copper Electrowinning Plant Precious Metals Plant BARBARA Cananea, Sonora Sulfuric Acid Plant Copper, Gold, Molybdenum & Silver Copper Rod Plant CHALCHIUITES CHARCAS Precious Metals, Selenium TOQUEPALA SAN MARTIN INDUSTRIAL MINERA MÉXICO & Tellurium Plant Copper Electrowinning Plant SAN LUIS POTOSI Charcas, San Luis Potosi Agua Prieta, Sonora Silver, Copper, Lead & Zinc Lime Plant San Martin, Zacatecas ASARCO ANGANGUEO MÉXICO, D.F. Silver, Lead, Zinc & Copper BUENAVISTA DEL COBRE TAXCO Santa Eulalia, Chihuahua Cananea, Sonora MINES: Silver, Lead & Zinc Copper Electrowinning Plants Santa Barbara, Chihuahua MISSION, ARIZONA: Gold, Silver, Copper, Lead & Zinc INDUSTRIAL MINERA MEXICO Gold, Silver, Copper & Molybdenum Taxco, Guerrero San Luis Potosi, San Luis Potosi Gold, Silver, Lead & Zinc Sulfuric Acid Plant SILVER BELL, ARIZONA Nueva Rosita, Coahuila Zinc Electrolyte & Cadmium Refinery Copper Coal & coke Nueva Rosita, Coahuila Coke Plant RAY, ARIZONA Gold, Silver & Copper SPCC SMELTERS, REFINERY MINES: & OTHER PLANTS:

CUAJONE HAYDEN, ARIZONA Copper, Silver, Molybdenum & Gold Copper Smelter & Sulfuric Acid Plant

TOQUEPALA RAY, ARIZONA Copper, Silver, Molybdenum & Gold Copper Electrowinning Plant

SILVER BELL, ARIZONA CHAUCHA Copper Electrowinning Plant

GEOGRAPHIC LOCATION TANTAHUATAY AMARILLO, TEXAS Copper, Precious Metals, Nickel, LEGEND Selenium & Tellurium Refinery Copper Rod Plant MINES LIMA Cake Plant PLANTS

OFFICES LOS CHANCAS FUTURE MINE PROJECTS TIA MARIA CUAJONE TOQUEPALA ILO CATANAVE 28 29 MINING DIVISION AMC - AMERICAS MINING CORPORATION

In 2013, the Mining Division invested US$1.871 billion, an increase of 52% over 2012, confirming the Company’s commitment to creating value through constant growth.

AMC Consolidated Highlights

EBITDA at the Mining Division level, represented by AMC, was US$3.411 billion in 2013, equal to 47% of sales.

With 71 million tons, we have the world’s January - December Variance largest copper reserves. Mining Division. (US$ thousands) 2012 2013 $ % Grupo México.

Sales 8,350,899 7,279,454 (1,071,444) (12.8) Cost of Sales 3,803,642 3,797,265 (6,377) (0.2) Operating Income 3,606,015 2,787,725 (818,290) (22.7) EBITDA 4,357,368 3,410,895 (946,473) (21.7)

EBITDA Margin (%) 52.2% 45.6% Net earnings 1,917,612 1,603,283 (314,329) (16.4)

Profit Margin (%) 23.0% 20.8% Investments / Capex 1,227,405 1,870,968 643,563 52.4

30 31 400.00 700.0 The Grupo México Mining Division is represented by its with high electrical conductivity and resistance to corro- While we are expecting strong mine production growth 400.50 342.51 361.45 350.00 subsidiary AMC, whose principal subsidiaries are South- sion, as well as excellent malleability and ductility, mak- in 2014, as the global economic recovery starts to 334.11 600.0 300.00 557.0 532.0 587.0 500.0 509.0 250.00 ern Copper Corporation (“SCC”) in Mexico and Peru, and ing it an ideal material for field applications in electricity, accelerate, we anticipate a broader growth outlook 400.0 200.00 300.0 ASARCO in the United States. Together, these companies telecommunications, computers, cell phones, construc- based on copper consumption, with lesser dependence 150.00 200.0 hold the world’s largest copper reserves, are low cost lead- tion, transportation, and industrial machinery. Copper is on China. 100.00 50.00 100.0

ers, and are fifth worldwide in terms of copper production. also used in numerous non-electrical applications, such POUND / CENTS DOLLAR 0.00 0.0 TONS METRIC OF THOUSANDS 10 11 12 13 SCC trades on the New York and Lima stock exchanges as plumbing and roofing, and when alloyed with tin it PRODUCTION NY COMEX + LME LONDON INVENTORIES NY COMEX PRICES (ticker: SCCO). Its stockholders, directly or through sub- forms bronze. Copper is also an ingredient in consumer Copper production in 2013 decreased 4%, compared sidiaries, are: Grupo México (82.3%) and other stock- and household products, fungicides and various other with 2012, to 792,463, tons as a result of lower pro- COPPER PRICES & INVENTORIES holders (17.7%). AMC has 14 mines and exploration proj- chemical products. duction from Buenavista (-10%), partially compensated ects in Mexico, Peru, the United States, Chile, Ecuador, by increased production at Cuajone (+6%). Flooding at and Argentina. The copper market closed in 2013 with a surplus, although Buenavista affected 22,000 tons of the total production. most of this excess supply was actually produced in 2012. COPPER The net effect was a surplus of 180kt in 2013; total invento- CASH COST Copper is the third most used metal in the world and an ries increased to 71 days consumption, slightly higher than In 2013, the operating cash cost per pound of copper important component of infrastructure worldwide. Cop- the average balance level of 65 days consumption. During net of byproducts was US$1.29. The cash cost, excluding per has exceptional chemical and physical properties, the year, the average price of copper was US$3.32/lb. byproducts, was US$2.01. Thanks to our investment plan, copper production will increase 65%, from 792,000 tons to 1,306,000 tons. Mining Division. Grupo México.

2010 140.3 498.6 2010 140.3 547.7 2011 181.2 593.0 2011 181.2 591.3 2012 175.4 578.4 2012 175.4 650.8 2010 588.7 2013 167.4 586.2 2013 167.4 625.1 2011 712.0

REFINERY CONCENTRATORS 2012 703.3 SX/EW SX/EW 2013 669.2 REFINED COPPER PRIMARY MINED COPPER (REFINERIES + SX/EW) (CONCENTRATES + SX/EW) CAST COPPER THOUSANDS OF TONS THOUSANDS OF TONS (THOUSANDS OF TONS)

32 33 PRIMARY MINED PRODUCTION AND COPPER RESERVES IN 2013

Production Ore Reserves Processed Copper Copper Ore Content Ore Content Grade Years Thousands of Tons Millions of tons % Operation

Mexico Concentrators: La Caridad 33,629 96.9 4,241.9 9.37 0.22 97 Buenavista del Cobre 25,277 115.8 5,671.9 23.14 0.41 200 Underground Mines 3,066 6.4 48.8 0.24 0.49 4 a 16 Subtotal 61,971 219.1 9,962.6 32.75

SX/EWs: La Caridad 30,426 23.9 201.4 0.35 0.17 15 Buenavista del Cobre 131,559 66.4 2,344.9 3.31 0.14 50 Subtotal 161,986 90.3 2,546.3 3.66

Peru Concentrators: Toquepala 19,925 110.7 2,749.3 13.75 0.50 124 Cuajone 29,353 168.6 2,242.9 10.77 0.48 64 Subtotal 49,278 279.3 4,992.2 24.52 SX/EWs:* Toquepala 38,847 28.4 1,674.5 2.68 0.16 94 Cuajone 3,071 - 9.1 0.05 0.58 5 Subtotal 41,918 28.4 1,683.6 2.73

United States Concentrators: Mission 14,447 52.6 272.5 1.20 0.39 23 Ray 13,054 74.2 435.4 2.25 0.52 30 Subtotal 27,501 126.7 707.9 3.45

SX/EWs: Ray 24,064 28.8 279.7 0.67 0.24 23 Silver Bell 10,171 19.9 201.3 0.62 0.30 31 Subtotal 34,236 48.7 481.0 1.29 During 2013, Grupo México was the world’s fifth largest integrated copper Total Concentrators 138,750 625.1 15,662.7 60.72 producer. Mining Division. Grupo México. Total SX/EWs 238,139 167.4 4,710.9 7.68 Total 376,889 792.5 20,373.6 68.40

* Solutions with leached copper from Cuajone are sent to the SX/EW Plant at Toquepala ** Reserves are valued at US$3.65 per pound of copper, except for Asarco, which are valued at US$2.20

34 35 BYPRODUCTS

For the first time in 15 years, the Precious Metals Plant at the Metallurgic Complex reached a monthly production of 1,081,292 ounces of silver, a record in the production of this metal. La Caridad Metallurgic Complex. Sonora, Mexico.

MOLYBDENUM Molybdenum is corrosion resistant and is used to make steel The price of molybdenum closed in 2013 at US$10.32/lb, alloys and steel tools more durable, to soften tungsten alloys 19% below the previous year. The design and construction of the new molybdenum plant at Buenavista was and as a catalyst in the oil and gas industry to remove sulfur. completed in a record time of 15 months. It is also used in fertilizers, dyes, paints, and reagents. Our production of molybdenum in 2013 increased 9%, Molybdenum Plant at Buenavista. compared with 2012, to 19,897 tons. La Caridad produced Sonora, Mexico. The supply and demand for molybdenum in 2013 ended a record 11,742 tons, while the new molybdenum plant at with a surplus of 4 million pounds. Buenavista produced its first 359 tons.

MOLYBDENUM PRODUCTION INCREASED 9% IN 2013 COMPARED WITH 2012

36 37 16.00 15.61 15.33 14.00 12.62 12.00 10.26 10.00 8.00 6.00 2010 20.5 4.00 2011 18.6 2.00 2012 18.3 0.00 10 11 12 13 2013 19.9 MW DEALER OXIDE PRICES PRIMARY MINED MOLYBDENUM (THOUSANDS OF TONS) MOLYBDENUM PRICES

Thickeners at the concentrator to improve water recovery. La Caridad. Sonora, Mexico. Zinc Zinc is used primarily to galvanize steel and iron and protect them from corrosion. It is also used to make molds, in batter- ies, and in sheets for architectural purposes.

Zinc production in 2013 increased 11% to 99,372 tons, compared with 89,884 tons in 2012. This increase is a result of uninterrupted production at Santa Eulalia after restarting operations due to flooding.

38 39 Our silver production was 14,934 ounces in 2013. La Caridad Metallurgic Complex. Sonora, Mexico.

Precious Metals

SILVER Silver is used for photographic, electrical, and electronic 120.00 1,400.0 160.00 174.0 180.0 1,224.0 products, and to a lesser degree, in welding alloys, jewel- 140.00 100.00 98.01 99.49 1,200.0 147.0 150.0 86.65 1,000.0 ry, coins, silverwork, and catalysts. 120.00 80.00 88.36 117.0 120.0 REFINED ZINC PRODUCTION 824.0 933.0 100.00 105.0 701.0 800.0 60.00 80.00 90.0 600.0 60.00 40.00 The silver market balance in 2013 reported a surplus, 60.0 THOUSANDS OF TONS 400.0 40.00 35.18 31.19 20.00 while the interest of the mutual funds investing in precious 20.18 23.82 30.0 200.0 20.00 DOLLAR CENTS / POUND / DOLLAR CENTS TONS METRIC OF THOUSANDS 0.00 0.0 metals continued to drop, resulting in the price of silver OUNCE / DOLLARS 0.00 0.0 OUNCES TROY OF MILLIONS Refineries 10 11 12 13 10 11 12 13 LME LONDON INVENTORIES LME LONDON PRICES maintaining its downward trend, to end the year at an av- NY COMEX INVENTORIES NY COMEX PRICES Mexico erage US$23.8/oz. San Luis Potosi 97.7 ZINC PRICES AND INVENTORIES SILVER INVENTORIES & PRICES

Our production of silver decreased 1% in 2013 to 14.934 million ounces, compared with 2012, due primarily to fewer purchases of concentrates.

2010 99.2 2010 95.1 2010 13.2 2010 15.2 2011 83.8 2011 90.0 2011 15.8 2011 14.5 2012 89.9 2012 93.5 2012 16.0 2012 15.0 2013 99.4 2013 97.7 2013 15.6 2013 14.9

PRIMARY MINED ZINC REFINED ZINC REFINED SILVER PRIMARY MINED SILVER (THOUSANDS OF TONS) (THOUSANDS OF TONS) (MILLIONS OF OUNCES) (MILLIONS OF OUNCES)

40 41 Our gold production was 35,545 ounces in 2013. Metallurgic Complex. Amarillo, Texas.

GOLD 2010 17.2 The average price per ounce of gold in 2013 was US$1,410.78, 15% below the price of 2011 36.1 2012 44.0 US$1,668 for 2012. 2013 35.5 1,800.00 14,000.0 1,568.58 1,668.82 1,600.00 11,592.0 1,411.03 12,000.0 1,400.00 11,393.0 11,056.0 10,000.0 PRIMARY MINED GOLD 1,200.00 The price of gold dropped in 2013 after 11 consecutive years of increases. This reflects, (THOUSANDS OF OUNCES) 1,224.66 1,000.00 8,000.0 among other factors, a change in investor confidence towards the reactivation of the econ- 800.00 7,828.0 6,000.0 600.00 4,000.0 omy and consequently, the diversification of investors away from precious metals. 2010 65.4 400.00 2011 62.0 200.00 2,000.0

2012 64.1 OUNCE / DOLLARS 0.00 000.0 OUNCES TROY OF MILLIONS 10 11 12 13 Our gold production in 2013 decreased 19% to 35,545 ounces, compared with the 43,947 2013 51.7 NY COMEX INVENTORIES NY COMEX PRICES ounces produced in 2012, due to fewer purchases of concentrates. REFINED GOLD (THOUSANDS OF OUNCES) GOLD PRICES & INVENTORIES

42 43 MINE PRODUCTION SUMMARY*

2013 Distribution Tons 2013 2012 2011 2010

Copper Concentrates 2,528,015 2,603,914 2,369,759 2,093,685 Copper Content in Concentrates 625,108 650,846 591,329 547,692 Copper Content SX/EWs (Cathode) 167,364 175,362 181,233 140,288 Total Mine Copper Content 792,472 826,208 772,562 687,980

Smelter Copper Content 669,240 703,301 712,015 588,701 Refinery Copper 586,207 578,366 593,026 498,640 Refined Copper (Refineries + SX/EWs) 753,571 753,728 774,259 638,928

Refined copper made into Copper Rod 276,326 289,865 282,492 247,825 Refined copper made into Cake 11,494 6,911 10,747 9,643

Zinc concentrates 185,254 166,952 151,493 179,826 Zinc content in concentrates 99,372 89,884 83,807 99,194 Refinery Zinc 97,692 93,542 90,869 95,072

Lead Concentrates 40,077 35,345 34,719 36,514 Lead Content in Concentrates 23,918 19,978 18,817 20,240

Gold Content in Concentrates (ounces) 35,545 43,959 36,111 17,204 Refinery Gold (ounces) 51,718 64,076 62,038 65,392

Silver Content in Concentrates (ounces) 14,933,798 15,034,604 14,480,800 15,241,928 Refinery Silver (ounces) 15,572,552 15,974,465 15,848,904 13,173,333

Molybdenum Content in Concentrates 19,896 18,297 18,570 20,519

Coal 291,505 325,308 238,504 240,538 A 400-ton truck, one of the largest in Coke 93,214 91,263 84,428 72,933 the world. Buenavista del Cobre. Sulfuric Acid 2,365,051 2,539,794 2,538,040 2,039,729 Sonora, Mexico. Cadmium 584 622 628 602 Lime 133,568 133,870 130,862 96,520

* Figures in metric tons except where indicated

44 45 PROJECTS AND INVESTMENTS

In 2013, we finished the molybdenum plant and the Quebalix III facility at Buenavista, reopened the molybdenum plant at Mission, and completed the variable cutoff grade project at Cuajone.

Projects in Mexico

BUENAVISTA We continue the development of our US$3.4 billion in- through December 31, 2013 is reported at 63%, with an vestment program at Buenavista, which will increase investment of US$545 million. Four of the six ball mills copper production capacity by approximately 175%. have been installed, and we are currently in the process of installing the remaining two. Operation start-up is slat- Construction moves forward on the SX/EW III plant, re- ed for the first half of 2015. porting 82% completion at December 31, 2013. To date, US$374 million has been expended of the total US$444 The Quebalix IV project will increase production by im- million budgeted. The plant will have an annual produc- proving SX/EW copper production and reducing process- tion capacity of 120,000 tons of copper cathodes and is ing time, in addition to reducing hauling costs. The Com- expected to start operations in April 2014. pany recently completed an analysis of the Quebalix IV project crushing capacity and found that by increasing it The new concentrator with integrated molybdenum cir- from 40 to 80 million tons per year, we could eliminate the In 2013, the construction of the first molybdenum plant at Buenavista was cuit project includes a concentrator with an annual pro- need for an additional Quebalix facility in the future and completed on schedule and 6% below budget. duction capacity of 188,000 tons of copper content and a operate at a lower unit investment cost (from US$5.33 to The annual capacity of the plant is 2,000 tons of molybdenum content in concentrates, which molybdenum plant with a 2,600 ton capacity. In addition, US$4.25 per ton processed). The Board of Directors has represents an increase of 11% compared with the project will produce 2.3 million ounces of silver and approved this change, increasing the project budget by production in 2012. Molybdenum Plant at 21,000 ounces of gold annually. The total capital bud- US$100 million, to $340 million. The project is expected Buenavista. Sonora, Mexico. get for the project is US$1.384 billion, and completion to start operations in the first half of 2015.

46 47 Construction of the Quebalix III project was completed in 2013. This facility will be able to crush up to 15 million tons of ore per year, improving SX/EW copper production and reducing processing time, in addition to reducing hauling costs. Buenavista. Sonora, Mexico.

OUR EXPANSIONS AT THE BUENAVISTA MINE WILL THE BOARD OF DIRECTORS APPROVED INVESTMENTS INCREASE COPPER PRODUCTION CAPACITY AT OF US$2.498 BILLION IN THE MINING DIVISION FOR THIS MINE APPROXIMATELY 175% BY 2016. 2014, REPRESENTING AN INCREASE OF 33% OVER 2013.

Angangueo Regarding the acquisition of equipment for the mine operations, at December 31, 2013 we had The project is moving forward as scheduled to develop this underground polymetallic deposit invested US$482 million of the total US$505 million budgeted and received 60 (of 61) trucks in Michoacan, Mexico. With an estimated investment of US$175 million, Angangueo includes and the seven shovels and eight drills the project requires. a concentrator plant which will have an estimated average annual metal content production of 10,400 tons of copper and 7,000 tons of zinc in the first seven years. Over the life of the mine, The remaining projects covered by the US$3.4 billion investment program include substantial average annual concentrate production is expected to contain 2.4 million ounces of silver and investments in infrastructure and other facilities at Buenavista. 1,500 ounces of gold. Production is scheduled to begin in the first half of 2015.

48 49 In 2013, we finalized the refurbishment to reopen the Molybdenum Plant, which will contribute to improving Asarco’s cash cost, as Asarco does not currently produce molybdenum. Panoramic view of the Mission Mine. Tuscon, Arizona.

Projects in Peru

Toquepala Tía María We have invested a total US$289 million in Toquepala. The 6% increase in production at Cuajone is a reflec- The project to improve slope stability in the southern The hearings and workshops required for the approval These projects include the construction of a new in-pit tion of the Variable Cut-Off Ore Grade project, which area of the Cuajone mine will remove approximately 148 of the project’s new Environmental Impact Assessment crusher and a conveyor belt system to replace current was completed in the first quarter of 2013 at a cost million tons of material to improve the mine design with- (EIA) were successfully carried out during the fourth mine rail haulage, resulting in major savings. of US$112 million. The HPGR project, which will im- out reducing our current production level. In addition to quarter of 2013. We expect to receive the approval of prove copper recovery and generate savings by reduc- preparing the mine for the future, this investment will the EIA and the construction permits by the end of the Cuajone ing power consumption in the crushing process, is on avoid a reduction in average ore grade between 2014 second quarter of 2014. Considering this, the Tia Ma- We have invested US$146 million of the US$157 million track to reach full capacity in the first quarter of 2014. and 2018, while maintaining current production levels. ria project is expected to start production at the end budgeted on two projects to increase productivity through The total product budget is US$45 million, of which we At December 31, 2013, we had invested US$59 million of 2016. The project has an annual copper production technological improvements at this unit: (i) the Variable had invested US$34 million by December 31, 2013. of a total budget of US$65 million. The mine equipment capacity of 120,000 tons. Cut-Off Ore Grade project, and (ii) the High Pressure We expect that both projects will be at full capacity by acquired includes one shovel, five trucks, one drill, and Grinder Roll (HPGR) project. mid 2014. auxiliary equipment.

50 51 EXPLORATIONS As of December, we had received 60 trucks (of 61), the seven shovels, and the eight We have 100,383 hectares of mining rights in Argentina, 35,958 hectares in Chile, and drills required for the Buenavista project. 2,544 hectares in Ecuador. Buenavista. Sonora, Mexico.

We continue with our intensive exploration, development, We evaluate new projects based on our long-term objec- and drilling programs at our existing mines in Mexico, tives, the expected return on the investment, environmen- Peru, and the United States, and we are exploring ad- tal aspects, investment required, and estimated produc- ditional ore bodies at other sites in Mexico, Peru, the tion, among other considerations. We continually revise United States, Chile, Argentina, and Ecuador. We invested and make adjustments to all our investment plans in re- US$51 million in exploration activities in 2013. sponse to changes in the economy or market conditions.

Currently, we have direct control of 93,972 hectares The following are some of our more significant exploration of mining rights in Peru; 160,454 hectares in Mexico; projects: 100,383 hectares in Argentina, 35,958 hectares in Chile, and 2,544 hectares in Ecuador.

WE INVESTED US$51 MILLION IN MINE EXPLORATION IN 2013

52 53 Copper prospect with an annual production capacity of 100,000 tons. Los Chancas, Peru.

PERU Los Chancas This project, located in the department of Apurimac in southern Peru, is a copper and molyb- proved to acquire the land required for the project. When developed, this project is expected denum porphyry deposit. At the close of 2013, we were about to finalize the feasibility study to produce 190,000 tons of copper and 105,000 ounces of gold annually. for this prospect, and we expect to start the environmental impact study in 2014. Current estimates indicate 545 million tons of mineralized material with a copper content of 0.59%, Buenavista-Zinc molybdenum content of 0.04%, and 0.039 grams of gold per ton plus 181 million tons of This project is located in the state of Sonora, Mexico and forms part of the Buenavista ore mineralized leachable material with a total copper content of 0.357%. body. Drilling and metallurgical studies have shown that the zinc-copper deposit contains approximately 36 million tons of mineralized material, with a content of 29 grams of silver per ton, MExico 0.69% copper, and 3.3% zinc. In 2011, 11,956 meters of diamond drilling confirmed the grade El Arco and provided geotechnical information. In 2012, the Buenavista-Zinc mine plan was integrated El Arco is a world class copper deposit in the central part of the Baja California peninsula, with with the overall mine plan for the Buenavista pit. An additional 15,128 meters were drilled in ore reserves of over 1.5 billion tons with an ore grade of 0.42% and 0.14 grams of gold per 2013 to locate the oxidized zinc for new modeling and metallurgical testing. We expect to re- ton. In 2010, we concluded the feasibility study and an investment of US$56 million was ap- ceive the results of the new model early in 2014 and proceed with metallurgical testing.

54 55 Panoramic view of La Caridad Mine. La Caridad. Sonora, Mexico.

Los Chalchihuites UNITED STATES The Chalchihuites site is located in the state of Zacatecas. It is a replacement deposit with Chilito, Arizona. Chilito is a modest-sized copper porphyry located Gila County, Arizona along mixed oxides and sulfides of lead, copper, zinc, and silver. In 2009, we started a prefeasibility the south side of the Dripping Springs range, about 6.4 kilometers northeast of the Asarco study. In 2010 and 2011, we added several claims and carried out a 9,396 meter drilling smelter in Hayden, Arizona. Asarco acquired the deposit with the purchase of the Ray mine program that indicated at least seven million tons of mineralized material containing 97.9 in 1986. Asarco controls approximately 70% of the deposit, while Freeport controls the grams of silver, 0.41% lead, 0.52% copper, and 2.53% zinc. In 2013, we continued with the remaining 30%. process to obtain all the permits and the land required for the project. Additionally, another prefeasibility study was started, which we expect to complete early in 2014. For 2014, we The mineralization at Chilito is in the form of a donut or crown centered on the south lobe plan to perform additional drilling to confirm the metallurgical results of the prefeasibility study of a quartz diorite porphyry. Mapping indicates that the mineralization near the surface is in and to drill three wells to supply the water needed for the project. an inverted cup form, the upper part of which has been destroyed by erosion. The copper mineralization near the surface consists mainly of copper oxides and silicates (chrysocolla, malachite, azurite, and cuprite). Below the copper oxide zone is a noncontinuous enriched zone

56 57 Panoramic view of the Ray SX/EW. Arizona, United States.

of secondary sulfurs. The secondary sulfur and oxide zones mix with a mineralization of pyrite Copper Butte, Arizona. The Greater Copper Butte area, located eight kilometers west-south- and chalcopyrite with minor molybdenum and bromite deep down. The contacts between west of Ray in Pinal County, Arizona, consists of three prospects, Copper Butte, Buckeye, and the primary, secondary, and oxide zones are irregular and discontinuous, with the secondary (Pioneer-Alabama), all of which have been explored at various times for copper by different and oxide zones being superficial in some areas. Drilling indicates the Chilito deposit has two companies since 1901. Copper oxide and copper silicate ores were discovered and mined mineralized zones, one inside the porphyry, dolerite, and sedimentary units and a deeper zone in small amounts at Copper Butte. During the 1940’s, exploration drilling began in search of (nearly 457 meters below the surface) with dolerite as the host. The firm Independent Mining porphyry copper deposits beneath the copper oxide and silicate showings in the Oligocene Consultants prepared a new calculation of reserves in 2013, which includes the upper zone Whitetail Conglomerate, and this work reached its peak in the early 1960’s, with Kennecott and just barely touches the upper limit of the deepest zone (the bottom of the block model has mapping the area. After 1968, when Kennecott installed an SX/EW operation at Ray, the ex- an elevation of 610 meters). The model indicates that with a cutoff grade of 0.27%, there are ploration work turned toward drilling the secondary copper mineralization. Over 142 holes have approximately 96 million tons of 0.462% copper grading. No drilling was performed in 2012 been drilled in the area, and significant, but relatively low grade, resources were developed at and 2013, and the project has been temporarily suspended, with the exception of a slope both Copper Butte and Buckeye. After Asarco acquired Ray, a small amount of exploration stability study and column leaching tests which are ongoing. and resource modeling continued until 1996. Another calculation was made of the reserves

58 59 in 2013. This model used a cutoff grade of 0.183% and estimated 90 million metric tons of Ecuador 0.46% total copper grading with a stripping ratio of less than 2:1 for Copper Butte. Using this Chaucha same cutoff grade, 39 million tons of 0.385% total copper grading with a stripping ratio of This mineralization is characteristic of a copper-molybdenum porphyry system. In 2013, we 3.1:1 were estimated at Buckeye. Both properties have additional exploration potential and obtained all the permits required for the evaluation of the deposit. We are planning to com- seem amenable to heap leaching and SX/EW recovery. Pioneer-Alabama needs further work plete a 20,000-meter diamond drilling program in 2014. to identify reserves. Argentina Chile In 2011, we started exploring in Argentina, concentrating the following year mainly on the Catanave Cochicos project, in the province of Neuquen, where we expect to locate mineralization for a Catanave is classified as an epithermal system of gold and silver. Between 2011 and 2013, gold and silver epithermal system. In 2013, we carried out geological exploration in the Salta, diamond drilling programs were completed and we are currently evaluating their results, to San Juan, and Neuquen provinces, expecting to locate copper porphyries. For 2014, we plan decide the future of the project. to start a 10,000 meters diamond drilling exploration program at the Cerro Sementa project, in the Salta province, and we expect to locate porphyry copper and molybdenum mineraliza- El Salado tion. We also plan to continue with the regional exploration at Piuqenes and Voluntad, located A copper-gold prospect located in the Atacama region of northern Chile, is being explored for in the San Juan and Neuquen provinces, respectively, where we expect to locate porphyry copper and molybdenum porphyries. In 2013, we completed a conceptual engineering study copper and molybdenum mineralization. for the project. A 15,000-meter drilling program is planned for 2014 to define the mineralized structures of the Diego de Almeida zone.

WE ARE EXPLORING IN MEXICO, PERU, THE UNITED STATES, CHILE, ARGENTINA, AND ECUADOR TO GUARANTEE OUR LONG-TERM GROWTH.

60 61 OCCUPATIONAL HEALTH & SAFETY We invested more than US$88 million in occupational health and safety in 2013, At Grupo México, caring for the life, health, and physical integrity of our personnel is our an increase of 18% over the previous year. top priority. Our goal: ZERO accidents. La Caridad, Sonora, Mexico.

Our Mining Division has a Comprehensive Workplace Health to the Nueva Rosita plant and the Buenavista del Cobre and Safety Management System in place that helps us to mine for their low accident rates. monitor and control the risks at our operations and to develop ongoing improvement plans to protect our personnel. • The Santa Barbara unit won first place in Benchman BioPak Biomarine training (United States Mine Res- We maintain OHSAS 18001:2007 Occupational Health cue Association) and second place in the Mine Rescue and Safety Management certification at 13 of our units in Squad category in the 13th National Underground Mine Mexico and Peru. Also, 11 of our units in Mexico are ac- Rescue Squad and First Aid Competition. credited with the Department of Labor and Social Welfare under the Self-Management Workplace Health and Safety • The Department of Health certified the Santa Eulalia Program (PASST). unit a “Healthy Environment”.

Our 2013 achievements in health and safety include the • The Globo and Caridad neighborhoods were certified following: by the Sonora Department of Health as “Healthy Neigh- borhoods”, thanks to the efforts of Mexicana de Cobre • The Mexican Mining Chamber (CAMIMEX) awarded in fostering favorable health and safety conditions in the “Jorge Rangel Zamorano” Casco de Plata Trophy these neighborhoods.

62 63 2011 1.24 2011 0.75 2012 1.06 2012 0.61 2013 0.94 2013 0.19

Safety Cells are interdisciplinary working groups INCIDENT RATE (IR), GRAVITY RATE (GR), formed by people from all areas, to reinforce MINING DIVISION, 2011 - 2013 MINING DIVISION, 2011 - 2013 the understanding and application of the Comprehensive Workplace Health & Safety Management System. Second Forum on Safety Cells, Corporate Offices. Mexico City.

Thanks to the efforts and commitment of our people in health and safety, at the close of 2013, the gravity rate (GR) OCCUPATIONAL HEALTH had dropped substantially, from 0.75 in 2011 to 0.19 in 2013, demonstrating that our safety actions have reduced the To promote a culture of self-healthcare, we continued to strengthen our prevention programs in the workplace, the severity of accidents. family, and the community.

Similarly, our incident rate (IR) experienced a significant decrease of 11% compared with 2012, as a result of our em- Throughout 2013, we carried out various risk education, prevention, and control programs, in addition to others on the ployees identifying and preventing risks as part of their daily activities. treatment of diseases. These programs were offered to our employees and, in some cases, to their families and members of the community. These results reflect our efforts to build a culture of safety, the implementation of inspection plans, and above all, the work and commitment of our employees.

64 65 SAFETY COURSES & CONFERENCES INVESTMENT IN HEALTH AND SAFETY

REWARDS During 2013, we invested more than US$88 million in occupational health and safety, an in- FOR EMPLOYEES SAFETY OR DEPARTMENTS crease of 18% over 2012, focusing on engineering works, the acquisition of personal protective EXPO WITH ZERO ACCIDENTS equipment, training, and industrial hygiene studies. In occupational health, we’ve invested in health awareness, promotion, and protection, as well as prevention, treatment, and therapy. ACTIVITIES FOR EMPLOYEES WORKPLACE

COMPANY INVESTMENT IN SAFETY HEALTH SAFETY US$ Millions RUN CELLS FORUM

HEALTH Mining Division FAIR Administrative safety projects 5.01 Training 4.10 Personal protection equipment 10.63 Industrial hygiene studies 0.59 Safety engineering works 59.07 Total 79.39

KNOW MY COMPANY INVESTMENT IN HEALTH GUIDED TOURS US$ Millions

HEALTH HEALTH DAY RUN Mining Division

Health awareness, promotion & protection 0.72 ACTIVITIES FOR EMPLOYEE FAMILIES FAMILY Detection and prevention 2.16 & THE COMMUNITY Treatment 6.06 FAMILY Therapy 0.06 SOCIAL CONTEST TO FAMILY EVENTS Total 9.00 PROMOTE & PARADES VALUES COURSE ON FIRE EXTINGUISHING

66 67 O3 TRANSPORTATION DIVISION EBITDA FOR OUR TRANSPORTATION DIVISION INCREASED 11% TO A RECORD US$621 MILLION

In the first 16 years of the concession, we’ve invested US$4.8 billion, principally in infrastructure and locomotives, representing 300% more than the US$1.2 billion we promised to invest when we received the concession in 1998. 68 69 GEOGRAPHIC LOCATION TRANSPORTATION DIVISION PRINCIPAL ROUTES Mexico has undergone a transformation in its railroad system over the past 15 years, from

ALBUQUERQUE an operation that had been dependant on large government subsidies to a highly productive PHOENIX system with technological improvements that operates at a profit and autonomously. CALEXICO SAN WELLTON PICACHO CLIFTON DIEGO DALLAS MEXICALI LONGVIEW CALEXICO TUCSON FT. WORTH SHREVEPORT MEXICALI NOGALES EL PASO SAN ANGELO JCT The Transportation Division of GMéxico is represented by age in Mexico; it operates a track network of more than NOGALES CD. JUÁREZ SAN ANGELO FT. STOCKTON its subsidiary Infraestructura y Transportes México, S.A. 10,500 kilometers, covering approximately 81% of the ALPINE NEW ORLEANS SPOFFORD B. HILL SAN ANTONIO IOWA HOUSTON de C.V. (“ITM”), whose principal subsidiaries are Grupo country. ITM’s lines connect to five border points with the PIEDRAS PRESIDIO HERMOSILLO NEGRAS EAGLE OJINAGA PASS Ferroviario Mexicano, S.A. de C.V. (“GFM”), Ferrocar- United States, four ports on the Pacific Coast, and two on

GUAYMAS CHIHUAHUA CORPUS ril Mexicano, S.A. de C.V. (“Ferromex”), Ferrosur, S. A. the Gulf of Mexico. ITM is controlled by GMéxico, which CHRISTI CD. FRONTERA ESCALÓN de C. V. (“Ferrosur”), Intermodal México, S.A. de C.V. holds 74.9%, and Grupo Carso-Sinca Inbursa, 25.1%, PAREDÓN MONTERREY TOPOLOBAMPO TORREÓN SALTILLO (“IMEX”), and Texas Pacifico, LP, Inc. (“TXP”). ITM is the Ferromex is controlled by ITM, 74%, and Union Pacific, largest railroad company with the most extensive cover- 26%. Ferrosur is wholly owned by ITM. GULF OF FELIPE MAZATLÁN PESCADOR MEXICO PTO. ALTAMIRA

AGUASCALIENTES SAN LUIS TAMPICO POTOSÍ PROGRESO GUADALAJARA

VIBORILLAS PACIFIC IRAPUATO HUEHUETOCA OCEAN MANZANILLO VERACRUZ

COLIMA MEXICO CITY COATZACOALCOS

SALINA CRUZ TAPACHULA

LEGEND Thanks to our heavy investments in sidings, GRUPO MÉXICO LINES double tracks, and yards between 1998 and GRUPO MÉXICO TRACK USAGE RIGHTS 2013, we’ve increased our track capacity 131%. Transportation Division, OTHER LINES Grupo México.

70 71 INFRAESTRUCTURA Y TRANSPORTES MÉXICO HIGHLIGHTS TRANSPORTATION DIVISION RESOURCES

January - December Variance Ferromex Ferrosur TXPT Total

(US$ thousands) 2012 2013 $ % Track (km) 8,111 1,813 616 10,540 Locomotives 593 172 14 780

Volume Transported (millions tons/km) 51,344 51,054 (290) (0.6) Cars 15,614 4,011 - 19,625 Employees 8,025 1,949 59 10,033 Sales 1,676,720 1,856,416 179,696 10.7 Cost of Sales 1,066,087 1,172,621 106,534 10.0 Operating income 416,611 460,285 43,674 10.5 EBITDA 559,301 621,253 61,952 11.1

Cumulative sales through December 2013 increased 11%, driven by a better traffic mix as the net tons-km transported EBITDA Margin (%) 33.4% 33.5% remained constant compared with 2012. The volume transported was affected by heavy rains during the year and the low Net Earnings 341,854 262,181 (79,673) (23.3) grain imports during the first nine months of the year, due to the drought in the United States. Compensating these effects, movement of local crops increased significantly. The segments that reported the greatest growth in sales were: Energy Profit Margin (%) 20.4% 14.1% (27%), Mineral (13%), and Industrial (11%). Investments - Capex 258,959 414,617 155,658 60.1

A total 51.054 billion net tons-kilometer were transported in 2013. The segments that experienced the greatest growth were: Automotive (6%), due to the increased exports from Ford, Nissan, and Honda, and Industrial (3%), due to higher beer exports. INFRAESTRUCTURA Y TRANSPORTES MÉXICO, S.A. DE C.V. ITM provides railroad services to the Agricultural, Industrial, Mineral, Automotive, Chemical, Metals, Cement, Energy, and Intermodal segments. The transportation of products and materials in bulk, especially over long distances, is more effective and efficient by train than by truck. ITM has implemented a commercial strategy based on three areas: (i) retaining its current customer base; (ii) increasing sales to current customers, and (iii) seeking out new customers. THE RAILROAD IS UP TO Since it began operations, ITM has implemented new operating practices and made significant capital expenditures to reduce long-term costs and to improve operating efficiency. 50% MORE ECONOMICAL THAN TRUCKING, WHICH TRANSLATES INTO MAJOR SAVINGS FOR OUR CUSTOMERS.

72 73 In 2013, ITM became the largest transporter of automobiles in Mexico, moving 70% of the production from the plants served. Automotive Segment, Transportation Division.

Agricultural; 27% In 2013, ITM became the largest transporter of automo- of Manzanillo, Veracruz, and Altamira. In this segment, daily ported, for which an additional fleet of 300 tanker cars was Minerals; 11% Automotive; 11% biles in Mexico, moving 70% of the production from the service was started in 2013 on the Monterrey - Chicago - added. In Minerals, the Nogales-Guaymas corridor was Industrial; 10% plants served, and we expect this trend to continue. Saint Louis - Los Angeles - Monterrey route and daily ser- consolidated to export 1.1 million tons of mineral from the Chemical; 9% Energy; 8% vice on the Monterrey - Altamira - Monterrey route. Invest- United States. In the Agricultural segment, a record 5.5 Intermodal; 7% Steel Products; 6% Regarding the Intermodal Segment, ITM is concentrating ments were also made to expand the cross dock terminals million tons of local crops were transported. In Cement, a Cement; 5% its efforts on services and infrastructure, to compete with at Monterrey, Nuevo Leon and Silao, Guanajuato. multi-year contract was signed with a major cement com- Others; 4% Car-Hire; 2% the nearly 6 million trips made by the trucking industry be- pany for US$500 million. Lastly, a collaboration agreement tween Mexico and the United States and to transport the Other segments have grown significantly this year as well. was signed with the Morelos state government to improve 2.3 million containers that are moved to and from the ports In Energy, 14,000 cars of diesel and fuel oil were trans- the line from Mexico City to Cuautla, Morelos. PERCENTAGE OF SALES BY PRODUCT IN 2013

74 75 Growth and Operating Efficiency at ITM ITM’s total sales at the close of 2013 were at a record US$1.856 billion, 11% above 2012.

The operating costs in 2013 were 10% higher than in 2012, mainly due to increases in labor (10%) and diesel (13%) costs, the latter partially compensated by a 5% improvement in consumption efficiency. Costs were also affected by an increase in concession fees on sales from 0.5% to 1.25%, which took effect in February 2013.

The EBITDA for 2013 was US$621 million, also a record for ITM, equal to 33.5% of sales and representing an increase of 11% compared with 2012.

Investment in Fixed Assets In 2013, ITM invested US$415 million, a 60% increase over 2012. These investments were allocated primarily to infrastructure and track improvements, the expansion and construction of sidings, and the purchase of track machinery, which will increase capacity and benefit the operation moving forward.

55,000 1,400,000

45,000 1,200,000 IN 2013, FERROMEX For every 1% Mexico’s GDP grows, our volume increases 1.36%. Trains in Mexico transport 1,000,000 WAS NAMED THE BEST 35,000 more freight than any railroad in the European RAILROAD IN NORTH AMERICA 800,000 Union, with the exception of Germany; more CARS 25,000 BY THE “INTERNATIONAL

NET TONS/KM NET than the railroads in France, Spain, Italy, and 600,000 TRANSPORT FORUM” Austria combined. Transportation Division, 15,000 400,000 Grupo México.

5,000 200,000 YEAR 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 CARS NET TONS/KM (MILLIONS)

RAIL FREIGHT - ITM

76 77 O4 INFRASTRUCTURE DIVISION THE EBITDA FOR OUR INFRASTRUCTURE DIVISION WAS 73% higher, REACHING US$109 MILLION

PEMSA’s EBITDA increased 92% in 2013, its best year since being incorporated into Grupo México. Infrastructure Division, Grupo México. 78 79 GEOGRAPHIC LOCATION INFRASTRUCTURE DIVISION INFRASTRUCTURE DIVISION MPD - MÉXICO PROYECTOS Y DESARROLLO, S.A. DE C.V.

Cumulative investments over the last 3 years total US$2.000 billion.

The Infrastructure Division is represented by México MCC are wholly owned by GMéxico. PEMSA offers oil Proyectos y Desarrollos, S.A de C.V. (“MPD”), whose and water drilling services, value added services, such as CANANEA principal subsidiaries are: Perforadora México, S.A. de cementation engineering and directional or slant drilling. CANANEA WELL NACOZARI 500MW POWER PLANTS C.V. (PEMSA), México Generadora de Energía, S.A. de MGE and MGEE are active in the production of self-sup-

HERMOSILLO OFFICE C.V. (“MGE”) México Generadora de Energía Eólica, S.A. ply power. MCC engages in engineering and procurement de C.V. (“MGEE”), and México Compañía Constructora, activities, and infrastructure projects. S.A. de C.V.(“MCC”). MPD, PEMSA, MGE, MGEE, and

SAN LUIS POTOSI ZACATECAS WELL CHIHUAHUA” PLATFORM OPERATING IN CANTARELL LAND DRILLING LEON POZA RICA, VERACRUZ “ZACATECAS” PLATFORM OPERATING NEAR FRONTERA, TABASCO “SONORA” PLATFORM OPERATING NEAR FRONTERA, TABASCO

OFFICES MEXICO CITY OFFICES CD. DEL CARMEN, CAMPECHE CUERNAVACA OFFICES VILLAHERMOSA, TABASCO The 400 foot jack-up “Tabasco” platform with a JUCHITAN, OAXACA 74MW WIND FARM drilling capacity of 35,000 feet arrived in January 2014 to start operations in March. Puerto Dos Bocas, Tabasco, Mexico.

LEGEND

PEMSA MCI

CONSUTEC MGE MGEE

80 81 EBITDA FROM THE DRILLING SUBDIVISION ROSE MÉXICO PROYECTOS Y DESARROLLO (MPD) HIGHLIGHTS We are the Mexican 98% COMPARED WITH 2012. company with the January - December Variance most ocean assets in operation in (US$ thousands) 2012 2013 $ % 2012 2013 Mexico and the only company in 10 20 30 40 50 60 70 80 90 100 Sales 223,160 305,969 82,810 37.1 Mexico with high- specification jack-up Cost of Sales 140,293 183,964 43,671 31.1 2013 CAPITAL EXPENDITURE platforms that Operating Income 38,659 78,175 39,516 102.2 ALLOCATIONS can drill in hostile environments. EBITDA 63,218 109,257 46,039 72.8 TO THE PURCHASE OF PLATFORMS 60% AND MODULAR UNITS EBITDA Margin (%) 28.3% 35.7% TO THE CONSTRUCTION OF OUR POWER Net Profit (Loss) 17,299 29,467 12,189 70.5 35% PLANTS Profit Margin (%) 7.8% 9.6% TO THE CONSTRUCTION OF THE SALA- Investments - Capex 631,435 572,525 (64,910) (10.3) 5% MANCA-LEON HIGHWAY

INFRASTRUCTURE DIVISION DRILLING The Infrastructure Division has started to reap the benefits of the significant investments made in recent years. Consolidat- Perforadora México, S.A. de C.V. (PEMSA). ed sales in 2013 were US$306 million, a 37% increase over 2012, as a result of the start of operations of the “Chihuahua” (June 2012) and “Zacatecas” (November 2012) drilling platforms. The initial sales of electricity from the first 250MW power Continuing its fast-paced growth, 2013 was the Company’s best year since incorporating into Grupo México. The pros- plant were made at the end of 2013 to Minera México. The EBITDA for the Division increased 73% to US$109 million. pects in the sector are excellent with the investments already made and those committed since the end of 2011.

During 2013, the Infrastructure Division invested US$572 million, mostly for the purchase of two 400 foot jack-up drilling Revenues in 2013 were US$200 million and the EBITDA was US$101 million, which reflects increases of 27% and platforms, with a drilling capacity of 30,000 feet and able to drill in “hostile environments”, and the construction of two 98%, respectively, compared with 2012. This growth is due to better than expected results from the Chihuahua, Zacate- modular platforms that will start operations in June and October 2014, respectively. cas, and Sonora jack-up platforms.

The board of directors has approved US$380 million in capital expenditures for 2014. US$271 million of that amount will The investments committed in 2013, plus those made in 2011 and 2012, total US$1.400 billion, primarily for the be allocated to one new ocean platform and two modular units. These substantial investments in the Infrastructure Division acquisition and start-up of the Chihuahua, Zacatecas, Campeche, and Tabasco platforms and the two modular units: will create more than 800 direct and indirect jobs. Veracruz and Tamaulipas.

82 83 The Tabasco jack-up platform will start operations in March 2014, with a daily fee of US$160,000.

Puerto Dos Bocas TABASCO THE TABASCO JACK-UP PLATFORM HAS THE LONGEST PEMEX CONTRACT 2,528 DAYS

1. OCEAN DRILLING 1.2 Chihuahua Platform The platform reported 98% productivity in 2013, generating income of US$47 million and EBIT- The Chihuahua platform has a US$189 million contract DA of US$36 million. The revenue from the Zacatecas platform represented 23% of CIPEME’s 1.1 Sonora Platform that expires March 1, 2016. total revenue. The Sonora platform has a US$71 million contract that expires December 19, 2014. The platform reported 99% productivity in 2013, gen- 1.4 Investment in New Platforms erating revenue of US$47 million and EBITDA of US$37 Two JU-2000E Friede & Goldman platforms “Tabasco” and “Campeche” were acquired in 2012, The Platform reported 93% productivity in 2013, gen- million, a 75% increase over the US$21 million reported to drill in ocean depths of up to 400 feet. erating income of US$26 million and resulting in EBIT- for 2012. The revenue from the Chihuahua platform rep- DA of US$16 million, an 84% increase over the US$9 resented 23% of CIPEME’s total revenue. The Tabasco Platform has a signed 2,528 day contract and will start operations on March 1, million reported for 2012. 2014, at a daily fee of US$160,000. 1.3 Zacatecas Platform The revenue from the Sonora platform represented The Zacatecas platform has a US$141 million contract The Campeche Platform has a 2,281 day contract and will start operations on October 1, 2014, 13% of CIPEME’s total revenue. that expires on June 27, 2015. at a daily fee of US$159,000.

84 85 The “Veracruz” modular platform has a 1,219-day contract, at a daily fee of US$80,000, and will start operations on June 24, 2014.

The “Tamaulipas” modular platform has a 1,153-day contract, at a daily fee of US$80,000, and will start operations on June 24, 2014. 1 2 2. Land Drilling

2.1 Cement 1. Our power plants will supply better quality 2. Construction of the Second 250MW power to our mine operations, at a lower Plant is practically finished, on time and The Cement division executed work for Pemex and earned US$10 million, representing 5% price than the CFE, while generating major within budget, representing the successful of CIPEME’s total revenue. earnings for the Infrastructure Division. completion of our first major energy project Sonora, Mexico. in the Infrastructure Division. Sonora, Mexico.

2.2 Tertiary Oil Gulf Project The Pemex contract started in September 2009 and ended in September 2013.

In 2013, well drilling work was completed for US$58 million and finishing work on them for US$6 million.

The drilling and finishing of wells represented 31% of CIPEME’s revenue. ENERGY Controladora de Infraestructura Energética México, S.A. de C.V. (“CIEM”)

México Generadora de Energía MGE was formed in 2005 to develop, construct, operate, and maintain two 250MW combined cycle power plants in the state of Sonora, Mexico. The project is of great strategic importance for Grupo México as it will supply power to AVAILABILITY our open-pit mine operations at a lower cost than the CFE service. The first 250MW plant was completed at the end of THANKS TO THE MGE’S EXPERIENCED OPERATING TEAM, THE FIRST September 2013 and since December 1 has been selling power to its consumer partners. The second 250MW plant is % 250MW POWER PLANT STARTED OPERATIONS IN 2013 expected to start operations in the second quarter of 2014, in line with its original schedule. This second unit will supply 98 AND SINCE THEN, ITS AVAILABILITY HAS BEEN ABOVE 98% power to the expansion projects at Buenavista del Cobre.

86 87 A total of US$540 million had been invested through De- This power will supply more than 180 Cinemex movie cember 2013. With this project, the Company reaffirms its theaters, ITM stations and yards, and also our IMMSA commitment to strengthening its Mining Division position underground mines. The project will also reduce green- as one of the world’s lowest cost producers, while at the house gas emissions equivalent to 120,000 tons of car- same time developing its Infrastructure Division. bon dioxide.

México Generadora de Energía Eólica (MGEE) The wind farm started to produce power and pass con- During 2013, MGEE developed the first wind farm for struction and operating tests in December 2013. During self-supply and sale to third parties. This project is of construction, more than 9,500 tons of components and great importance to the group as it diversifies the Infra- materials were transported to the site by sea and land, structure Division both technologically and geographically. including tower sections, blades, and turbines, and more The Company continues to develop its Infrastructure Division, promoting the use of than 500 jobs were created during the civil works, trans- clean energy, like wind power and meeting the The project consists of 37 2MW turbines, for a combined portation, assembly, and start-up of the equipment. goal of contributing to the environment and the total of 74MW, which will generate 239 GWh per year. development of renewable energy infrastructure in the country. Oaxaca, Mexico.

CONSTRUCTION OF THE WIND FARM WAS OUR WIND FARM WILL REDUCE GREENHOUSE FINISHED IN 2013, CREATING MORE THAN GAS EMISSIONS EQUIVALENT TO 120,000 TONES OF CARBON DIOXIDE (EQUAL TO TAKING 22,000 120,000 CARS OFF THE ROAD) TONS OF EQUAL TO 500 NEW JOBS CARBON 22,000 DIOXIDE FEWER CARS 100 200 300 400 500 LESS

88 89 MÉXICO COMPAÑÍA CONSTRUCTORA Our 30-year concession four-lane Salamanca-Leon highway reports 48% REPORTED SALES OF completion. Guanajuato, Mexico. US$154 MILLION REPRESENTING 73% GROWTH OVER 2012

CONSTRUCTION

The project is located in La Ventosa, a community in the municipality of Juchitan, Oaxaca and México Compañía Constructora MCC operates to the highest market standards for Engi- has an administrative office in Juchitan. In 2013, personnel from Grupo México’s Community MCC has been active, without interruption, in the con- neering and Construction services in the areas of Engi- Development department joined the team and carried out extensive diagnostics to identify the struction of Mexican infrastructure since 1936, starting neering, Planning, Procurement, Civil and Electromechan- needs of the community and the area. The wind power industry has become one of the major with the “Construction of the Southeast Railroad”. This ical Construction, Supervision and Control of all Works economic activities in the Tehuantepec Isthmus region. year, we are proud to celebrate 77 years building Mexico. Processes, and start-up.

A total US$150 million has been invested in the project, which is scheduled to start commercial MCC is a strong and dynamic company, backed by Gru- MCC has held ISO 9001 Quality, ISO 14001 Environmen- operations in the second quarter of 2014 once the construction, operating, and suitability tests po México, providing comprehensive services to develop tal, and OHSAS 18001 Occupational Safety certifications have been completed at the points of consumption. projects in the private and public sectors. since 2005.

90 91 Its strength and operating capacity mean MCC can effec- reported 48%. Section 1 of the Highway, Cerro Gor- tively undertake all types of major projects and with a high do-ITESI, is scheduled to open in October 2014, while degree of difficulty, added to the vast experience acquired Section 2 ITEST-Leon is scheduled for April 2015. over 77 years of operation, covering a wide range of large scale and complex works projects, such as: Fondo Inmobiliario, S.A. de C.V.: The work assigned to the Company for Plaza Cuernavaca II was completed on – Hydroelectric and Thermoelectric Plants time and within budget, having built 5,700 tons of steel – Deviation and Storage Dams, Canals and Irrigation structure and 48,000 m2 of commercial space. Districts – Projects for the Bottling, Pharmaceutical and Automo- Mexicana de Cobre, S.A. de C.V.: Work continues on the tive Industries Rockfill of the Curtain for Tailings Dam No. 7 in Nacozari – Construction of Oil and Gas Projects de Garcia, Sonora, reporting 35% progress and is slated – Mining, Exploration, Smelter Plant and Refinery Works for completion in March 2015. Projects – Construction of Railway Lines, Multimodal and Auto- Buenavista del Cobre, S.A. de C.V.: The flotation cells Copper is the only conductor that is sufficiently motive Terminals and the milling area for the New Concentrator in Cana- durable to support the helix of a Wind Farm – Construction of Highways, Underground Projects and nea, Sonora were completed on time and within budget. making 6 turns on its axis daily without breaking. Our Wind Farm uses approximately Tunnels 185 tons of copper. Juchitan, Oaxaca, Mexico. – Construction of Residential Developments In December 2013, we were awarded the construction contract for the First Stage Phases I and II of the New MCC reported sales of US$154 million and EBITDA of Tailings Dam in Cananea. An investment of US$41 mil- US$34 million, reflecting increases of 73% and 48%, re- lion will be made to purchase the latest construction spectively, over 2012. equipment for the project.

Major Projects: New Projects: We are planning to actively participate Department of Transport and Communications (SCT): in the federal government’s investment projects in the construction of the “Salamanca-Leon” Highway, under railroad, oil, energy, and concessioned highway sectors. the program to release rights of way, has progressed a

92 93 O5 GRUPO MÉXICO FOUNDATION

THROUGH OUR SOCIAL PROGRAMS, WE’VE REACHED EVERY CORNER OF MEXICO, HELPING 20,369,199 PEOPLE

Some of the students that received educational support materials from the Grupo México Foundation.

94 95 GRUPO MÉXICO FOUNDATION GRUPO MÉXICO FOUNDATION IN MEXICO

The Grupo México Foundation Volunteer Day was held simultaneously in 12 Mexican states, benefiting 25,000 people. USA

1. Social Linkage Program Volunteer Day.- Through the FGM Volunteer Day, 28 Building Schools.- We sponsored the “2013 Lorena institutions and 25,000 individuals were benefited in Ochoa Invitational” golf tournament, which raised mon- 22 communities, with the participation of 3,972 vol- ey to build the “La Barranca” school in a community unteers, including families and employees of our three near Guadalajara, Jalisco, benefiting 355 children. divisions and Cinemex; volunteers from the institutions benefited also joined the cause. Reforestation.- A donation of 101,000 trees was made to the Nayarit state government to reforest 20 commu- Donation of Basic Supplies.- We donated more than nities, and another 1,000 trees to reforest the areas Gulf of Mexico 57,000 basic supplies to 27 institutions, benefiting where Ferromex operates in the states of Chihuahua 2,700 people in 6 communities in the states of Quereta- and Coahuila; benefiting 200,000 people. ro and Guanajuato.

Pacific Ocean

Central America Social Linkage Results:

LEGEND 18 States in Mexico 58 Institutions COUNTRYWIDE PRESENCE 228,055 People 3,972 Volunteers 101,000 Trees Planted

96 97 COMPARISON OF SOCIAL LINKAGE INCREASE

Increase in Increase in Total Trees Project States No. Benefited Total Benefited Trees Donated No. Benefited Trees Donated Donated 2012 2013 2012 2013 2013 vs. 2012 2012 2013 2013 vs. 2012 1,500 200,000 13233% 201,500 people people Reforestation 2 3 2,350 101,000 4197% 103,350 1 institu- 2 institu- 100% 3 tion tions

Increase in Increase in Total Project States No. Benefited Total Benefited Volunteers No. Benefited Volunteers Volunteers

2012 2013 2012 2013 2013 vs. 2012 2012 2013 2013 vs. 2012

N/A 25,000 people N/A 25,000 FGM N/A * 12 N/A 3,972 N/A 3,972 Volunteer Day N/A 28 institutions N/A 28

Project States No. Benefited Increase in No. Benefited Total Benefited

2012 2013 2012 2013 2013 vs. 2012

Lorena Ochoa International 1 1 355 people 355 people 0% 710

1 institution 1 institution 0% 2 **

Increase in Increase in Total Items Project States No. Benefited Total Benefited Items Donated No. Benefited Items Donated Donated

2012 2013 2012 2013 2013 vs. 2012 2012 2013 2013 vs. 2012 Donation of 2,700 N/A N/A 2,700 3,971 people participated in Volunteer Day, people recovered N/A *** 2 N/A 57,653 N/A 3,972 including families, Company employees, and 27 insti- N/A N/A 27 benefited institutions. items Ferromex tution(s)

* Not applicable (N/A) as this is a new program that was launched in 2013. ** The same institution was benefited both years. ** Not applicable (N/A) as FGM started to coordinate this program in the last quarter of 2013 (in 2012 and previous years, Ferromex had operated this program on its own, with a different focus and without FGM participation.

98 99 2. Education and the Environment Program Educational Support Materials.- We have developed 9 different booklets to support children, Development of the Nacozari Community Center.- youth, teachers, and parents on topics such as nutrition, violence (in all its forms), sexuality, Since its creation, the community center has offered and addiction. These materials will benefit 19 million children. We are working in collaboration workshops on sexuality, addiction, violence, and nu- with the Department of Education (SEP) to distribute these materials to all schools nationwide. trition for youth in efforts to contribute to improving the quality of life of the community. These workshops Tree Planting Days.- We held our third tree planting day this year with employees from our are held in middle and high schools and have had a IN 2013, THE NACOZARI COMMUNITY Mining and Transportation Divisions, in Huixquilucan, State of Mexico and 203 volunteers. significant impact, benefiting 1,466 youth in the state CENTER BENEFITED of Sonora. We are constantly seeking and creating alliances with state governments in the State of Mex- 1,466 YOUTHS IN ico, Hidalgo, Chihuahua, Nayarit, Guerrero, San Luis Potosi, and Coahuila and with institutions We are working to reach parents regarding these same THE STATE OF SONORA committed to the environment. As a result, 81 hectares have been reforested with more than issues; with these actions we are hoping to raise gen- 80,600 trees to benefit 676,000 people. eral awareness of the importance of a healthy lifestyle.

Through these workshops, In 2013, the Grupo México Foundation planted we are present in all 181,638 trees, an increase of 637% compared middle and high schools with 2012. in Nacozari.

100 101 7 WITH 80 BENEFITING TARAHUMARA TONS OF 33,759 COMMUNITIES FOODSTUFFS PEOPLE Bécalos Program.- We currently have 1,563 high school and 500 university scholarship students in the state of Sonora. BENEFITED During 2013, we extended this support to the state of Colima, where we have given scholarships to 100 high school and 100 university students. In three years, this program has grown 174%. In addition, in June, the first high school class sponsored by our Foundation graduated. Mexico in an Image.- For the second year, we supported the program “Lo Hecho en México” (Made in Mexico) through Free Transportation of Foodstuffs by our Transportation Division.- We support various communities in the Sierra Tarahu- “México en una imagen” (Mexico in an Image), The 60 winning photographs, out of the 3,500 submitted, were present- mara, delivering 80 tons of foodstuffs and benefiting 33,759 individuals each year. We also delivered 581 aid packages ed in an exhibition which traveled to eight states in Mexico. Given its quality, it was taken on a tour of Africa, beginning to victims of September’s natural disasters in the states of Sinaloa and Colima, benefiting 2,324 people. in Ethiopia.

Education & the Environment Results 32 States in Mexico 17 Institutions 19,952,144 People 80,638 Trees Planted 203 Volunteers 80 Tons of Foodstuffs Donated 581 Aid packages to Support Victims of Natural Disasters

COMPARISON OF THE INCREASE IN OUR EDUCATIONAL AND ENVIRONMENTAL ACTIONS

Project States No. Benefited Increase Total Trees Donated Increase Total Volunteers Increase Total In 2013, 476 students in the first high 2011 2012 2013 2011 2012 2013 2013 vs. 2010 2011 2012 2013 2013 vs. 2010 147,988 2011 2012 2013 2013 vs. 2010 Refor- school class sponsored by our Foundation 2 4 6 322,000 417,872 676,005 110% 1,415,877 28,500 38,850 80,638 183% 167 102 203 22% 472 estation in Nacozari graduated.

Project States No. Benefited Increase Total 2010 2011 2012 2013 2010 2011 2012 2013 2013 vs. 2010 Bécalos 1 1 1 2 1,023 437 200 1,150 174% 2,810

102 103 3. Impact of Cinemex Awareness & Support for Other Institutions Third Year for the Charity Premiere Program.- This program is gaining recognition as well as support of both distrib- 4th Cinemex Race.- This charity run, an initiative started by the Grupo México Foundation, has benefited more than utors and guests, who, with their participation, join the cause, making it possible for the Grupo México Foundation 13,000 people. Every year more people take part in the race, raising awareness for the spotlighted cause. to double the amount raised at each event. We held 21 premiere events in 2013, benefiting 57,781 people throughout Mexico.

We continue to conduct campaigns through Cinemex movie theaters to benefit different charity organizations. This year, we ran two very successful nationwide campaigns, which benefited over 10,000 individuals.

Cineminutos.- The Grupo México Foundation program to raise awareness through social messages at Cinemex theaters is growing in popularity. In this program, charity organizations have found a platform for disseminating their work. This year, 9,349 copies of cineminutos were shown across the country, benefiting 61,774 people.

“No Se Aceptan Devoluciones” charity premiere held at Cinemex Antara.

IN 2013, WE HELD In 2013, we had a record participation of 13,618 people. PREMIERES 57,781 21THE FUNDS RAISED HELPED PEOPLE IN MEXICO

104 105 Through our alliance with Fundación Televisa and the Film Industry, the Grupo México Foundation has actively participated in rebuilding and re-equipping schools affected by hurricanes Ingrid and Manuel in the state of Guerrero, offering support Total Total to 82 schools and benefiting more than 11,100 students. Project Copies Increase States No. Benefited Increase Copies Benefited

2012 2013 2013 vs. 2012 2012 2013 2012 2013 2013 vs. 2012 Commitment to Employees.- The Grupo México Foundation held a series of conferences on various topics aimed at optimal 166,752 Charity 61,774 people 5,649 9,349 165% 14,998 32 States 32 States people 37% 228,526 human development. These topics included: sexuality and pregnancy, alcoholism and drug addiction, violence, and life Cineminutos 6 institutions 12 institutions planning. During the first half of the year, we held 37 hours of conferences for 931 Cinemex employees.

Project Events States No. Benefited Increase Total Ongoing Support for Innovative Projects.- We sponsored the #Yolo Forum held by Convivencia sin Violencia, the purpose of 2012 2013 2012 2013 2012 2013 2013 vs. 2012 Social marketing 2 2 32 states 32 states 2,523 people 10,007 people which was to highlight success stories based on determination and persistence, inspiring youth to reach their goals. 2,209 397% 12,530 campaigns 2 institutions 2 institutions high school youths participated in the forum.

Project Events States No. Benefited Increase Total 2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 2013 vs. 2012 Cinemex 14,636 2,704 523 13,618 Cinemex Awareness & Support for Other Institutions Results 1 1 1 1 1 1 1 1 115% 31,481 race 1 institution 1 institution 1 institution 1 institution 32 States in Mexico

24 Institutions Project Completions States No. Benefited Increase Total 157,471 People 2012 2013 2012 2013 2012 2013 2013 vs. 2012 N/A 2,209 people 21 Charity Premieres Yolo forum N/A 1 N/A 1 N/A 2,209 N/A 1 institution 9,349 Copies of Cineminutos

15 Conferences Project Completions States No. Benefited Increase Total 2 Social Marketing Campaigns 2012 2013 2012 2013 2012 2013 2013 vs. 2012 11,151 Re-equipping N/A 82 Schools Re-Equipped N/A 1 N/A 1 people 0% 11,151 schools N/A 82 institutions

Project Conferences States No. Benefited Increase Total COMPARISON OF THE INCREASE IN CINEMEX AWARENESS AND SUPPORT FOR OTHER INSTITUTIONS 2012 2013 2012 2013 2012 2013 2013 vs. 2012 Conferences for 931 N/A 15 N/A 1 N/A N/A 931 Project Events States No. Benefited Increase Total Cinemex employees people* 2012 2013 2012 2013 2012 2013 2013 vs. 2012 Premieres 6,595 57,781 19 21 6 6 for Charity people people 876% 64,376 16 institutions 19 institutions

106 107 4. Cultural & Social Programs Our Fourth Cookbook in the Xocoyo Collection.- This project highlights the importance of Mex- ican products and their influence throughout the world. Our ingredient in 2013 was vanilla. The proceeds from the sale of Vainilla were given to Equinoterapia Verasur, A.C., an organization working in the state of Veracruz to help children with special needs. Vainilla is the second in our collection to be nominated in the “Single Subject” category of the Gourmand World Cookbook Awards, to be given out next May in China.

We sponsored the Annual Huapango Festival, celebrated in Veracruz, with musicians, dancers, Cover of Vainilla, the fourth book in the Xocoyo collection. interpreters, and storytellers of the Huasteco tradition. The event brought together the six Huas- teco states (Tamaulipas, Hidalgo, San Luis Potosi, Queretaro, Puebla, and Veracruz).

Cultural & Social Results 9 States in Mexico 6 Institutions 31,529 People

COMPARISON OF THE INCREASE IN OUR SOCIAL AND CULTURAL IMPACT

States/People States/People States/People States/People Increase Project Total Benefited Benefited Benefited Benefited 2012-2013 2010 # 2011 # 2011 # 2013 # 2013 vs. 2012 Xocoyo collection 2 129 2 240 2 260 2 450 71.00% 1,079

108 109 O6 SOCIAL RESPONSIBILITY & ENVIRONMENTAL ACTIONS WE INVESTED MORE THAN US$630 MILLION IN ENVIRONMENTAL, SOCIAL & OCCUPATIONAL HEALTH & SAFETY ACTIONS

In 2013, we doubled our production capacity to 4 million trees at our nurseries and greenhouses. Buenavista del Cobre Greenhouse. Sonora, Mexico. 110 111 SOCIAL RESPONSIBILITY & ENVIRONMENTAL ACTIONS

In 2013, we executed 11 canal and irrigation technique projects to improve water infrastructure Our reforestation activities each year contribute to mitigating the impacts of and benefit farm productivity. climate change. Greenhouse. La Caridad, Sonora, Mexico. At Grupo México, we understand that creating shared value on which we develop our management focus is articulated in our environment is key to the development and continu- by our business model and aligned with the needs of the ity of our organization. That is why we continually strive to communities and the specific context of the regions where make our organization more efficient in the social, econom- we have our operations. ic, and environmental spheres. We must, therefore, identify our focus groups and, through ongoing communication, Globally, interest among individual and institutional inves- listen to their expectations and concerns. tors in funding sustainable companies is growing. Given the relevance of this, we are proud to mention that for the third We use various channels and mechanisms to achieve open year, Grupo México has been included in the IPC Sustain- and transparent communication with our focus groups, ability Index of the Mexican Stock Exchange (BMV), after particularly with those that are most vulnerable, so as to receiving one of the highest ratings from among the 70 build on our culture of collaboration and sustainability, for companies evaluated according to the BMV’s methodology. the good of everyone. Continuing to be included in the index and the steady im- Generating value for Grupo México is closely related to the provement of our evaluations reaffirm our commitment to scope of our corporate goals and the development and sustainability, as only through responsible management can wellbeing of our focus groups. The methodological platform we ensure long-term growth and success for our business.

112 113 IN 2013, WE SPONSORED 3,074 ACTIVITIES IN 13 COMMUNITIES, Health, fun, sports, recreation, shopping, housing, BENEFITING 94,510 PEOPLE office and retail space and public areas for getting back to nature are some of the benefits the New Cananea Service and Entertainment Complex will offer. Sonora, Mexico.

OUR COMMUNITIES We continue to work actively and responsibly in the area of sustainability, taking this opportunity Through invitations, the community centers, and our community development plans in each re- to mention some of the activities Grupo México has been involved in to merge our economic and gion, in 2013 we sponsored 3,074 activities in 13 communities, benefiting 94,510 individuals. environmental goals with the social wellbeing of our communities. We also held 10,000 hours of productive courses for more than 2,000 people in the regions where we operate. In 2013, we implemented a social linkage program, known as the Community Committee, which is comprised of volunteer leaders and social entrepreneurs from the communities where In Cananea, Sonora, we have undertaken a vital project to promote the social wellbeing and the Company operates, to strengthen community participation based on a relationship of co-re- urban, economic, and industrial growth of the community. The “New Cananea Service and sponsibility, respect, and mutual support. Since they are voluntary, citizen, pluralistic, and Entertainment Complex” is an enormous complex built on 56 hectares, which includes a spe- transparent bodies fostering a social relationship between Grupo México and the community, cialty hospital, supermarket, gym with indoor pool, offices, doctors offices, movie theaters, the committees encourage the exchange of views, promote values, and strengthen the social stores, a hotel, bowling alley, event hall, residential area, sports facilities, a park, nursery, and weave. During 2013, one Community Committee was renewed and 10 more were created. nature reserve.

114 115 In Peru, we collaborate closely with the municipalities, water user boards, community organi- We have a registry of 35,000 cards given to local indigenous and low-income people, ensuring zations, and institutions and agencies representing the area, seeking to improve the quality of their access to the reduced rate. In 2013, we transported 77,030 passengers under this Com- life for the local community. We conduct studies and research on the availability of resources, pany-subsidized program. increasing production capacities and optimizing community commercialization processes. We foster entrepreneurship and strengthen small and medium companies in the Ilo province and We also invested in programs and projects for the communities where our Infrastructure Division the Moquegua region through programs like the “Textile Cluster”, which focuses on improving activities are located. Through these actions, we benefited 1,500 local residents with the refur- the production and marketing capacities of clothing manufacturers in the Ilo province, encour- bishment and overall construction of a sewer system in the community of Metlaltoyuca, located aging their participation in local and regional markets. in the municipality of Francisco Z. Mena, Puebla. We also continue make progress on the construction of the Salamanca-Leon highway, which employees 1,300 people and will bring sig- It should also be mentioned that in 2013, we sponsored 11 canal and irrigation technique nificant infrastructure benefits and a positive economic impact on the neighboring communities. projectsprojects to improve the water infrastructure and to benefit farm productivity. In addition, we carried out seven maintenance and restoration programs for housing, public buildings, and businesses. Program Grupo México

In the United States, we have strengthened the involvement of the working community and their US$ Millions families through educational, sports, and cultural activities, in which associations, students, and institutions in our neighboring communities also participate. We have sponsored family events Social linkage $ 2,270,983.37 and supported associations and clubs through the operation, maintenance, work, supplies, and Community Community development programs $ 5,071,186.99 materials for recreation centers, basketball courts, bowling alleys, and swimming pools. Development Sponsorships & donations $ 5,031,578.36 Infrastructure & equipping of local neighborhoods $ 3,123,804.33

In the Transportation Division, we’ve reinforced our commitment to the community by con- Investment in education $ 6,802,484.72 Employees & Sports & cultural promotion $ 1,016,233.57 tinuing to issue reduced rate cards for the low-income population, a program that is operated Communities through the Tarahumara State Coordination within the Chihuahua State Department of Social Investment in infrastructure in GMéxico neighborhoods $ 23,572,033.09 Development and the municipalities along the routes in Chihuahua and Sinaloa. Total $ 46,888,304.43

116 117 OUR ENVIRONMENTAL COMMITMENT All Grupo México operations adhere to strict environmental practices, since we are committed to achieving optimal environmental performance by evaluating and limiting the impact our activities have on the environment.

We have designed strategies to deal with the specific environmental needs of each region through nine specific areas of action within our environmental management system:

Prevention, Rational use of control and Minimal waste & reduction of Efficiency in Reduction of GHG water and natural emissions per tons comprehensive emissions released energy use waste resources into the produced atmosphere management

Closure of Preservation of Compliance with Reforestation operations biodiversity environmental regulations

In 2013, our mining units in Sonora received ISO 14001:2004 certification for the first time. Construction of the high-efficiency combined cycle Between our Mining and Transportation Divisions, we have 13 Clean Industry certifications and power plants in Sonora will reduce greenhouse 13 in Environmental Quality. In Peru, we maintained three ISO 14001:2004 certifications for gas emissions resulting from our electric power demands. Infrastructure Division. Grupo México. our Ilo Smelter and Refinery and the SX/EW Plant, together with the leaching heaps at Cuajone and Toquepala.

118 119 Energy & Climate Change At Grupo México, we’re conscious of the effects of climate change, and the impact these chang- The diesel used by the locomotives in the Transportation Division represents 99% of the di- es have on our operations. Therefore, foreseeing an increase in the probability of extreme vision’s energy consumption, therefore reducing diesel consumption at our operations would climatic events, such as hurricanes, droughts, floods, and fires, we have identified the possible mean releasing fewer emissions into the atmosphere while producing considerable savings for risks associated with global warming and the effects of the new environmental policies and the operation. In 2013, our diesel consumption was 17,013.34 terajoules (TJ), 164TJ less than regulations being adopted by governments worldwide. the diesel consumed in 2012, and 11% lower than in 2011.

For the ninth consecutive year, we’ve participated in the GEI Mexico Program, a voluntary pro- The implementation of Automatic Equipment Start Stop (AESS) in the Transportation Divi- gram for recording, reporting, and promoting the reduction of greenhouse gas emissions. In sion has resulted in energy efficiency in our locomotives when they are stopped or idle. This 2013, we were one of the first four companies to be awarded the GEI3 distinction, thanks to our mechanism meant savings of 8.08 million liters of diesel in 2013, to total a 157% savings achievement in reducing our emissions by 38,247.44 tons of CO2 eq as a result of our “blast compared with 2012. furnace replacement project at the coke plant in Agua Prieta, Sonora”. It should be noted that not only were we first place in reduction, ours were also the only two companies that achieved reductions over 35,000 tons of CO2 eq.

Among the reduction measures that have already concluded, and have led to 232,414 tons of CO2 eq, are the installation of solar water heaters and solar panels to generate electricity in areas with high sun radiation in the state of Sonora, in northern Mexico, and also Infrastructure Division projects to construct and startup a combined cycle plant using natural gas, the fuel with the lowest carbon content.

The actions we’ve implemented and will be launched in 2014 are a wind farm in La Ventosa area of the state of Oaxaca, in southern Mexico, and the second 250MW combined cycle power plant in the state of Sonora. Together, these efforts by the Infrastructure Division will produce significant reductions in emissions, 307,282 tons of CO eq each year. Our wind power project will supply power to the 2 Transportation Division and to our underground mines. Wind Farm. Oaxaca, Mexico.

120 121 Grupo México has implemented a comprehensive program for the preservation of the Gould’s turkey and the Mexican gray wolf in Cananea, Sonora. Ecological Center. Sonora, Mexico.

In 2013, 73% of the total water consumed in our mine operations was recovered water. Thickeners. Sonora, Mexico.

2011 1.73 2012 2 2013 4

ANNUAL TREE PRODUCTION CAPACITY, IN MILLIONS

WATER MANAGEMENT Water is one of the main input products in our mining operation, in both the extraction and These programs have led to a large proportion of our total water consumption coming from metallurgic processes. Given the amount of this resource we need to process the ore, water recovered water. In 2013, 73% of the total water used in our mining operations was recovered, usage is one the focal points of our sustainability strategy. Consequently throughout the Com- minimizing the consumption and demand for fresh water at our units. pany, and particularly in our Mining Division, we promote a culture that encourages the rational use, treatment, recycling, and reuse of wastewater to ensure sustainable mining. BIODIVERSITY Our operating units have tree nurseries that produce native species for reforestation and eco- Our water use and saving programs are based on: system development, including the reforestation of areas well beyond our operations.

• Implementation of recovered water pumping systems We have doubled tree production at our nurseries and greenhouses to four million. It should • Continual water recovery from the tailings dams and thickeners to be used in the metallurgic be noted that the new greenhouses at our Sonora operations alone, produced one million process additional trees in 2013. • Implementation and maintenance of closed circuits to make the most use of all water • Zero Wastewater Dumping Program, which strives to improve the management of both con- As part of our endangered species conservation efforts, in late 2013 we successfully transferred sumption and reuse of this resource in our mining operations six Mexican wolf pups to Cananea, where we have a proper sanctuary for them. This work has

122 123 inspired Grupo México to adopt the Mexican wolf as its banner species. To ensure their proper care, an international committee logs the genealogy of all animals in captivity.

This wildlife conservation program continues to include, the Gould’s turkey breeding farm, which targets release of the fowl in Mariquita, near Cananea, and at various private ranches. Grupo México has an Environmental Management Unit, authorized by PROFEPA, and a certified zootechnician working with the program.

All these actions form part of our environmental investment plan, which exceeded US$482 million in 2013, an increase of 23% over the previous year.

Of these investments, 74% was allocated to efficient energy use, and together with investment in air quality, they represent 81% of the total. Most of the actions undertaken with the joint investment in energy and air quality were focused on reducing greenhouse gas emissions.

The efforts mentioned throughout this chapter are part of Grupo México’s business model. For more information on our sustainability performance and activities, we invite you to consult our The goal of Grupo México’s Mexican Wolf 2013 Sustainable Development Report, at: www.gmexico.com Conservation and Protection Project is to increase the population of Mexican gray wolves, by captive breeding; to encourage parallel efforts in conservation by other public and private sector organizations, and to educate the public so that future releases into their natural habitat will have a greater chance of being successful. Environmental Management Unit. Sonora, Mexico.

124 125 BOARD OF DIRECTORS BOARD OF DIRECTORS

Grupo México MINING DIVISION Southern Copper Corporation

Germán Larrea Mota Velasco Germán Larrea Mota Velasco Executive Officers Executive President & Chairman of the Board Chairman of the Board

Genaro Larrea Mota Velasco† Executive Officers Emilio Carrillo Gamboa Oscar González Rocha Executive Vice-President Executive President Peru & US Alfredo Casar Pérez Luis Castelazo Morales Xavier García de Quevedo Topete Emilio Carrillo Gamboa Daniel Muñiz Quintanilla Executive President Mexico Chief Financial & Administrative Officer Enrique Castillo Sánchez Mejorada Alfredo Casar Pérez Xavier García de Quevedo Topete Juan Rebolledo Gout Valentín Diez Morodo Vice-President, International Relations Mauricio Ibañez Campos Oscar González Rocha Xavier García de Quevedo Topete General Counsel Daniel Muñiz Quintanilla Raúl Jacob Oscar González Rocha Chief Financial Officer Rodrigo Sandoval Navarro Luis Miguel Palomino Bonilla Claudio X. González Corporate Financial Officer Juan Rebolledo Gout Vidal Muhech Dip Prudencio López Martínez Vice-President, Projects Rafael Ríos García Carlos Ruiz Sacristán Antonio Madero Bracho Director of Security Gilberto Perezalonso Cifuentes Fernando Ruiz Sahagún

Guillermo Barreto Mendieta Javier Gomez Aguilar Rolando Vega Saenz Comptroller Secretary Daniel Muñiz Quintanilla Secretary ASARCO, LLC. INC.

Oscar González Rocha Executive Officers Chairman of the Board

Xavier García de Quevedo Topete Oscar González Rocha Executive President Alfredo Casar Pérez Daniel Muñiz Quintanilla Manuel Ramos Rada Chief Operating Officer Manuel Ramos Rada Jorge Lazalde Psihas Oscar González Barrón Secretary Chief Financial Officer

Jorge Lazalde Psihas General Counsel

126 127 BOARD OF DIRECTORS

TRANSPORTATION DIVISION INFRAESTRUCTURA Y TRANSPORTES MÉXICO

Germán Larrea Mota Velasco Executive Officers Chairman of the Board

Alfredo Casar Pérez Alfredo Casar Pérez Executive President Jaime Corredor Esnaola Xavier García de Quevedo Topete Rogelio Vélez López de la Cerda Chief Executive Officer Robert M. Knight Jr. Grupo México, S. A. B. de C. V. James R. Young Lorenzo Reyes Retana Márquez Padilla Chief Operating Officer Alfred Anthony Chacon and Subsidiaries Rogelio Vélez López de la Cerda Isaac Franklin Unkind Chief Financial & Administrative Officer Roberto Slim Seade Consolidated Financial Statements for the Patrick Slim Domit Fernando López Guerra Years Ended December 31, 2013 and 2012 and Vice-President, Sales & Marketing Christian Lippert Helguera Secretary Independent Auditors’ Report Dated April 16, 2014 Hilario Gabilondo Picollo Vice-President, Intermodal

INFRASTRUCTURE DIVISION MÉXICO PROYECTOS Y DESARROLLOS

Xavier García de Quevedo Topete Chairman of the Board

Daniel Muñiz Quintanilla Ricardo Arce Castellanos Octavio J. Ornelas Esquinca Federico Julio Larrea Mena Mauricio Ibáñez Campos Secretary

128 129 TABLE OF CONTENTS

INDEPENDENT AUDITORS’ REPORT 04

CONSOLIDATED BALANCE SHEETS 06

GRUPO MÉXICO, S. A. B. DE C. V. CONSOLIDATED STATEMENTS OF INCOME 08 AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME 09 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 10 Independent Auditors’ Report and Consolidated CONSOLIDATED STATEMENTS OF CASH FLOWS 12 Financial Statements for 2013 and 2012 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14

03 Independent Auditors’ Report to the Board of Directors and Stockholders of Grupo México, S. A. B. de C. V. and Subsidiaries

We have audited the accompanying consolidated financial statements of Grupo México, S. A. are appropriate in the circumstances, but not for the purpose of expressing an opinion on the B. de C. V. and subsidiaries (the “Company”), which comprise the consolidated balance sheets as effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An of December 31, 2013 and 2012, and the related consolidated statements of income, compre- audit also includes evaluating the appropriateness of accounting policies used and the reason- hensive income, stockholders’ equity and cash flows for the years then ended, and the related ableness of significant accounting estimates made by management, as well as evaluating the notes to the consolidated financial statements. overall presentation of the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements We believe that the audit evidence we have obtained is sufficient and appropriate to provide a Management is responsible for the preparation and fair presentation of these consolidated basis for our audit opinion. financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal con- Opinion trol relevant to the preparation and fair presentation of consolidated financial statements that In our opinion, the consolidated financial statements referred to above present fairly, in all ma- are free from material misstatement, whether due to fraud or error. terial respects, the financial position of Grupo México, S. A. B. de C. V. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the Auditors’ Responsibility years then ended in accordance with accounting principles generally accepted in the United Our responsibility is to express an opinion on these consolidated financial statements based on States of America. our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Galaz, Yamazaki, Ruiz Urquiza, S. C. Member of Deloitte Touche Tohmatsu Limited An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair C. P. C. Luis Javier Fernández Barragán presentation of the consolidated financial statements in order to design audit procedures that April 16, 2014

04 05 Grupo México, S. A. B. de C. V. and Subsidiaries CONSOLIDATED BALANCE SHEETS As of December 31, 2013 and 2012 (In thousands of U.S. dollars)

Assets 2013 2012 Liabilities and Stockholders’ Equity 2013 2012

Current assets: Current liabilities: Cash and cash equivalents $ 2,380,339 $ 3,057,478 Bank loan and current portion of long-term debt $ 367,071 Restricted cash 55,529 101,890 Accounts payable and accrued liabilities 948,096 $ 109,488 Short-term investments 208,725 135,089 Due to related parties 13,907 981,795 Trade accounts receivables 910,018 1,008,792 Income tax payable 36,704 10,047 Other accounts receivable 326,153 625,953 Employees' statutory profit sharing 219,473 142,090 Inventories – Net 1,158,116 1,142,486 Total current liabilities 1,585,251 294,611 Prepaid expenses and other 19,226 26,648 Deferred income tax 283,194 274,458 Long-term debt 5,443,772 5,474,350 Total current assets 5,341,300 6,372,794 Labor liabilities 358,555 548,136 Deferred income tax 1,003,723 985,247 Restricted cash 275,106 443,354 Noncurrent tax payable 197,547 438,594 Property, plant and equipment – Net 11,465,160 9,292,932 Other liabilities and reserves 344,131 484,404 Concession titles – Net 216,976 227,052 Total liabilities 8,932,979 9,468,762 Investment in shares of associated companies and other investments 1,075,007 1,054,211 Leachable material – Net 443,489 295,868 Stockholders’ equity: Other intangible assets – Net 302,845 259,458 Stockholders' equity of Grupo México, S. A. B. de C. V. Deferred income tax 899,289 1,172,460 Common stock (shares authorized and issued: 2013 and 2012, 7,785,000,000) 2,003,496 2,003,496 Other assets 387,524 440,376 Reserve for shares purchase 243,306 243,306 Additional paid-in capital 9,043 9,043 Total assets $ 20,406,696 $ 19,558,505 Treasury stock (1,059,380) (805,373) Accumulated other comprehensive income (loss) 125,697 (56,744) Retained earnings 8,187,076 6,899,262 Stockholders' equity of Grupo México, S. A. B. de C. V. 9,509,238 8,292,990 Noncontrolling interest 1,964,479 1,796,753 Total stockholders' equity 11,473,717 10,089,743

Total liabilities and stockholders’ equity $ 20,406,696 $ 19,558,505

See accompanying notes to these consolidated financial statements.

06 07 Grupo México, S. A. B. de C. V. and Subsidiaries Grupo México, S. A. B. de C. V. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2013 and 2012 For the years ended December 31, 2013 and 2012 (In thousands of U.S. dollars, except for income per share amounts) (In thousands of U.S. dollars)

2013 2012 2013 2012

Income: Consolidated net income $ 1,844,932 $ 2,401,506 Net product sales $ 7,279,454 $ 8,350,899 Service revenue 2,077,591 1,832,021 Other comprehensive income (loss) before tax: 9,357,045 10,182,920 Costs and operating expenses: Derivative instruments classified as cash flow hedges: Cost of product sales (exclusive of depreciation, amortization and depletion) 3,797,265 3,651,101 Net unrealized gains (loss) in the year 60 (12,766) Cost of services (exclusive of depreciation and amortization) 1,272,014 1,290,656 General expenses 97,056 181,858 Defined benefit plans: Legal fees related to SCC shareholders derivative lawsuit - 316,233 Net (losses) gains in pension plan during the year 69,038 (38,015) Depreciation, amortization and depletion 691,900 576,653 Net gain in other post retirement plans during the year 119,379 7,989 Exploration 57,599 62,351 188,417 (30,026) 5,915,834 6,078,852 Foreign currency translation and other 60,726 (27,741) Income from operations 3,441,211 4,104,068 Net unrealized losses in marketable securities: Interest expense 308,747 304,082 Net unrealized holding losses arising during the year (95) (1,066) Capitalized interest (68,946) (29,380) Interest income (49,851) (45,431) Other comprehensive income (loss) before tax 249,108 (71,599) Loss (gain) in investments in equity securities 51,247 (356,551) Foreign exchange gain (3,604) (14,328) Income tax (provision) benefit related to items of other comprehensive income (66,667) 13,588 237,593 (141,608) Other comprehensive income (loss) net of tax 182,441 (58,011) Income before income taxes 3,203,618 4,245,676 Income taxes 957,170 1,356,481 Total comprehensive income attributable to Grupo México, S. A.B. de C. V. 2,027,373 2,343,495 Equity in the results of associated companies and other unconsolidated subsidiaries 27,290 54,754 Consolidated net income 2,273,738 2,943,949 Total comprehensive income attributable to noncontrolling interest 383,444 547,886 Less: net income attributable to noncontrolling interest (428,806) (542,443) Net income attributable to Grupo México, S. A. B. de C. V. $ 1,844,932 $ 2,401,506 Total comprehensive income $ 2,410,817 $ 2,891,381

Net earnings - basic and diluted income per share $ 0.24 $ 0.31 Dividends paid $ 0.07 $ 0.12

Weighted average shares outstanding (´000) 7,785,000 7,785,000

See accompanying notes to these consolidated financial statements. See accompanying notes to consolidated financial statements.

08 09 Grupo México, S. A. B. de C. V. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the years ended December 31, 2013 and 2012 (In thousands of U.S. dollars)

Accumulated Stockholders’ Outstanding Reserve other equity of Grupo shares for shares Additional comprehensive Retained Mexico, Noncontrolling in thousands Common stock purchase paid-in capital Treasury stock loss earnings S. A. B. de CV interest Total

Balances as of December 31, 2012 7,785,000 $ 2,003,496 $ 243,306 $ 9,043 $ (810,760) $ 1,267 $ 5,811,326 $ 7,257,678 $ 1,481,029 $ 8,738,707

Dividends paid ------(918,984) (918,984) ( 626,748) (1,545,732) Decrease in treasury stock - - - - 5,387 - - 5,387 - 5,387 SCC derivative lawsuit ------(394,586) (394,586) 394,586 - Comprehensive result: Consolidated net income ------2,401,506 2,401,506 542,443 2,943,949 Other comprehensive income - - - - - (58,011) - (58,011) 5,443 (52,568) - - - - - (58,011) 2,401,506 2,343,495 547,886 2,891,381

Balances as of December 31, 2013 7,785,000 2,003,496 243,306 9,043 (805,373) (56,744) 6,899,262 8,292,990 1,796,753 10,089,743

Dividends paid ------( 557,118 ) ( 557,118 ) (171,917) (729,035) Increase in treasury stock - - - - (254,007) - - (254,007) (43,801) (297,808) Comprehensive result: Consolidated net income ------1,844,932 1,844,932 428,806 2,273,738 Other comprehensive income - - - - - 182,441 - 182,441 (45,362) 137,079 - - - - - 182,441 1,844,932 2,027,373 383,444 2,410,817

Balances as of December 31, 2013 7,785,000 $ 2,003,496 $ 243,306 $ 9,043 $ (1,059,380) $ 125,697 $ 8,187,076 $ 9,509,238 $ 1,964,479 $ 11,473,717

See accompanying notes to these consolidated financial statements.

10 11 Grupo México, S. A. B. de C. V. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2013 and 2012 (In thousands of U.S. dollars)

2013 2012 2013 2012

Operating: Financing: Consolidated net income $ 2,273,738 $ 2,943,949 Proceeds from notes payable 392,874 4,508,076 Debt repaid (164,355) (2,801,072) Charges (credits) not requiring (providing) resources: Dividends paid to controlling and noncontrolling stockholders (729,035) (1,545,732) Seniority premiums and compensation for retirement (189,581) 20,182 Decrease (increase) in treasury stock (297,808) 5,387 Foreign exchange loss (gain) 12,440 8,879 Net cash provided by (used in) financing activities (798,324) 166,659 Depreciation, amortization and depletion 691,900 576,635 Equity in the results of associated companies and other Increase (decrease) in cash and cash equivalents (649,600) 866,921 (27,290) (54,754) unconsolidated subsidiaries Deferred income tax and employees’ statutory profit sharing 207,773 14,483 Effect of exchange rate changes on cash and cash equivalents (27,539) (38,724) Loss on sale of property 40,700 14,044 (677,139) 828,197 Loss (gain) in investments in equity securities 51,247 (356,551) 3,060,927 3,166,867 Cash and cash equivalents at beginning of year 3,057,478 2,229,281

Changes in operating assets and liabilities: Cash and cash equivalents at end of year $ 2,380,339 $ 3,057,478 Accounts receivable 405,994 (377,063) Inventories (163,251) (187,959) Supplemental disclosure of cash flow information: Accounts payable, accrued liabilities and other liabilities (421,631) 130,705 Cash paid during the year for: Net cash provided by operating activities 2,882,039 2,732,550 Interest $ 292,402 $ 263,298 Income taxes $ 963,557 $ 1,219,004 Investing: Employees' statutory profit sharing $ 310,106 $ 273,693 Additions to property and equipment (2,858,110) (2,117,799) Acquisition of other permanent investments (20,796) (23,192) Sale of property and equipment 4,618 38,642 Restricted cash 214,609 (318,422) Purchase of short term investments (73,636) (152,441) Proceeds on sale of short-term investment - 540,924 Net cash used in investing activities (2,733,315) (2,032,288)

See accompanying notes to these consolidated financial statements.

12 13 Grupo México, S. A. B. de C. V. . and Subsidiaries On November 24, 2005, the Company reported that ITM, through its recently incorporated subsidiary, Infraestructura y NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Transportes Ferroviarios, S. A. de C. V. (“ITF”), acquired 99.99% of the capital stock of Ferrosur, S. A. de C. V. (“Ferro- For the years ended December 31, 2013 and 2012 sur”) from Sinca Inbursa, S. A. de C. V. (“Sinca”) and Grupo Condumex, S. A. de C. V. (“GCondumex”). In accordance (In millions of U.S. dollars) with guidance set forth in Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations”, it is necessary to have the Federal Antitrust Commission’s final authorization before the Company can consolidate Ferrosur. On 1. NATURE OF BUSINESS AND SIGNIFICANT EVENTS: November 8, 2006, the Federal Antitrust Commission denied the acquisition of Ferrosur by ITF. As a result, ITM and ITF initiated a legal proceeding to revoke the above mentioned ruled proposed by the Federal Tax and Administrative Nature of business - The Company’s mining operations are contained through its wholly owned subsidiary Americas Justice Court. Mining Corporation (“AMC”), which in turn is parent company of Southern Copper Corporation (“SCC”) and Asarco Inc. (“Asarco”). Beginning April, 2011 the Company consolidated the Ferrosur financial statements due to the authorization granted by the First Collegiate Circuit Court in Administrative Matters. See more comments in Note 9. SCC and subsidiaries comprise an integrated producer of copper and other minerals, which operates mining, smelting and refining facilities in Peru and Mexico. SCC and subsidiaries conduct their Peruvian operations through a registered ITM, through its wholly owned subsidiary, GFM, was formed to participate in the privatization of the Mexican Rail- branch (“the Branch”). The Branch is not a separated corporation from SCC. The Company’s Mexican operations are way System. The main subsidiary of GFM is Ferromex, which is engaged in providing freight and multi-modal railroad conducted through Minera México, S. A. de C. V. and subsidiaries (“MM”). services and related activities, including land transportation, storage and other complementary railroad transportation services. The Mexican Federal Government granted Ferromex a 50-year concession (exclusive for 30 years) to operate The Branch produces copper and other minerals through the operation of two mining facilities, a smelting facility, a the branches known as North-Pacific and the Ojinaga-Topolobampo Short Line. The concession is renewable, subject to solvent extraction/electro winning (SX/EW) facility and a refining facility, all located in southern Peru. certain conditions, for a similar period. In addition, the Mexican Federal Government also sold certain fixed assets and the materials necessary to operate Ferromex, plus 25% of the shares of Ferrocarril y Terminal del Valle de México, S. A. de C. MM and its subsidiaries produce copper in Mexico through the operation of two major open-pit mines, three solvent V. (“FTVM”), the entity responsible for operating the México City Terminal. In August 1999, Ferromex obtained the rights extraction/electro winning (SX-EW) facilities, one smelting facilities and a refining facility, one precious metals refining to operate the Nogales - Nacozari Short Line concession for 30 years, renewable for a period not exceeding 50 years, facility and one copper wire facility. MM’s operations also include five underground mining facilities producing, zinc beginning on September 1, 1999. GFM accounts for this 25% investment in FTVM under the equity method. In addition, and copper concentrates, one zinc refining facility, one coal mine and one coke plant. ITM through its subsidiary Ferrosur operates the Southeast railroad track concession granted by the government.

Asarco produces copper through its operation of three major open-pit mines, one smelting facilities, one of which The Company´s infrastructure operations are performed by México Proyectos y Desarrollos, S.A. de C.V. (“MPD”), is currently on standby, two solvent extraction/electro winning (SX-EW) facilities, a refining facility and a copper which owns 100% of Controladora de Infraestrutura Petrolera México, S.A. de C.V. (“CIPEME”), Controladora de In- wire facility. fraestrutura Energética México, S.A. de C.V. (“CIEM”), and México Compañía Constructora, S.A. de C.V. (“MCC”).

The Company’s railway system operations are carried out by Infraestructura y Transportes México, S. A. de C. V. CIPEME’s principal activity is to provide oil well drilling and related services. As of to date, CIPEME has provided ser- (“ITM”), in which GMEXICO owns 75%. The remaining 25% of ITM is owned by Sinca Inbursa, S. A. B. de C. V. and vices to Petróleos Mexicanos (PEMEX) for over 50 years. CIPEME has overseas well drilling jack ups and additionally Grupo Carso, S. A. B. de C. V-. ITM owns 74% of Grupo Ferroviario Mexicano, S. A. de C. V. (“GFM”), which, owns provides cement engineering, and directional drilling services and leases modular drills. CIPEME also provides water 100% of Ferrocarril Mexicano, S. A. de C. V. (“Ferromex”). The remaining 26% of GFM is owned by Union Pacific. well drilling services for the mining industry in Mexico.

14 15 The main operation of CIEM through its subsidiaries is the construction of electricity generation plants, which are esti- v. Mexico Generadora de Energía, Subsidiary of Grupo México, starts interconnection contract with Minera Méxi- mated to be completed and in operation by 2013 and 2014 to provide electricity to the mining division. co.- On December 1, the subsidiary México Generadora de Energía (“MGE”) began sales of electricity from its first 250 MW plant to Minera México. The second 250 MW plant will start operations in April 2014. The main operation of MCC is to provide directly or indirectly construction services on public and private infrastructure projects, the construction of storage and hydroelectric dams, waterways and irrigation systems, roads, thermoelectric vi. Oaxaca Wind Farm.- Through December, all equipment has been received, construction has been completed, the plants, railroad projects, mining projects, manufacturing plants, petrochemical plants, and housing projects. 37 turbines have been installed, and the initial testing has begun. The 74 MW plant reports 95% completion and will start operations in 2Q14. The operations under MM, ITF, GFM and MPD and their respective subsidiaries are collectively referred to as the “Mex- ican Operations”. The operations under the Branch and SCC are collectively referred to as the “Peruvian Operations”. vii. Startup of platforms.- One of the two platforms which the Company acquired at the end of 2011 began operations Asarco´s operations are referred to as the “American Operations”. for Pemex in June 2012. The second platform started operations on November 16, 2012.

Significant Events - viii. Lemon Bay Litigation.- On October 9, 2012, GMEXICO fulfilled with the sentence set by the court of the State of i. The First Molybdenum Plant at Buenavista Starts Operations.- Construction of the first Molybdenum Plant was Delaware which force the subsidiary AMC to contribute $2.1 to its subsidiary SCC, of which AMC owns 81.3%. completed as expected in 1Q13 and initial testing started in May 2013. Molybdenum sales will start in 3Q13. The With this payment, AMC is totally exempt from legal contingencies related to the merger operation ocurred in 2005 total investment in the project was 6% below the $38.0 budgeted. The annual production capacity is 2,000 tons between its subsidiaries SCC and MM. AMC accomplish with the court conclusion paying in cash with financed of molybdenum content in concentrates per year, representing an 11% increase on the molybdenum produced in resources with very favorable conditions. Considering that GMEXICO owns the 81.3% of stock equity of SCC, the 2012. net impact to GMEXICO was $394.6.

ii. Favorably conclude legal action for monopolistic practices.- On September 6, the Federal Competition Com- ix. SCC issued debt.- In November 2012, SCC issued bonds amounting to $1.5, which included a $0.3 tranch at a mission (“COFECO”) definitively closed the investigation into the alleged monopolistic practices of Ferromex and rate of 3.50% with maturity in 2022 and a $1.2 tranch at a rate of 5.25% with maturity in 2042. These additional Ferrosur. With this development, the fines were wiaved and all legal actions that were generated in connection with resources ensure SCC´s liquidity to complete its aggressive expansion plan. the acquisition of Ferrosur in 2005 were concluded. x. México Generadora de Energía (“MGE”) issued bonds.- MGE, a subsidiary of CIEM, issued bonds (structure proj- iii. Fitch ratifica las Calificaciones de GMéxico y Subsidiarias.- In October 2013, Fitch Ratings confirmed its rating of ect finance) for $0.5 due in 20 years at a rate of 5.50%, for the construction of two electricity generation plants BBB+ for GMexico, Americas Mining Corporation (“AMC”), and Southern Copper Corporation (“SCC”). Fitch also that will have a combined capability of 500 Mega Watts. confirmed its rating of BBB+ for GFM and AAA (in Mexico) for Ferromex. a. Consolidation principles.- The consolidated financial statements include the financial statements of GMEXICO (as iv. Concentrator expansion at the Mission mine in Arizona complete.- The Mission Concentrator Expansion project parent and holding company) and those of its subsidiaries, over which the Company has control. All significant inter- was completed in 4Q13 on time and on budget, at a total cost of $60.0The expansion will increase copper produc- company transactions and balances have been eliminated in consolidation. These consolidated financial statements tion by 10,000 tons annually starting 2014. were prepared under accounting principles generally accepted in the United States of America (“USGAAP”).

16 17 The Company’s direct consolidated subsidiaries are shown below: The gains and losses resulting from foreign currency transactions are included in “Cost of sales (exclusive of depreciation, amortization and depletion)”. Ownership Ownership Company Percentage Percentage Activity The functional currency of ITM, ITF, GFM and MCC is the Mexican peso. Therefore, these entities use the current

Americas Mining Corporation 100% 100% Exploration and extraction of minerals rate translation method to translate its financial statements in to U.S. dollars. The current rate method requires the translation of all assets and liabilities using the year-end exchange rate and the capital stock continues to Infraestructura y Transportes Mexico, be translated at historical exchange rates. The components of the statements of operations, including foreign S. A. de C. V. 74.9% 74.9% Freight and multimodal railway services exchange gains and losses recorded in Mexican pesos as a result of fluctuations in the rate of exchange between México Proyectos y Desarrollos, Public and private infraestructure and the Mexican pesos and the U.S. dollars, are translated at the average exchange rate for the period. The effect of (1) S. A. de C. V. 100% 100% construction the exchange rate on the translation is reflected as a component of accumulated other comprehensive loss within stockholders’ equity. The gains and losses from foreign currency transactions are shown in the consolidated Grupo México Servicios, S. A. de C. V. (“GMS”) 100% 100% Administrative and personnel services statements of income.

Infraestructura de Transportes Holding of airway transportation com- The consolidated financial statements should not be construed as representations that Mexican pesos had been, Aéreos México, S.A. de C. V. (“ITAM”) 100% 100% panies could have been or may be converted in the future into dollars at such rates or any other rates. Air Finance, LLC 100% 100% Merchandising services Relevant exchange rates used in the preparation of these consolidated financial statements were as follows: (1) In October 12, 2012 the structure of the Company changed, Compañía Perforadora México, S.A.P.I. de C.V. (“PEMSA”) and CIPEME began to consolidate with MPD, before the restructure, these Companies consolidated whit GMéxico. 2013 2012

The permanent investments in the entities in which control is held are consolidated in these financial statements Mexican pesos (Ps) per one U.S. dollar: because they grant the power to govern the entity’s financial and operational policies. The investments over Current exchange rate at December 31 Ps 13.0765 Ps 13.0101 which the Company does not have significant control are recognized by the equity method. Weighted average exchange rate for the year ended Ps 12.7674 Ps 13.1667

b. Foreign currency financial statements - In accordance with local laws, the Peruvian branch mantains its account- Peruvian nuevos soles (Pns) per one U.S. dollar: ing books in Peruvian nuevos soles; MM, ITM and MCC in Mexican pesos. Current exchange rate at December 31 Pns 2.7960 Pns 2.5510

In the mining division, the functional currency is the U.S. dollar, therefore, foreign currency assets and liabilities are Weighted average exchange rate for the year ended Pns 2.7020 Pns 2.6390 remeasured into U.S. dollars at current exchange rates except for non-monetary items such as inventory, property,

plant and equipment, intangible assets, other assets and stockholders’ equity which are remeasured at historical c. Use of estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP requires exchange rates. Revenues and expenses are generally translated at actual exchange rates in effect during the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and period, except for those items related to balance sheet amounts that are remeasured at historical exchange rates. disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported Gains and losses from foreign currency remeasurement are included in earnings of the period. amounts of revenues and expenses during the reporting period. Although management believes the estimates and

18 19 assumptions used in the preparation of these consolidated financial statements were appropriate in the circum- AMC sells copper in concentrate, rod, anode, cathode, blister and refined form at industry standard commercial stances, actual results could differ from those estimates and assumptions. terms. Net sales include the invoiced value and corresponding fair value adjustment of the related forward contract of copper, zinc, silver, molybdenum, acid and other metals. d. Reclassifications - Certain amounts in the consolidated financial statements as of and for the year ended Decem- ber 31, 2012 have been reclassified in order to conform to the presentation of the consolidated financial statements ITM and subsidiaries recognize revenue as transportation services in the period services are rendered as the ship- as of and for the year ended December 31, 2013. Such reclassifications applied to correct departures from US- ment moves from origin. GAAP are immaterial. CIPEME, MCC and CIEM recognize revenues based on the “percentage of completion” method, in which revenue 2. Significant accounting policies: is recognized according to the cumulative costs incurred as a percentage of total estimated costs required to finish the project. If the most recent cost estimate exceeds the total revenue contracted, a loss is recorded to income of A summary of the significant accounting policies used in the preparation of the accompanying consolidated financial the period. statements follows: b. hipping and handling fees and costs - Amounts billed to customers for shipping and handling, are classified as a. Revenue recognition - Substantially all of AMC copper is sold under annual or other longer-term contracts. Rev- sales. Amounts incurred for shipping and handling are included in cost of sales (exclusive of depreciation, amorti- enue is recognized when title passes to the customer. The passing of title is based on terms of the contract, gen- zation and depletion). erally upon shipment. Copper revenue is determined based on the monthly average of prevailing commodity prices according to the terms of the contracts. AMC provides allowances for doubtful accounts based upon historical bad c. Cash and cash equivalents - The Company considers all highly-liquid debt instruments purchased with an original debt, claims experience and periodic evaluation of specific customer accounts. maturity of three months or less to be cash equivalents.

For certain of AMC sales of copper and molybdenum products, customer contracts allow for pricing based on a d. Restricted cash - Restricted cash consists of cash in the custody of the Company for which the use in whole or in month subsequent to shipping, in most cases within the following three months and occasionally in some cases part is restricted for specific purposes pursuant to binding agreements. The restricted cash, including both current a few additional months. In such cases, revenue is recorded at a provisional price at the time of shipment. The and long-term balances at December 31, 2013 and 2012, were $330.6 and $545.3, respectively. The carrying provisionally priced copper sales are adjusted to reflect forward in the London Metal Exchange (“LME”) or in the value approximates fair value and is classified as Level 1 inputs in the fair value hierarchy. Commodities Exchange in New York (“COMEX”) copper prices at the end of each month until a final adjustment is made to the price of the shipments upon settlement with customers pursuant to the terms of the contract. In e. Short - term investments - The Company classifies investments as trading, held-to-maturity, or available-for-sale the case of molybdenum sales, for which there are no published forward prices, the provisionally priced sales are at the time of purchase and reassesses such classifications as of each balance sheet date. Investments classified adjusted to reflect the market prices at the end of each month until a final adjustment is made to the price of the as trading securities are acquired and held principally for the purpose of selling them in the near term. Trading shipments upon settlement with customers pursuant to the terms of the contract. securities are stated at fair value with any unrealized gains or losses recognized within earnings. Held-to-maturity investments are those which the Company has both the ability and intent to hold until maturity and are car- These provisional pricing arrangements are accounted for separately from the contract as an embedded derivative ried at amortized cost. Available-for-sale securities include investments that are classified neither as trading nor instrument under ASC 815-30 “Derivatives and Hedging – Cash Flows Hedges” (in prior literature SFAS 133 “Ac- held-to-maturity and are stated at fair value with any unrealized gains and losses recorded as a component of other counting for Derivative Instruments and Hedging Activities”). comprehensive income within stockholders’ equity and reclassified to current earnings upon their sale or maturity.

20 21 Financial investments classified as held-to-maturity and available-for-sale are subject to annual impairment tests in Useful Life (Years) which the Company evaluates if any events have occurred or economic conditions exist that would indicate that an impairment loss exists and if such loss is other than temporary. The Company considers various factors including, Buildings and equipment 4 - 44 Locomotives and freight cars 9 - 33 but not limited to, the severity and duration of the loss, the financial condition and future prospects of the issuer Rails and structures 13 - 15 and the intent to sell and the Company’s ability to maintain the instrument until maturity. If there is evidence that Drilling equipment 15 - 25 the reduction in fair value is other than temporary, the impairment is recognized in earnings.

Buildings and equipment are depreciated on the straight-line method over their estimated lives ranging from 5 to 40 f. Inventories - Metal inventories, consisting of work- in-process and finished goods, are carried at the lower of aver- years or the estimated life of the mine if shorter. age cost or market. Costs incurred in the production of metal inventories exclude general and administrative costs.

The Mexican railway operation uses the straight-line method based on the estimated useful lives of the related Work-in-process inventories represent materials that are in the process of being converted into a saleable product. assets estimated by the administration of ITM. Conversion processes vary depending on the nature of the copper ore and the specific mining operation. For sulfide

ores, processing includes milling and concentrating and results in the production of copper and molybdenum con- Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate centrates. Molybdenum in-process inventory includes the cost of molybdenum concentrates and the costs incurred that the carrying amount of an asset may not be recoverable. The carrying amount of an asset is not recoverable to convert those concentrates into various high-purity molybdenum chemicals or metallurgical products. when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The Company measures an impairment loss as the difference between the carrying Finished goods include saleable products (e.g., copper concentrates, copper anodes, blister copper, copper cath- value of the asset and its fair value. odes, copper rod, molybdenum concentrates and other metallurgical products).

h. Mine development - Mine development includes primarily the cost of acquiring land rights to an exploitable ore Supplies inventories are carried at average cost less a reserve for obsolescence or market. body, pre-production stripping costs at new mines that are commercially exploitable, costs associated with bringing new mineral properties into production and removal of overburden to prepare unique and identifiable areas outside ITM inventories consist primarily of rails, railroad ties and other materials for maintenance of property and equip- the current mining area for such future production. Mine development costs are amortized on a unit of production ment, as well as diesel fuel used in providing railroad services. Inventories are stated at the lower of cost or real- basis over the remaining life of the mines. izable value, using average cost method. Also, the cost of sales is recognized at historical cost of the purchased

inventories during 2013 and 2012. Values thus determined do not exceed their market value. There is a diversity of practices in the mining industry in the treatment of drilling and other related costs to delineate new ore reserves. The Company follows the practices delineated in the next two paragraphs in its treatment of g. Property, plant and equipment - Property, plant and equipment are recorded at acquisition cost, net of accumu- drilling and related costs. lated depreciation and amortization. Cost includes major expenditures for improvements and replacements, which extend useful lives or increase capacity and interest costs associated with significant capital additions. Drilling and other associated costs incurred in the Company’s efforts to delineate new resources, whether near mine or Greenfield are expensed as incurred. These costs are classified as mineral exploration costs. Once the Company Depreciation and amortization are calculated using the straight-line method, based on the estimated useful lives of determines through feasibility studies that proven and probable reserves exist and that the drilling and other associ- the related assets, as follows: ated costs embody a probable future benefit that involves a capacity, singly or in combination with other assets, to

22 23 contribute directly or indirectly to future net cash inflow, then the costs are classified as mine development costs. expense until the asset becomes associated with additional proven and probable reserves and they are produced or These mine development costs incurred prospectively to develop the property are capitalized as incurred, until the the asset is determined to be impaired. Transfers from VBPP to proven reserves are recorded at the carrying value. commencement of production, and are amortized using the units of production method over estimated life of the Additions to proven and probable reserves for properties with VBPP will carry with them the value assigned to VBPP ore body. During the production stage, drilling and other related costs incurred to maintain production are included at the date the Company acquired Asarco. in production cost in the period in which they are incurred. j. Capitalization of railway improvements and maintenance - Railway improvements and maintenance are capital- Drilling and other related costs incurred in the Company’s efforts to delineate a major expansion of reserves at an ized in the caption “Rails and structures”, when the components of more than 20% of a track section are changed. existing production property are expensed as incurred. Once the Company determines through feasibility studies The capitalized items are depreciated at an average rate between 3.3% and 6.6%. When maintenance or repairs that proven and probable incremental reserves exist and that the drilling and other associated costs embody a do not require changing the components of more than 20% of one section of a track, the cost is expensed as probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly incurred. or indirectly to future net cash inflow, then the costs are classified as mine development costs. These incremental mine development costs are capitalized as incurred, until the commencement of production and amortized using k. Capitalization of overhauls - Regular maintenance and repair costs are expensed as incurred. The costs of a the units of production method over the estimated life of the ore body. A major expansion of reserves is one that locomotive overhauls, which extend the useful life, are capitalized and amortized over a term ranging from 4 to 10 increases total reserves at a property by approximately 10%. years, depending on the type of overhaul.

For the years ended December 31, 2013 and 2012 the Company did not capitalize any drilling and related costs. l. Concession titles - Concessions titles are recorded at their adjudication cost. Amortization is calculated using the The net balance of capitalized mine development costs at December 31, 2013 and 2012 were $36.2 and $37.9, straight-line method, based on the remaining estimated useful life of the fixed assets under concession, which was respectively. an average of 30.3 years (as determined by independent experts), as of the date the concessions were granted.

i. Value Beyond Proven and Probable Ore Reserves - Included as a component of property, plant and equipment m. Asset retirement obligations (reclamation and remediation costs) - The fair value of a liability for asset retirement on the consolidated balance sheets at December 31, 2013 and 2012, are values for ore bodies beyond proven and obligations is recognized in the period in which the liability is incurred. The liability is measured at fair value and probable reserves (“VBPP”). VBPP is attributable to (i) mineralized material, which includes measured and indicated is adjusted to its present value in subsequent periods as accretion expense is recorded. The corresponding asset amounts that the Company believes could be brought into production with the modification of existing permits and retirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over should market conditions and technical assessments warrant, (ii) inferred mineral resources, and (iii) exploration the asset’s useful life. potential. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/ or underground sampling to support reported tonnage and average grade of minerals. Such a deposit does not n. Intangible assets - Intangible assets include primarily the excess amount paid over the book value for investment qualify as proven and probable reserves until legal and economic feasibility are confirmed based upon a compre- shares of the Branch and mining and engineering development studies. Intangible assets are carried at its acqui- hensive evaluation of development costs, unit costs, grades, recoveries and other material factors. Inferred mineral sition cost, net of accumulated amortization and are amortized principally on a unit of production basis over the resources are those parts of a mineral resource for which the overall tonnages, grades, and mineral contents can estimated remaining life of the mines. Intangible assets are reviewed for impairment whenever events or changes be estimated with a reasonable level of confidence based on geological evidence and apparent geological and in circumstances indicate that the carrying amount of the asset may not be recoverable. grade continuity after applying economic parameters. An inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource. Exploration potential is the estimated value of potential mineral o. Debt issuance costs - Debt issuance costs, which are included in other assets, are amortized using the effective deposits that the Company has the legal right to access. Carrying amounts assigned to VBPP are not charged to interest method over the term of the related debt.

24 25 p. Ore reserves - AMC periodically reevaluates estimates of its ore reserves, which represent the Company’s estimate deferred tax assets and liabilities are adjusted in income in the period that the change is enacted. Deferred income as to the amount of unmined copper remaining in its existing mine locations that can be produced and sold at a tax assets are reduced by any benefits that, in the Company’s opinion, are more likely than not to be realized. profit. Such estimates are based on engineering evaluations derived from samples of drill holes and other openings, combined with assumptions about copper market prices and production costs at each of the respective mines. The Company classifies income tax-related interest and penalties as income taxes in the consolidated financial statements. AMC updates its estimate of ore reserves at the beginning of each year. In this calculation AMC uses current metal prices which are defined as the average metal price over the preceding three years. The current price per pound of The Company’s operations involve dealing with uncertainties and judgments in the application of complex tax reg- copper, as defined, was $3.65 dollars and $3.68 dollars at the end of 2013 and 2012, respectively. The ore reserve ulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with estimates are used to determine the amortization of mine development and intangible assets. taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the Once AMC determines through feasibility studies that proven and probable reserves exist and that the drilling and U.S. and other tax jurisdictions based on the estimate of whether, and the extent to which, additional taxes will be other associated costs embody a probable future benefit that involves a capacity, singly or in combination with other due. The Company follows the guidance of ASC 740 “Income tax” (FIN 48 “Uncertain tax positions” in prior litera- assets, to contribute directly or indirectly to future net cash inflow, then the costs are classified as mine develop- ture) to record these liabilities. The Company adjusts these reserves in light of changing facts and circumstances; ment costs and AMC discloses the related ore reserves. however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. q. Leachable material - The leaching process is an integral part of the mining operations carried out at the Company’s open-pit mines. The Company capitalizes the production cost of leachable material at its Toquepala, La Caridad and If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense Buenavista mines recognizing it as inventory. The estimates of recoverable mineral content contained in the leach- would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of ing dumps are supported by engineering studies. As the production cycle of the leaching process is significantly the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities longer than the conventional process of concentrating, smelting and electrolytic refining, the Company includes on are no longer necessary. The Company recognizes interest and penalties, if any, related to unrecognized tax bene- its balance sheet, current leach inventory (included in work-in-process inventories) and long-term leach inventory. fits in income tax expense. The cost attributed to the leach material is charged to cost of sales generally over a five-year period (the average estimated recovery period based on the historical recovery percentages of each mine). t. Derivative financial instruments -The Company uses certain types of derivative financial instruments to enhance its ability to manage risks that exist as part of its ongoing business operations and to enhance its return on Com- r. Exploration - Tangible and intangible costs incurred in the search for mineral properties are charged against earn- pany assets. Derivative contracts are reflected as assets or liabilities in the balance sheet at their fair value. The ings when incurred. estimated fair value of the derivatives is based on market and/or dealer quotations and in certain cases valuation modeling. From time to time the Company has entered into copper and zinc swap contracts to protect a fixed cop- s. Income taxes - Provisions for income tax are based on taxes payable or refundable for the current year and deferred per and zinc price for portions of its metal sales, hedging contracts to fix power prices for a portion of its production taxes on temporary differences between the amount of taxable income and pretax financial income and between the costs, interest rate swap agreements to hedge the interest rate risk exposure on certain of its bank obligations tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and with variable interest rates and currency swap arrangements to ensure Mexican peso/ U.S. dollar conversion rates. liabilities are included in the consolidated financial statements at currently enacted income tax rates applicable to Gains and losses related to copper and zinc hedges are included in net sales, gain and losses related to power the period in each jurisdiction in which the deferred tax assets and liabilities are expected to be realized and settled costs are included in cost of sales, all other gains and losses on derivative contracts are included in “Gain (loss) on as prescribed in ASC Topic 740 “Income Taxes”. As changes in tax laws or rates are enacted in each jurisdiction, derivative contracts” in the consolidated statement of earnings.

26 27 The Company assesses the effectiveness of the derivative contracts periodically using either regression analysis or trading purposes in entities over which it does not exercise control, joint control, or significant influence are the dollar offset approach, both retrospectively and prospectively, to determine whether the hedging instruments initially recorded at acquisition cost and adjusted to its fair value if such investments have readily determinable have been highly effective in offsetting changes in fair value of the hedged items. fair values.

Unrealized gains (losses) on cash flow derivatives that meet the requirements of hedge accounting are included in w. Other comprehensive income - Represents changes in equity during a period, except those resulting from “other comprehensive income” in the consolidated balance sheet until settlement. investments by owners and distributions to owners. During the years ended December 31, 2013 and 2012, the components of “other comprehensive income (loss)” were the unrealized gain (loss) on cash flow hedge deriva- u. Asset impairments - The Company evaluates its long-term mining, railway and drilling assets when events or tive instruments, the unrecognized gain (loss) on employee benefit obligations, and realized gain (loss) included changes in economic circumstances indicate that the carrying amount of such assets may not be recoverable. in net income. These evaluations in case of mining segment are based on business plans that are prepared using a time horizon that is reflective of the Company’s expectations of metal prices over its business cycle. The Company is currently x. Recently adopted accounting pronouncements - During 2013 the Company adopted the following Accounting using a long-term average copper price of $3.00 dollars per pound of copper and an average molybdenum price Standards Updates (“ASU”) and ASC’s issued by the Financial Accounting Standard Board (“FASB”). of $10.00 dollars per pound, reflective of the current price environment, for the impairment tests. The results of its impairment tests using these long-term copper and molybdenum prices show no impairment in the carrying value In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update of their assets. (“ASU”) No. 2011-11, Balance Sheet: Disclosures about Offsetting Assets and Liabilities. This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial state- In recent years the Company’s assumptions for long-term average prices resulted in stricter evaluations for impairments to understand the effect of those arrangements on its financial position. The objective of this disclosure ment analysis than would the higher three year average prices for copper and molybdenum. Should this situation is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. reverse in the future with three year average prices below the long-term price assumption, the Company would GAAP and those entities that prepare their financial statements on the basis of International Financial Report- assess the need to use the three year average prices in its evaluations. The Company uses an estimate of the future ing Standards (“IFRS”). The amended guidance is effective for annual reporting periods beginning on or after undiscounted net cash flows of the related asset or asset group over the remaining life to measure whether the January 1, 2013. assets are recoverable and measures any impairment by reference to fair value. In July 2012, the FASB issued ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefi- v. Investment in shares of associated companies and other investments - Investments in shares of associated nite-Lived Intangible Assets for Impairment. This update amends ASU 2011-08, Intangibles – Goodwill and Other companies are valued according to the equity method. Under this method, the acquisition costs are initially (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qual- recognized based on the net fair value of the entities’ identifiable assets and liabilities as of the date of ac- itative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired quisition. Such value is subsequently adjusted for the portion related both to comprehensive income (loss) as a basis for determining whether it is necessary to perform the quantitative impairment test. The amendments of the associated company and the distribution of earnings or capital reimbursements thereof. The equity in are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, income of associates is included in earnings. Comprehensive income attributable to associates is included in 2012. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements other comprehensive income. Investments in equity securities made by the Company and classified as held for and related disclosures.

28 29 3. Short-term investment The following table summarized the activity of these investments:

The balances of short-term investments were as follows: 2013 2012

Trading: 2013 2012 Interest earned $ 5.2 $ 3.1 Unrealized loss (1.9) 2.4 Trading securities $ 202.6 $ 127.8 Weighted average interest rate 3.78% 1.87% Available for sale: Interest earned(*) $ - $ 0.1 Available for sale $ 6.1 $ 7.3 Investment redeemed 0.8 1.9 Weighted average interest rate 0.42% 0.43% (*) Less than $0.1 as of December 31, 2013. Total $ 208.7 $ 135.1 4. Other accounts receivable Trading securities consist of bonds issued by public companies and are publicly traded. Each financial instrument is

independent of the others. The Company has the intention to sell these bonds in the short-term. 2013 2012

Available-for-sale investments consist of securities issued by public companies. Each security is independent of the Recoverable taxes $ 155.1 $ 239.7 Prepayments 123.5 325.0 others and, as of December 31, 2013 and 2012, included corporate bonds and asset and mortgage backed obliga- Loan to workers 23.1 21.7 tions. As of December 31, 2013 and 2012, gross unrealized gains and losses on available-for-sale securities were Deferred employee participation in profit sharing 14.1 27.2 not material. Other 10.3 12.3

Total $ 326.1 $ 625.9 The Company earned interest on these investments, which was recorded as “interest income” in the consolidated statement of earnings. Also the Company redeemed some of these securities and recognized gains (losses) due to 5. Inventories changes in fair value, which were recorded as other income (expense) in the consolidated statement of income. 2013 2012

As of December 31, contractual maturities of debt securities classified as available-for-sale are as follows: Metals and minerals: Finished goods $ 150.5 $ 149.5 Work-in-process 545.6 558.2 2013 2012 696.1 707.7 Materials and Supplies 462.0 434.8 One year or less $ 0.8 $ 1.2 Maturing after five years through ten years 0.2 - Inventories – Net $ 1,158.1 $ 1,142.5 Due after ten years 5.1 6.1 Inventory, long-term: Total debt securities $ 6.1 $ 7.3 Leachable material Long-term $ 443.5 $ 295.9

30 31 As of December 31, 2013 and 2012, work in-process includes $191.7 and $121.8, respectively, of capitalized 8. Concession titles leaching costs. Concessions are comprised of the following:

Leachable material recognized as cost of sales amounted to $223.9 and $158.4 in 2013 and 2012, respectively. 2013 2012

6. Prepaid expenses and other North-Pacific railroad track $ 109.3 $ 109.8 Southeast railroad track 210.7 211.7 Nogales-Nacozari short railroad track 1.6 1.6 2013 2012 Ojinaga-Topolobampo short railroad track 0.2 0.2 South-Oaxaca short railroad track 0.2 0.3 Prepaid insurances $ 10.7 $ 12.1 Overhauls 19.0 19.1 Contributions 8.5 14.5 341.0 342.7 Accumulated amortization (124.0) (115.6) $ 19.2 $ 26.6

Concession titles – Net $ 217.0 $ 227.1 7. Property, plant and equipment Amortization charged to 2013 and 2012 income amounted to $9.1 and $8.9, respectively. 2013 2012 The value of the North-Pacific Railway concession title was determined by deducting the value of the tangible assets re- Buildings and equipment $ 9,459.6 $ 8,699.2 ceived from the price paid for the Ferromex shares, net of the liability arising from the capital lease of 24 locomotives that Locomotives and freight cars 1,046.7 995.6 Rails and structures 1,108.1 862.9 Ferrocarriles Nacionales de México (“FNM”) had entered into with Arrendadora Internacional, S. A. de C. V. (settled in 2001). Drilling equipment 679.9 442.4 Train yards and terminals 199.2 176.8 9. Investments in associated companies and other investments Value beyond proven and probable reserves 142.8 134.9 Other railway equipment 413.7 294.0 Investments in associated companies 13,050.0 11,605.8 The investments in associated companies were as follows:

Less - Accumulated depreciation, amortization and depletion (6,241.4) (5,713.0) 6,808.6 5,892.8 Equity in the results Associated companies Investment at December 31, from the year ended % 2013 2012 2013 2012 Land, other than mineral 947.2 928.9 Construction in progress 3,709.4 2,471.3 TVM 50.0 $ 28.1 $ 24.8 $ 6.3 $ 6.1 TTX Company 0.6 9.1 9.2 - - Property, plant and equipment - Net $ 11,465.2 $ 9,293.0 Minera Coimolache 44.2 57.1 47.1 20.9 48.7 Wind Farm “El Retiro” 134.1 - - Depreciation expense for the years ended December 31, 2013 and 2012 amounted to $676.3 and $557.7, Other 5.0 34.0 - - respectively. Total $ 233.4 $ 115.1 $ 27.2 $ 54.8

32 33 The Company has a 44.2% participation in Coimolache S.A. (“Coimolache”), which it accounts for on the equity 11. Other noncurrent assets 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 to Coimolache. 2013 2012

Patents and licenses $ 13.4 $ 5.7 Investments in equity securities Amortization (3.5) (3.0) 9.9 2.7 The Company’s share in these investments, and their carrying amounts, are as follows: Long – term receivable 226.0 328.5 Deferred charges 11.0 10.9 Share in Share in Prepayment in properties 34.9 34.9 Company 2013 2012 2013 2012 Others 105.7 63.4

Grupo Aeroportuario del Pacífico S. A. B. de C. V. 28.60% 29.59% $ 841.6 $ 939.1 $ 387.5 $ 440.4

As of December 31, 2013 and 2012 the carryng amounts of the fair value in investments in equity securities were 12. Maintenance agreements $154.0 and $190.2, respectively.

Ferromex has executed two maintenance and repairs agreements with Lámparas General Electric, S. de R. L. de C. 10. Other intangible assets V. (“Lámparas”), an agreement with Alstom Mexicana, S. A. de C. V. (“ALSTOM”), and another with EMD Locomotive Company de México, S. A. de C. V. (“EMDL”) to provide repair and maintenance services, as well as the major repairs 2013 2012 of some locomotives of Ferromex, as follows: Mining concessions $ 121.2 $ 121.2 Infrastructure concessions 147.3 31.7 Terms of the agreement Mine engineering and development studies 6.0 6.1 Suplier Number of locomotives included Initial date Expiration Software 12.2 8.9 286.7 167.9 Lámparas 253 August 2012 June 2017 Accumulated amortization (46.2) (43.8) Lámparas 160 May 1999 December 2026 240.5 124.1 ALSTOM 50 February 2010 February 2015 Goodwill 62.3 135.4 EMDL 98 June 2006 June 2026

Intangible assets $ 302.8 $ 259.5 Total 561

Amortization expense on intangible assets was $2.4 and $2.2 for the years ended December 31, 2013 and 2012, Ferromex has the right to rescind some of the maintenance contracts, assuming then the cost for early termination. respectively. The estimated aggregate amortization expense for intangibles is $9.1 for the years 2014 through 2018 for an average expected annual expense of approximately $1.8 per year during this period. The Lámparas agreement for 253 locomotives expiring in June 2017 stipulates the following payments for early termination: a) $2.7 if it occurs between July 1, 2014 and June 30, 2015, b) $1.8 if it occurs between July 1, 2015 and The goodwill translation effect as of December 31, 2013 and 2012 was ($73.1) and $4.1, respectively. June 30, 2016 and c) $1.0 if it occurs between July 1, 2016 and June 30, 2017.

34 35 The Lámparas agreement for 160 locomotives includes two separate fleets (AC4400 and ES44AC). The agreement 13. Bank loans and long-term debt related to the AC4400 fleet, which expires in June 2024, indicates that the Company may cancel beginning on July 1, 2009, but will be subject to a penalty ranging from $2.0 in 2009 to $0.1 in June 2024. Regarding the 100 At December 31, 2013 and 2012, the Company was in compliance with the guarantees and restrictions established by ES44AC locomotives (EVO), the agreement indicates that the Company may cancel as of 2010, but will be subject the debt agreements which include financial covenants and restrictions on contracting additional debt and on certain to penalties of $2.7 to $ 0.1 in 2026. capital expenditures, the consolidated debt was as follows:

2013 2012 The ALSTOM agreement, with maturity in January 2015, contemplates an early termination, for which the Company

would have to pay the cost of inventories and the termination benefits epescified in the employement contracts of SCC $ 4,153.8 $ 4,162.8 ALSTOM’s personnel. GFM/ITM 420.2 474.3 MM 51.1 51.1 MPD 1,185.8 895.7 The EMDL agreement may not be canceled before July 1, 2015. If the Entity decides to conclude the contract be- Total 5,810.9 5,583.9 tween July 1, 2015 and June 30, 2016, it would have to pay an amount equivalent to 15 months average billing. Less - Current portion (367.1) (109.5) The cancellation payment will decrease by one month for each 12 month period during the current contract. Long-term debt $ 5,443.8 $ 5,474.4 As of December 31, 2013 and 2012, Ferrosur has an agreement to receive maintenance with ALSTOM to receive The maturities of notes payable as of December 31, 2013 were as follows: maintenance, repairs and inspecting services to the transport equipment. The terms of the agreement are effective over the twelve-year period covered by the contract. Year Principal due *

Maintenance and repairs – Under the agreements Ferromex must make monthly payments for maintenance and 2014 367.1 rapier work based on certain fees that include mainly preventive and corrective maintenance. These fees are re- 2015 296.0 2016 66.9 corded in the results of operations as the services are received. For the years ended December 31, 2013 and 2012, 2017 52.2 Ferromex paid $72.5 and $69.15, respectively. 2018 44.0 Thereafter 5,031.0 Overhauls - Overhauls are capitalized to property and equipment as incurred and amortized over the period be- $ 5,857.2 tween overhauls which may varydepending on the use of the railways. Generally, the costs are amortized over 5

to 8 years average. (*) Total debt maturities do not include the debt discount valuation account of $46.3.

36 37 MINING SEGMENT: The bonds, referred above as “Yankee bonds”, contain a covenant requiring MM to maintain a ratio of EBITDA to interest expense of not less than 2.5 to 1.0 as such terms are defined by the facility. At December 31, 2013, MM is in 2013 2012 compliance with this covenant.

SCC EThe Mitsui credit agreement which was collateralized by pledges of receivables on 31,000 tons of copper per year Notes due 2015 ($200 face amount, less unamortized discount 6.375% of $0.3 and $0.4 at December 31, 2013 and 2012, respectively 199.7 199.6 was fully repaid in December 31, 2013.

Notes due 2020 ($400 face amount, less unamortized discount 5.375% Between July 2005 and November 2012 SCC issued senior unsecured notes six times totaling $4.2 billion as listed of $1.4 and $1.6 at December 31,2013 and 2012, respectively) 398.6 398.4 above. Interest on the notes is paid semi-annually in arrears. The notes rank pari passu with each other and rank pari Notes due 2040 ($1,100 face amount, less unamortized discount passu in right of payment with all of SCC’s other existing and future unsecured and unsubordinated indebtedness. 6.750% of $7.9 and $8.0 at December 31,2013 and 2012) 1,092.1 1,092.0

Notes due 2035 ($1,000 face amount, less unamortized discount The indentures relating to the notes contain certain restrictive covenants, including limitations on liens, limitations on 7.500 % of $14.5 and $14.7 at December 31, 2013 and 2012, respectively) 985.5 985.3 sale and leaseback transactions, rights of the holders of the notes upon the occurrence of a change of control triggering event, limitations on subsidiary indebtedness and limitations on consolidations, mergers, sales or conveyances. Mitsui credit agreement due 2013 (Japanese LIBOR rate plus 1.25% 1.763% Certain of these covenants cease to be applicable before the notes mature if SCC obtains an investment grade rating. (2.02% at December 31, 2011) - 10.0 SCC obtained investment grade rating in 2005. SCC has registered these notes under the Securities Act of 1933, as Notes due 2042 ($1,200 face amount, less unamortized discount 5.25% amended. SCC may issue additional debt from time to time pursuant to certain of the indentures. of $21.2 and $21.5 at December 31, 2013 and 2012) 1,178.8 1,178.5

Notes due 2022 ($300 face amount, less unamortized discount of Related to these notes, SCC capitalized $28.9 of issuance costs which unamortized balance is included in “Other 3.50% $0.9 and $1.0 at December 31,2013 and 2012) 299.1 299.0 assets”, non-current on the consolidated balance sheet and are being amortized as interest expense over the life of the loans. At December 31, 2013 and 2012, the balance of capitalized debt issuance costs was $26.1 and $25.9, MM respectively. Amortization charged to interest expense was $1.9 and $1.3 in 2013, 2012, respectively.

9.25% Yankee Bonds - Series “B” due 2028 51.1 51.1 Total debt 4,204.9 4,213.9 The net proceeds from the issuance and sale of the July 2005 notes were principally used to repay outstanding indebtedness of SCC and the balance was used for general corporate purposes. Net proceeds from the other notes were Less - Current portion (10.0) - used for general corporate purposes, including the financing of SCC’s capital expenditure program.

Long-term debt $ 4,204.9 $ 4,203.9 If SCC experiences a Change of Control Triggering Event, SCC must offer to repurchase the notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any. A Change of Control Trigger The difference between the face amount and the balances as of December 31, 2013 and 2012 of the senior unsecured Event means a Change of Control (as defined) and a rating decline (as defined), that is, if the rating of the notes, by at notes is the unamortized issuance discount, which is being amortized over the term of the related debt. least one of the rating agencies shall be decreased by one or more gradations.

38 39 At December 31, 2013, SCC was in compliance with the covenants of the notes. 2013 2012

Aggregate maturities of the outstanding borrowings at December 31, 2013, are as follows: Loan from CREDIT AGRICOLE CIB (before CALYON) - and EXIM with maturities every three months through June 15, 2016, subject to interests at three month LIBOR without spread (3) 20.8 29.2 Year Principal due (*) Loan from CREDIT AGRICOLE CIB (before CALYON) - for with maturities every three months through June 15, 2016, subject to interest at three month 2014 $ - LIBOR rate plus 0.40% to 0.50% (3) 5.8 8.2 2015 200.0 2016 - Loan from Private Export Corporation (“PEFCO”)-EXIM funded in March 16, 2017 - 2013, with maturities every three months through May 15, 2021, subject to Thereafter 4,051.2 interest rate at monthly LIBOR plus 0.65% (4) 34.0 38.5

$ 4,251.2 Syndicated loan from various banks managed by CITIBANK, N. A., secured by ITM comprised of the following tranches

(*) Total debt maturities do not include the debt discount valuation account of $46.3. I. Ps $121.5 subject to 28-day TIIE plus 0.575%, with quarterly amortizations, from June 7 2010, through June 6, 2013 (5) - 9.3 At December 31, 2012 other assets included $5.1 million held in escrow accounts as required by the Mitsui’s loan II. $25.0 with quarterly amortizations through June 7, 2010, due in June 6, (5) agreement. The funds were released from escrow since the loan was paid in December 2013. 2013, subject to three-month LIBOR plus 0.55% - 3.8

Long-term debt contracts in Mexican pesos: RAILWAY SEGMENT: Loan from BANAMEX and EXIM with maturities every three months through 2013 2012 September 15, 2015, subject to interest at the fixed rate of 8.18%(6) 18.7 29.5

Loan from Scotiabank and Export-Import Bank (“EXIM”) with maturities ev- Loan from BANAMEX with maturities every three months through March 15, ery three months through July 25, 2013, subject to interest at three month 2014, subject to interest at the fixed rate of 8.25% (6) 0.7 3.5 LIBOR plus 0.09% (1) $ - $ 3.5 Loan from IXE BANK, with maturities every three months through August 31, Loan from HSBC Bank PLC and Export Development Canada (“EDC”), with 2013 subject to interest at 91-days TIIE rate plus 1.35% (7) 30.9 34.6 maturities every six months through November 26, 2014, subject to interest at six month LIBOR plus 0.8% (2) 2.9 5.7 Debt securities (“certificados bursátiles”) (8) 305.9 307.5 420.2 474.3 Loan from HSBC México, S. A. Commercial Bank (“HSBC”) with maturities every six months through November 26, 2014, subject to interest at six Less - Current portion of long-term debt (113.3) (52.2) months LIBOR plus 0.40% (2) 0.5 1.0 Long-term debt $ 306.9 $ 422.1

40 41 Debt matures as follows: Date of Maturity Issuance Transaction Date Annual Rate 2013 2012 Maturity FERROMX -07 Nov 16, 2007 Nov 7, 2014 TIIE 28 days +0.34% $ 76.5 $ 76.9 2014 $ 113.3 2015 30.0 FERROMX -07-2 Nov 16, 2007 Oct 28, 2022 Fixed rate of 9.03% 114.7 115.3 2016 16.7 2017 11.4 FERROMX-07-2 Apr 15, 2012 Apr 2, 2021 Fixed rate of 8.88% 114.7 115.3 Thereafter 248.8 $ 305.9 $ 307.5 $ 420.2

(1) In order to secure the loans from Scotiabank and EXIM on December 30, 2004 and on January 27, 2005, an irrevocable trust guarantee was set up, with The loans and the debt paper establish certain covenants for GFM, which as of December 31, 2013 had been fulfilled. Banco Nacional de México, S. A. (“BANAMEX”) as the trustee, GFM as the trustor, EXIM as the trust beneficiary in the first instance and Scotiabank as trust beneficiary in the second instance, for which GFM pledged the rights of 25 acquired locomotives that gave rise to these loans, as well as the titles and interest on the guarantees provided to the trustee, the agreement was fully repaid in July, 2013. The average annual rates for the years ended on December 31, 2013 and 2012 were: 6-month LIBOR: 0.47% and

(2) Loans from HSBC BANK PCL - EDC and HSBC BANK MEXICO, respectively contracted for the purchase of 15 SD70ACe locomotives, which are pledged for 0.73%, 3-month LIBOR of 0.28% and 0.47% and TIIE for 28 days 3.11% and 3.31%, respectively. these loans.

(3) Loans from CREDIT AGRICOLE CIB (before CALYON) - EXIM and CREDIT AGRICOLE CIB (before CALYON), respectively contracted for the purchase of 40 INFRAESTRUCTURE SEGMENT: locomotives, which are pledged for these loans.

(4) Loan from PEFCO - EXIMBANK on March 16, 2012 for $41.9, subject to interest at three-month Libor rate plus 0.65%, contracted for the purchase of 24 2013 2012 locomotives which expire on May 15, 2021.

(5) On September 29, 2006 Ferrosur held a derivate transaction exchange rate and interest rate to 7 years, making the obligation of U.S. $25,000 thousand to PEMSA $ $274,875 thousand pesos, generating monthly interest at the TIIE 28 plus 0.71% days.

On June 6, 2007 the Company entered into a derivate instrument, to fix the interest rate at 8.51% for 6 years. Bank loan with MONEX, S.A., with maturity on August 30, 2017, bears interest at a rate equal to monthly LIBOR plus 2.5% (1) $ 1.4 $ 1.8 (6) Loans from BANAMEX - EXIM and direct loan from BANAMEX, hired to settle in advance the bridge loan from BANAMEX, used for the purchase of 60 locomotives, which are pledged for such loans. Bank loan with IXE, S. A., with maturity on May 31, 2014, bears interest at a (2) In the loans mentioned above Ferromex signed as guarantor. rate equal to monthly LIBOR plus 4.75% 1.9 6.4

(7) Credit with IXE BANCO hired May, 31, 2011 by Ferrosur to refinance liabilities. Bank loan with IXE, S. A., with maturity on August 6, 2014, bears interest at (3) a rate equal to monthly LIBOR plus 4.25% 5.0 - (8) As of December 31, 2013 and 2012, Ferromex has issued debt paper under these programs with the following features and whose balances are as follows: CIPEME

Bank loan with HSBC MÉXICO, S.A., with maturity on June 14, 2020, bears interest at a rate equal to monthly LIBOR plus 2.50% (4) 175.0 -

Bank loan with INBURSA, S.A., with maturity on June 14, 2020, bears interest at a rate equal to monthly LIBOR plus 3.25% (5) 108.4 129.8

42 43 2013 2012 (1) Loan with Monex Bank, to acquire water well drilling equipment, which assets are held as collateral, with monthly amortizations to August 30, 2017.

(2) Loan from IXE Banco S.A. contracted in 2010 for $10.0, due in May 31, 2014, to financer the continued drilling operations in Poza Rica, Veracruz on the Bank loan with INBURSA, S.A., with maturity on July 2, 2020, bears interest project Aceite Terciario del Golfo (“ATG”), with monthly amortizations to May 31, 2014. at a rate equal to monthly LIBOR plus 3.25% (6) 116.9 137.8 (3) Loan from IXE Banco S.A. contracted in 2013 for $5.0, due in August 6, 2014, to finance the continued drilling operations in Poza Rica, Veracruz on the project Aceite Terciario del Golfo (“ATG”). MCC (4) Mortgage loan with HSBC MÉXICO, S.A. for the acquisition of the jack up rig “Tabasco” for $175.0. payable in 6 months.

Bank loan with BANOBRAS, S.A., with maturity on October 1, 2032, bears (5) Mortgage loan with Inbursa Bank for the acquisition of the jack up rig “Zacatecas” for $129.8, with monthly amortizations to June 14, 2020. interest at a rate equal to monthly LIBOR plus 5.85% (7) 105.6 44.9

(6) Mortgage loan with Inbursa Bank for the acquisition of the jack up rig “Chihuahua” for $141.3. with monthly amortizations to July 2, 2020. MGE (7) Loan with BANOBRAS used for the construction of the highway denominated “León – Salamanca” in Guanajuato, Mexico, with quarterly amortizations to 5.50% Senior secured notes due in 2032 payable semi annually with a final October 1, 2032. During 2013 increased by $60.8. (8) maturity date of December 6, 2032 575.0 575.0 (8) The proceeds of the offering are used for the payment of development and construction of two natural-gas-fired combined cycled electric generating plants, with a potential net capacity of 258.1 megawatts each, with semestral amortizations to December 6, 2032. México Generadora de Energía Eólica, S.A. de C.V. (“MGEO”) (9) The proceeds of this credit facility are used for the development and construction of a wind farm located in Juchitán, Oaxaca with a potential net capacity of 74 megawatts. Once the project is fully operative amortizations will be paid on a semi-annual basis. MXN $1.2 billion Secured Credit Facility (9) 67.5 - (10) The proceeds of this credit facility were used to finance MPD infrastructure projects while larger credit facilities with longer tenors are obtained. Notional of this credit facility is paid fully on April 21, 2014, while interest has been paid on a monthly basis. MPD

TIIE + 1.25% credit facility (10) 29.1 - The loans establish certain covenants, which the Company is in compliance as of December 31, 2013.

Total debt 1,185.8 895.7 14. Asset retirement obligation (ARO) Less, current portion (253.8) (47.3 ) SCC Total long-term debt $ 932.0 $ 848.4 SCC maintains an estimated asset retirement obligation for its mining properties in Peru, as required by the Peruvian Mine Closure Law. In accordance with the requirements of this law, SCC’s closure plans were approved by MINEM. As Maturity part of the closure plans, commencing in January 2010 and, as amended in 2012, SCC is required, under its approved closure plans, to provide annual guarantees over the estimated life of the mines, based on a present value approach, 2014 $ 253.8 and to furnish the funds for the asset retirement obligation. This law requires reviews of closing plans every five years. 2015 66.0 2016 50.2 Currently and for the near-term future, SCC has pledged the value of its Lima office complex as support for this ob- 2017 40.8 ligation. The accepted value of the Lima office building, for this purpose, is $27.8. Through January 2014, SCC has 2018 44.0 provided guarantees of $14.2. The closure cost recognized for this liability includes the cost, as outlined in its closure Thereafter 731.0 plans, of dismantling the Toquepala and Cuajone concentrators, the smelter and refinery in Ilo, and the shops and

$ 1,185.8 ancillary facilities at the three units, including the Ilo marine trestle. In the last quarter of 2012, SCC submitted updates

44 45 to the closure plans for Toquepala, Cuajone and Ilo in accordance with the law. As a result of these revised plans, SCC tion obligations. Accretion expense related to ARO’s was $2.4 and $2.1 for the years ended December 31, 2013 and adjusted its asset retirement obligation. 2012, respectively.

In 2012, SCC decided to recognize an estimated asset retirement obligation for its mining properties in Mexico as Asarco has approximately $6.7 and $6.3 of cash and investments pledged to secure certain ARO’s, which are record- part of its environmental commitment. Even though, there is currently no enacted law, statute, ordinance, or written ed as restricted cash and investments as of December31, 2013and 2012, respectively. or oral contract requiring SCC to carry out mine closure and environmental remediation activities, SCC considers that a constructive obligation presently exists based on, among other things, the remediation caused by the closure of the Information relating to the total obligations for ARO liabilities as of December31, 2013and 2012, is as follows: San Luis Potosi smelter in 2010. Consequently, according to ASC- 410-20 on December 31, 2012 SCC recorded an asset retirement obligation of $25.1 million and increased net property by $20.3 million. The overall cost recognized for mining closure includes the estimated costs of dismantling concentrators, smelter and refinery plants, shops and 2013 2012 other facilities. Beginning balance $ 17.3 $ 15.2 Remediation expanditures (3.1) - The following table summarizes the asset retirement obligation activity for the two years ended December 31, 2013 Accretion expense 2.4 2.1 and 2012: Ending balance $ 16.6 $ 17.3 2013 2012

Balance as of January 1 $ 118.2 $ 62.0 15. Employees’ statutory profit sharing Changes in estimates - 27.4 Additions - 25.1 SCC’s operations in Peru and Mexico are subject to statutory workers’ participation. Closure payments (1.5) (0.3) Accretion expense 8.1 4.0 In Peru, the provision for workers’ participation is calculated at 8% of pre-tax earnings. The current portion of

Balance as of December 31, $ 124.8 $ 118.2 this participation, which is accrued during the year, is based on Peruvian Branch’s taxable income and is distributed to workers following determination of final results for the year. The annual amount payable to an individual ASARCO worker is capped at the worker’s salary for an 18 month period. Amounts determined in excess of the 18 months Accounting for reclamation and remediation obligations requires management to make estimates, unique to each min- of worker’s salary is no longer made as a payment to the worker and is levied first for the benefit of the “Fondo ing operation, relating to the future costs anticipated to complete reclamation and remediation work that is required to Nacional de Capacitacion Laboral y de Promocion del Empleo” (National Workers’ Training and Employment Pro- comply with existing laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. motion Fund) until this entity receives from all employers in its region an amount equivalent to 2,200 Peruvian Additionally, future changes to environmental laws and regulations could increase the extent of reclamation and reme- taxable units (approximately $2.9 million in 2013). Any remaining excess is levied as payment for the benefit of diation work required. Any such changes could materially affect the amounts charged to earnings for reclamation and the regional governments. These levies fund worker training, employment promotion, road infrastructure and other remediation. As of December 31, 2013 and 2012, $16.7 and $17.3, respectively, were accrued for potential reclama- government programs.

46 47 In Mexico, workers’ participation is determined using the guidelines established in the Mexican income tax law at Additionally, in 2007, SCC’s Mexican subsidiaries provided guaranties for two loans obtained by MexTransport, a com- a rate of 10% of pre-tax earnings as adjusted by the tax law. In December 2013, the Mexican Congress approved pany controlled by the Larrea family, from Bank of Nova Scotia in Mexico. One of these loans has been repaid and the some amendments to the tax law, as a consequence, SCC recorded a deferred workers’ participation provision remaining loan requires semi-annual repayments. The repayment of these loans was completed in August 2013. SCC of $16.3. also received fees from Mextransport.

The provision for workers’ participation is included in “Cost of sales (exclusive of depreciation, amortization and deple- The following table summarize the purchase activity with companies with relationships to SCC executive officers´dam- tion)” and “Administrative expenses” in the consolidated statement of income. For the years ended December 31, 2013 ilies in 2013 and 2012: and 2012, workers’ participation expense was $233.0 and $277.4, respectively. 2013 2012

16. Related party balances and transactions Higher Technology S.A.C. $ 2.2 3.1 Servicios y Fabricaciones Mecánicas S.A.C. 0.4 0.2 2013 2012 Sempertrans 1.1 0.3 PIGOBA, S.A. de C.V. 0.3 0.8 Due to related parties: Breaker, S.A. de C.V. 3.9 2.3 Fondo Inmobiliario, S. A. de C. V. $ 0.4 $ 4.1 Ferrocarril y Terminal Valle de México S. A. de C. V. 8.4 3.4 Total purchased $ 7.9 $ 6.7 México Transporte Aéreos, S.A. de C.V. ("Mextransport") 3.1 0.1 TTX Company 0.8 1.3 SCC purchased industrial materials from Higher Technology S.A.C., and paid fees for maintenance services provided Others 1.2 1.1 by Servicios y Fabricaciones Mecánicas S.A.C. Mr. Carlos Gonzalez, the son of SCC’s Chief Executive Officer, has a $ 13.9 $ 10.0 proprietary interest in these companies.

The Company has entered into certain transactions in the ordinary course of business with parties that are controlling SCC purchased purchased industrial material from Sempertrans France Belting Technology and Sempertrans Belcha- shareholders or their affiliates. These transactions include the lease of office space, air transportation and construction tow SP Z.O.O., in which Mr. Alejandro Gonzalez is employed as a sales representative. Also, SCC purchased industrial services and products and services relating to mining and refining. The Company lends and borrows funds among material from PIGOBA, S.A. de C.V., a company in which Mr. Alejandro Gonzalez has a proprietary interest. Mr. Alejan- affiliates for acquisitions and other corporate purposes. These financial transactions bear interest and are subject to dro Gonzalez is the son of SCC’s Chief Executive Officer. 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 SCC purchased industrial material and services from Breaker, S.A. de C.V., a company in which Mr. Jorge Gonzalez, entering or continuing a material related party transaction that has not been reviewed and approved or ratified by the son-in-law of SCC’s Chief Executive Officer, has a proprietary interest, and from Breaker Peru, S.A.C., a Company in Audit Committee. which Misters Jorge González and Carlos González, son-in-law and son, respectively, of SCC’s Chief Executive Officer have a proprietary interest. The Larrea family controls a majority of the capital stock of GMEXICO, and has extensive interests in other businesses, including aviation and real estate. SCC engages in certain transactions in the ordinary course of business with other It is anticipated that in the future SCC will enter into similar transactions with these same parties. entities controlled by the Larrea family relating to the lease of office space and air transportation.

48 49 17. Benefit plans 2013 2012

Mining segment Actuarial loss 0.3 1.0 Actuarial (gain) loss assumption changes (1.0) 0.8 Inflation adjustment - 0.9 SCC – Peruvian and Mexican Operations SCC has two non-contributory defined benefit pension plans covering former salaried employees in the United States Projected benefit obligation at end of year $ 26.8 $ 27.9 and certain former employees in Peru (“The Expatriate Plan”). Effective October 31, 2000, the Board of Directors Change in plan assets: amended the qualified pension plan to suspend the accrual of benefits. Fair value of plan assets at beginning of year $ 61.9 $ 55.8 Actual return on plan assets (0.2) 4.9 In addition our Mexican subsidiaries have a defined contribution benefit pension plan for salaried employees and a Employer contribution 0.1 (0.6) non-contributory defined benefit pension plan for union employees (“The “Mexican Plan”). These plans are in addition Benefits paid (0.9) (1.1) Currency exchange rate adjustment (0.3) 2.9 to benefits granted by the Mexican Institute of Social Security.

Fair value of plan assets at end of year $ 60.6 $ 61.9 The components of net periodic benefit costs calculated in accordance with ASC 715 “Compensation retirement benefits,” using December 31 as a measurement date, consist of the following: Funded status at the end of year $ 33.8 $ 34.0

2013 2012 ASC 715 amounts recognized in the statement of financial position consists of:

Service Cost $ 1.1 $ 1.0 2013 2012 Interest Cost 1.0 1.1 Expected return on plans assets (3.4) (3.6) Non current assets $ 33.8 $ 34.0 Amortization on net actuarial (gain) (0.7) (0.8) Amortization on net loss 0.2 0.1 ASC-715 amounts recognized in accumulated other comprehensive income (net of income taxes of $1.5 and $2.9 in Net periodic benefit cost 2013 as of December 31, 2013 and 2012, respectively) consists of: Service Cost $ (1.8) $ (2.2) 2013 2012 The change in benefit obligation and plan assets and a reconciliation of funded status are as follows: Net (gain) $ (1.6) $ (3.6) 2013 2012

The following table summarizes the changes in accumulated other comprehensive income for the years ended Decem- Change in benefit obligation: Projected benefit obligation at beginning of year $ 27.9 $ 25.2 ber 31, related to the defined benefit pension plan, net of income tax: Service cost 1.1 1.0 Interest cost 1.0 1.1 Actuarial gain census (0.3) ( 0.1) Benefit Paid (2.2) (2.0)

50 51 2013 2012 The scheduled maturities of the benefits expected to be paid in each of the next five years, and thereafter, are as follows: Reconciliation of accumulated other comprehensive income: Accumulated other comprehensive income at beginning of plan year $ (3.6) $ (3.8) Year Expected Benefit Payments

Net loss amortized during the year 0.4 0.5 2014 $ 1.7 Net loss occurring during the year 1.5 0.3 2015 1.3 Currency exchange rate adjustment 0.1 (0.6) 2016 1.3 2017 1.3 Net adjustment to accumulated other comprehensive income (net income 2018 1.3 taxes of $(1.3) and $(0.5) in 2013 and 2012, respectively) 2.0 0.2 2019 a2023 7.4

Accumulated other comprehensive income at end of plan year $ (1.6) $ (3.6) Total $ 14.3

The following table summarizes the amounts in accumulative other comprehensive income amortized and recognized Peruvian Operations as a component of net periodic benefit cost in 2013 and 2012, net of income tax: SCC’s funding policy is to contribute amounts to the qualified pension plan sufficient to meet the minimum funding

2013 2012 requirements set forth in the Employee Retirement Income Security Act of 1974, such additional amounts as SCC may determine to be appropriate. Plan assets are invested in stock and bond funds. Net loss $ 1.5 $ 0.6 Amortization of net gain 0.4 0.2 Plan assets are invested in a group annuity contract (the “Contract”) with Metropolitan Life Insurance Company

Total amortization expenses $ 1.9 $ 0.8 (“MetLife”). The Contract invests in the MetLife Broad Market Bond Fund (the “Bond Fund”) managed by BlackRock, Inc. (“BlackRock”), and the MetLife General Account Payment Fund (the “Money Fund”). The assumptions used to determine the pension obligation and seniority premiums as of year-end and the net cost in the ensuing year are: The Money Fund seeks to maximize current income to the extent consistent with preservation of capital and liquidity and the maintenance of a stable $1.00 per share net asset value, by investing in U.S. Dollar-denominated money mar- Peruvian Operations 2013 2012 ket securities. The Bond Fund seeks to outperform the Barclays Capital U.S. Aggregate Bond Index, net of fees, over a full market cycle. The Bond Fund invests in publicly traded, investment grade securities with a target duration within Discount rate 4.25% 3.35% Expected long-term rate of return on plan asset 4.50% 4.50% one and a half years of the Barclays Capital U.S. Aggregate Bond Index. Rate of increase in future compensation level N/A N/A The investment allocation decisions within the Funds, as reported to SCC by BlackRock effective December 31, 2013, Mexican Operations (*) 2013 2012 were as follows:

Discount rate 7.10% 6.50% Expected long-term rate of return on plan asset 7.10% 6.50% With respect to the Bond Fund, its interest rate/yield curve position moved from neutral to short duration during the Rate of increase in future compensation level 4.00% 4.00% year. Within Treasuries/Agencies, BlackRock is overweight 5- and 10-year breakevens. Within Mortgages, BlackRock has a small overweight concentrated in Fannie 30-year 4.0% coupons versus 5- and 10-year Treasuries. (*) These rates are based on Mexican pesos as pension obligations are denominated in pesos.

52 53 Within the Commercial Mortgage-Backed Securities (CMBS) sector, BlackRock maintained an overweight position 2013 2012 to CMBS.BlackRock continues to favor liquid high-quality paper. Within Credit, BlackRock increased its underweight position. Credit remaints largest underweight and is concentrated in industrials versus financials. Asset category: Equity securities 74% 73% Treasury bills 26% 27% Within the Asset-Backed Securities (ABS) sector, BlackRock maintains its overweight. BlackRock continues to hold subprime autos. Within the remaining sub-sectors, BlackRock favors Federal Family Education Loan Program student 100% 100% loans, servicer advances and dollar denominated senior UK Residential Mortgage-Backed Securities. The amount of contributions that SCC expects to pay to the plan during 2014 is $2.4 million. SCC’s policy for determining asset mix-targets includes periodic consultation with recognized third party investment consultants. The expected long-term rate of return on plan assets is updated periodically, taking into consideration Post-retirement Health Care Plan asset allocations, historical returns and the current economic environment. Based on these factors SCC expects its assets will earn an average of 4.50% per annum assuming its long-term mix will be consistent with its current mix and Peru: an assumed discount rate of 4.25%. The fair value of plan assets is impacted by general market conditions. If actual Former Peruvian and U.S. expatriate employees: SCC adopted the post-retirement health care plan for retired salaried returns on plan assets vary from the expected returns, actual results could differ. employees eligible for Medicare on May 1, 1996 (The Expatriate Health Plan”). The plan is unfunded.

Mexican Operations Effective October 31, 2000, the health care plan for retirees was terminated and SCC informed retirees that they would Minera Mexico’s policy for determining asset mix targets includes periodic consultation with recognized third party be covered by the then in effect post-retirement health care plan of Asarco, a former shareholder of SCC and a sub- investment consultants. The expected long-term rate of return on plan assets is updated periodically, taking into con- sidiary of Grupo Mexico, which offered substantially the same benefits and required the same contributions. Asarco is sideration assets allocations, historical returns and the current economic environment. The fair value of plan assets is no longer managing the plan. SCC has assumed management of the plan and is currently providing health benefits to impacted by general market conditions. If actual returns on plan assets vary from the expected returns, actual results retirees. The plan is accounted for in accordance with ASC 715 “Compensation retirement benefits.” could differ. Mexico: The plan assets are managed by three financial institutions, Scotiabank Inverlat, S.A., Banco Santander and IXE Banco, Mexican Health Plan: Through 2007, the Buenavista unit provided health care services free of charge to employees S.A. 26% of the funds are invested in Mexican government securities, including treasury certificates and development and retired unionized employees and their families through its own hospital at the Buenavista unit. In 2011, SCC bonds of the Mexican government. The remaining 74% is invested in common shares of GMEXICO. signed an agreement with the Secretary of Health of the State of Sonora to provide these services to its retired workers and their families at a lower cost for SCC but still free of charge to the retired workers. As a result of the cost The plan assets are invested without restriction in active markets that are accessible when required and are therefore savings, the plan value and the cost of the net periodic benefits have been reduced and are included in the activity considered as level 1, in accordance with ASC 820. in the following tables.

These plans accounted for approximately 30% of benefit obligations. The following table represents the asset mix of The components of net period benefit costs are as follows: the investment portfolio as of December 31:

54 55 2013 2012 2013 2012

Interest cost $ 1.7 $ 1.5 ASC-715 amounts recognized in accumulated other comprehensive income Amortization of prior service cost/(credit) - (0.3) (net of income tax) consists of: Net loss (gain) $ (4.3) $ ( 0.1) Net periodic benefit costs $ 1.7 $ 1.2 Prior service cost (credit) (0.1) $ ( 0.1)

Total $ (4.4) $ (0.2) The change in benefit obligation and a reconciliation of funded status are as follows:

2013 2012 The following table summarizes the changes in accumulated other comprehensive income for the years ended Decem- ber 31, related to the post-retirement health care plan, net of income tax: Change in benefit obligation: Projected benefit obligation at beginning of year $ 27.2 $ 20.3 2013 2012 Interest cost 1.7 1.5 Actuarial gain claims cost - (0.2) Reconciliation of accumulated other comprehensive income: Benefit paid (0.1) (1.5) Accumulated other comprehensive income at beginning of plan year $ (0.3) $ (3.4) Actuarial (gain)/loss (6.8) 5.6 Actuarial (gain)/loss assumption changes (0.2) 0.1 Net loss/(gain) occurring during the year (4.1) 3.2 Inflation adjustment (0.1) 1.4 Amortization of transition obligation - 0.2 Currency exchange rate adjustment - (0.3) Projected benefit obligation at end of year $ 21.7 $ 27.2 Net adjustment to accumulated other comprehensive income (net of income (4.1) 3.1 taxes of $2.8 and $(2.4) in 2013 and 2012, respectively 2013 2012 Accumulated other comprehensive income (loss) at end of plan year $ (4.4) $ (0.3) Change in plan assets: Employer contributions $ 0.1 $ 0.1 The following table summarizes the amounts in accumulative other comprehensive income amortized and recognized Benefits paid (0.1) ( 0.1) as a component of net periodic benefit cost in 2013 and 2012, net of income tax: Fair value of plan assets at end of year $ - $ -

Funded status at the end of the year $ (21.7) $ (27.2) 2013 2012

ASC-715 amounts recognized in statement of financial position consists of: Net/ (gain) loss $ (4.1) $ 3.2 Amortization of transition obligation - 0.2 Current liabilities $ (0.1) $ ( 0.1) Non-current assets (21.6) ( 27.1) Total amortization (income) expenses $ (4.1) $ 3.4

Total $ (21.7) $ (27.2) The discount rates used in the calculation of other post-retirement benefits and cost as of December 31 were:

56 57 Peruvian Operations 2013 2012 One percentage point Increase Decrease Discount rate 4.25% 3.35% Effect on total service and interest cost components $ 1.4 $ 1.3 Mexican Operations Effect on the post-retirement benefit obligation 18.1 22.4 Discount rate 7.10% 6.50% Asarco - American Operations

The benefits expected to be paid in each of the next five years, and thereafter, are as follows: Pension and Postretirement Plans Asarco recognizes the funded status (i.e., the difference between the fair value of plan assets and benefit obligations) Year Expected Benefit Payments of its defined benefit postretirement plans in the consolidated balance sheets, with corresponding adjustments to other

2014 $ 1.4 comprehensive income (loss), net of tax. These amounts are recognized as net periodic postretirement cost in accor- 2015 1.5 dance with Asarco’s accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in 2016 1.6 subsequent periods and are not recognized as net periodic postretirement cost in the same periods will be recognized 2017 1.7 as a component of other comprehensive income. These amounts will be subsequently recognized as a component of 2018 1.8 2019 a 2023 10.5 net periodic postretirement cost on the same basis as the amounts recognized in accumulated other comprehensive income (loss). Total $ 18.5

Pension Plans Peruvian operations Asarco maintains two noncontributory defined benefit pension plans covering substantially all of its employees. Ben- For measurement purposes, a 6.0% annual rate of increase in the per capita cost of covered health care benefits was efits for salaried plans are based on salary and years of service. Hourly plans are based on negotiated benefits and assumed for 2013. The rate is assumed to decrease gradually to 4.6%. years of service. Pension costs are determined annually with the assistance of independent actuaries. Asarco’s funding policy is to contribute amounts to the plans sufficient to meet the minimum funding requirements set forth in the Assumed health care cost trend rates can have a significant effect on amounts reported for health care plans. However, Employee Retirement Income Security Act of 1974, plus such additional tax deductible amounts as may be advisable because of the size of SCC’s plan, a one percentage-point change in assumed health care trend rate would not have under the circumstances. Benefit accruals under the salaried plan were frozen effective April 30, 2011. As amended, a significant effect. anyone who has not yet become a participant as of that date will be excluded and current participants will not accrue any credited service after April 30, 2011, for purposes of determining retirement benefits; however, participants will Mexican operations continue to accrue credited service for purposes of vesting and for eligibility for early retirement under the Plan. Plan For measurement purposes, a 4.0% annual rate of increase in the per capita cost of covered health care benefits was assets are invested principally in commingled stock funds, mutual funds and securities issued by the U.S. government. assumed for 2013 and remains at that level thereafter. The pension plans have a December 31 year-end.

An increase in other benefit cost trend rates have a significant effect on the amount of the reported obligations, as well Supplemental Executive Retirement Plan (“SERP”) as component cost of the other benefit plan. One percentage-point change in assumed other benefits cost trend rates Asarco records a liability related to a SERP benefit for certain of its executives. All assumptions used to calculate the li- would have the following effects: ability match the salaried plans noted above. As such, unrealized gains and losses that will arise in subsequent periods,

58 59 as calculated by the actuaries, will be recognized as a component of other comprehensive income until such amounts Change in Plan Assets Pension Pension Post-retire Post-retire are realized. The total present value of the SERP liability recorded as of December 31, 2013 and 2012 was $1.2 and Period ended Benefits Benefits Health Care Health Care December 31, 2013 Salaried Hourly Salaried Hourly Total $1.4, respectively. These amounts are in addition to the salaried plan information as presented below.

Beginning of the period – The measurement dates used to determine benefit obligations were December 31, 2013 and 2012, and are based January 1 $ 161.0 $ 210.6 $ - $ - $ 371.6 on census data provided as of the beginning of the years of such plans. No events have occurred that would have a Actual return on plan assets 16.6 23.8 - - 40.4 significant impact on those calculations and measurements. Employer contributions 7.5 14.4 1.9 7.8 31.6

Benefits paid (12.5) (13.6) (1.9) ( 7.8 ) (35.8) Postretirement Benefits Contributory postretirement health care coverage under Asarco’s health plans is provided to substantially all U.S. retir- Administrative expenses (0.8) (1.1) - - (1.9) ees not eligible for Medicare. A cost-sharing Medicare supplement plan is available for retired salaried employees and Fair Value of Plan Assets at December 31 $ 171.8 $ 234.1 $ - $ - $ 405.9 life insurance coverage is provided to substantially all retirees. The plans are unfunded but exist as general corporate obligations. The postretirement health care plans have a December 31 year-end. Funded Status at December 31 $ (44.8) $ (38.5) $ (27.2) $ (245.0) The measurement dates used to determine benefit obligations were December 31, 2013 and 2012, and are based on census data provided as of the beginning of each plan year. No events have occurred that would have a significant Change in Projected Pension Pension Post-retire Post-retire impact on those calculations and measurements. Benefit Obligation Period Benefits Benefits Health Care Health Care ended December 31, 2012 Salaried Hourly Salaried Hourly Total

Changes to Asarco’s benefit plans as of December 31, 2013 and 2012, are as follows: Beginning of the period – January 1 $ 214.0 $ 263.8 $ 36.6 $ 327.1 $ 841.5 Change in Projected Pension Pension Post-retire Post-retire Service cost 1.2 6.8 1.0 14.0 23.0 Benefit Obligation Period Benefits Benefits Health Care Health Care ended December 31, 2013 Salaried Hourly Salaried Hourly Total Interest cost 10.4 12.6 1.5 12.8 37.3

Actuarial loss/(gain) 27.4 29.7 0.8 (9.8) 48.1 Beginning of the period – January 1 $ 239.3 $ 298.7 $ 38.5 $ 335.5 $ 912.0 Administrative expenses paid (0.9) (1.2) - - (2.1) Service cost 0.9 7.3 1.0 15.7 24.9 Interest cost 9.2 11.8 1.1 10.9 33.0 Benefits paid (12.8) (13.0) (1.5) (8.6) (35.9) Actuarial (gain) (19.5) (30.5) (11.5) (109.3) (170.8) Benefit Obligation at Administrative expenses paid (0.8) (1.1) - - (1.9) December 31 $ 239.3 $ 298.7 $ 38.4 $ 335.5 $ 911.9 Benefits paid (12.5) (13.6) (1.9) ( 7.8 ) (35.8) Accumulated Benefit Benefit Obligation at Obligation $ 239.3 $ 297.9 December 31 $ 216.6 $ 272.6 $ 27.2 $ 245.0 $ 761.4 Accumulated Benefit Obligation $ 216.6 $ 272.0

60 61 Change in Plan Assets Pension Pension Post-retire Post-retire Pension Pension Post-retire Post-retire Period ended Benefits Benefits Health Care Health Care Period ended Benefits Benefits Health Care Health Care December 31, 2012 Salaried Hourly Salaried Hourly Total December 31, 2013 Salaried Hourly Salaried Hourly Total

Beginning of the period – Net loss $ (26.6) $ (40.1) $ (10.2) $ (109.1) $ (186.0) January 1 $ 142.0 $ 177.7 $ - $ - $ 319.7 Actual return on plan assets 21.3 27.3 - - 48.6 Pension Pension Post-retire Post-retire Employer contributions 11.3 19.8 1.5 8.6 41.2 Period ended Benefits Benefits Health Care Health Care Benefits paid (12.8) (13.0) (1.5) (8.6) (35.9) December 31, 2012 Salaried Hourly Salaried Hourly Total Administrative expenses (0.9) (1.2) - - (2.1) Fair Value of Plan Assets at Net loss $ 17.6 $ 17.1 $ 1.8 $ (9.8) $ 26.7 December 31 $ 160.9 $ 210.6 $ - $ - $ 371.5

Funded Status at December 31 $ (78.4) $ ( 88.1) $ (38.4) $ (335.5) Amounts recorded in accumulated other comprehensive income consisted of the following:

Amounts recognized in the accompanying consolidated balance sheets consisted of the following: Pension Pension Post-retire Post-retire Period ended Benefits Benefits Health Care Health Care Pension Pension December 31, 2013 Salaried Hourly Salaried Hourly Total Period ended Benefits Benefits Post-retire Post-retire December 31, 2013 Salaried Hourly Health Care Health Care Total Beginning balance $ 39.3 $ 41.7 $ (6.4) $ 32.4 $ 107.0 Amortization of net gain (2.2) (1.3) 1.2 0.1 (2.2) Current liabilities $ - $ - $ (1.9) $ (8.6) $ (10.5) Net gain / (loss) (24.3) (38.7) (11.5) (109.2) (183.7) Non-current liabilities (44.8) (38.5) (25.3) (236.4) (345.0) Net amount recorded $ 12.8 $ 1.7 $ (16.7) $ (76.7) $ (78.9) Net amount recognized $ (44.8) $ (38.5) $ (27.2) $ (245.0) $ (355.5) Pension Pension Post-retire Post-retire Pension Pension Post-retire Post-retire Period ended Benefits Benefits Health Care Health Care Period ended Benefits Benefits Health Care Health Care December 31, 2012 Salaried Hourly Salaried Hourly Total December 31, 2012 Salaried Hourly Salaried Hourly Total Beginning balance $ 21.7 $ 24.6 $ (8.2) $ 42.2 $ 80.3 Current liabilities $ - $ - $ (2.2) $ (8.8) $ (11.0) Amortization of net gain - - 1.0 - 1.0 Non-current liabilities (78.4) ( 88.1) (36.2) (326.7) (529.4) Net gain / (loss) 17.6 17.1 0.8 (9.8) 25.7

Net amount recognized $ (78.4) $ ( 88.1) $ (38.4) $ (335.5) $ (540.4) Net amount recorded $ 39.3 $ 41.7 $ (6.4) $ 32.4 $ 107.0

Amounts recognized in other comprehensive income (loss) during the periods consisted of the following: The components of net periodic benefit cost for the years ended December 31, 2013 and 2012, are as follows:

62 63 Pension Pension Post-retire Post-retire Weighted-average assumptions used to determine net period benefit costs as follows: Period ended Benefits Benefits Health Care Health Care December 31, 2013 Salaried Hourly Salaried Hourly Total Pension Pension Post-retire Post-retire Benefits Benefits Health Care Health Care Service cost $ 0.9 $ 7.3 $ 0.9 $ 15.7 $ 24.8 Period ended December 31, 2013 Salaried Hourly Salaried Hourly Interest cost 9.2 11.8 1.1 10.9 33.0 Expected return on plan assets (11.7) (15.6) - - ( 27.3 ) Discount rate 3.95% 4.05% 3.80% 4.05% Recognized loss (gain) 2.2 1.3 (1.2) ( 0.1) 2.2 Expected return on assets 7.50 % 7.50 % N/A N/A $ 0.6 $ 4.8 $ 0.8 $ 26.5 $ 32.7 Rate of compensation increase N/A 4.00% N/A N/A Total net periodic benefit cost Pension Pension Post-retire Post-retire Benefits Benefits Health Care Health Care Period ended December 31, 2012 Salaried Hourly Salaried Hourly Pension Pension Post-retire Post-retire Period ended Benefits Benefits Health Care Health Care December 31, 2012 Salaried Hourly Salaried Hourly Total Discount rate 5.00% 5.00% 4.85% 4.60% Expected return on assets 7.75% 7.75% N/A N/A Service cost $ 1.2 $ 6.8 $ 1.0 $ 14.0 $ 23.0 Rate of compensation increase N/A 4.00% N/A N/A Interest cost 10.4 12.6 1.5 12.8 37.3 Expected return on plan assets (11.6) (14.7) - - (26.3) Plan Assets Recognized (gain) - - (1.0) - (1.0) $ - $ 4.7 $ 1.5 $ 26.8 $ 33.0 Asarco’s investment policy is to actively manage certain asset classes where potential exists to outperform the broad- Total net periodic benefit cost er market while maintaining acceptable risk levels inherent in specific benchmarks used to measure performance for each asset class. To develop an expected long term rate of return on assets assumption, Asarco considered the The actuarial assumptions used to determine end of period benefit obligations were as follows: historical returns and the future expectations for returns for each asset class as well as the target asset allocation of the pension portfolio. Pension Pension Post-retire Post-retire Benefits Benefits Health Care Health Care Period ended December 31, 2013 Salaried Hourly Salaried Hourly Prior to November 2013, the assets of the Salaried and Hourly Pension Plans were combined in a single master investment trust. In November 2013, Asarco split the assets of the master investment trust between a trust for the Salaried Discount rate 4.85% 4.95% 4.70% 5.05% Pension Plan and a trust for the Hourly Pension Plan, based on each Plan’s interest in the master investment trust. The Expected return on assets 7.25% 7.25% N/A N/A split allows Asarco to better tailor a trust’s investment strategy to meet the needs of each Plan. Rate of compensation increase N/A 3.50% N/A N/A

Pension Pension Post-retire Post-retire Asarco’s policy for determining asset allocation targets includes periodic consultation with recognized third-party in- Benefits Benefits Health Care Health Care vestment consultants. The fair value of plan assets is affected by general market conditions. If actual returns on plan Period ended December 31, 2012 Salaried Hourly Salaried Hourly assets vary from the expected returns, actual results could differ.

Discount rate 3.95% 4.05% 3.80% 4.05% Expected return on assets 7.50 % 7.50 % N/A N/A Rate of compensation increase N/A 4.00% N/A N/A

64 65 The allocations as of December 31, 2013 and 2012, were as follows: Salaried Hourly

Asset allocation and fair value hierarchy Annual effect on total service and interest cost component 2013 Level 1 Level 2 Level 3 1% increase $ 0.3 $ 7.3 1% decrease (0.2) (5.4) U.S. equity composite $ 98.6 40.5% 59.5% - International equity composite 89.0 91.7% 8.3% - Effect on postretirement benefit obligation Bond composite 141.2 10.2% 89.8% - 1% increase $ 2.8 $ 51.7 Global real estate composite 31.2 75.6% 24.4% - 1% decrease (2.4) (40.2) Hedge fund composite 14.9 - 87.0 % 13.0% Cash and cash equivalents 31.0 100.0% - - For measurement purposes, an 8.6% annual rate of increase in the per capita cost of covered health care is as- Total asset allocation $ 405.9 47.0 % 52.5% 0.5% sumed for 2013 for salaried plans and 8.7% for hourly plans. At December 31, 2013, assumed health care cost

Asset allocation and fair value hierarchy trend rates were: 2012 Level 1 Level 2 Level 3 Trend of the assumed percentage of the cost for medical services U.S. equity composite $ 94.1 61.0% 39.0% - at December 31, 2013 Salaried Hourly International equity composite 85.5 - 100.0% - Emerging markets composite 19.9 - 100.0% - Health care trend assumed for next year 7.0 % 7.1% Fixed income composite 110.0 - 97.5% 2.5% Pre-65 medical trend care 5.0% 5.0% Hedge fund composite 21.7 - 88.8% 11.2% Post-65 medical trend care 5.2% 5.3% Real Estate InvestmentTrust's composite 22.9 - 100.0% - Year that the rate reaches the ultimate trend rate 2093 2093 Cash composite 15.9 - 100.0% - Other Asset 1.8 100.0% - - Cash Inflows and Outflows Total asset allocationæ $ 371.8 16.0% 83.0% 1.0% Asarco contributed approximately $21.9 and $31.1 to the pension plans in 2013 and 2012, respectively, and expects to contribute approximately $26.0 to the combined pension plans in 2014.

Investments in commingled “composite” funds are recorded at fair value based on the net asset value of the fund as The Medicare Prescription Drug, Improvement and Modernization Act of 2003 was reflected as of December 31, 2013 provided by the fund manager or general partner. Investments in these funds are specific to asset allocation strategies. and 2012, assuming that Asarco will continue to provide a prescription drug benefit to retirees that is at least actuar- The classifications include both direct investments in debt and equity securities as well as investments in privately held ially equivalent to Medicare Part D. The benefit payments listed in the following table are shown net of the expected entities that manage an underlying portfolio of marketable debt and equity securities. Medicare Part D subsidy.

For the year ended December 31, 2013, the health care cost trend rate assumptions have a significant effect on the Asarco projects benefit payments to be paid by the combined plans as follows: amounts for postretirement health care costs and obligations, as follows:

66 67 Pension Benefits Postretirement Health Care 18. Stockholders’ equity

2014 $ 30.5 $ 10.5 Common stock: 2015 30.0 11.1 At December 31, 2013 and 2012, the Company’s paid common and outstanding stock consists 7,785,000,000, fully 2016 31.0 11.5 2017 32.2 12.2 paid and subscribed shares, corresponding to fixed capital Series “B”, Class I shares. Variable capital is limited to ten 2018 33.0 13.2 times the amount of the minimum fixed capital. 2019 – 2023 173.4 74.1

Series “B” consists of ordinary voting stock representing 100% of all Class I and Class II voting stock. At least 51% of $ 330.1 $ 132.6 the shares comprising this Series must be subscribed by private individuals or companies considered to be Mexican Employee Savings Plan investors, as established by the Ley General de Sociedades Mercantiles. Asarco maintains employee savings plans for salaried and hourly employees that permit employees to make contributions by payroll deductions pursuant to section 401(k) of the Internal Revenue Code. Asarco matches contributions up During 2013 the Board of Directors of the Company approved four dividends in accordance with the resolutions take to 6% of compensation for its employees. As of April 30, 2011, in conjunction with the salaried pension plan freeze, in the Ordinary Stockholders’ Meeting held on April 30, 2012 with amounting to a total of $557.1 paid as follows: on Asarco increased the matching contributions for employees who were active participants in the salaried plan, from 6% February 28, 2013, a 0.26 pesos per share dividend was paid equal in the amount of $157.7, on May 23, 2013, a to 9% of compensation. In connection with the required match, Asarco’s contributions, for both the salaried and hourly 0.26 peso per share dividend was paid in the amount of $164.0, on August 6, 2013, a 0.13 peso per share dividend plans, charged against earnings were $4.4 and $4.1 in 2013 and 2012, respectively. was paid in the amount $79.7 and on November 4, 2013, a 0.26 peso per share dividend was paid in the amount of $155.7. All dividends were paid out of retained earnings. Copper Basin 401(k) Plan Copper Basin also maintains a defined contribution plan that permits eligible employees to make contributions by During 2012, the Board of Directors of the Company approved two dividends in accordance with the resolutions payroll deductions pursuant to Section 401(k) of the Internal Revenue Code, which includes a matching Company taken in the Ordinary Stockholders’ Meeting held on April 29, 2011 for a total amount of $532.8 which was paid contribution up to 6% of compensation. The contributions charged against earnings in 2013 and 2012, were $0.1. as follows: on February 20, 2012, a 0.40 peso per share dividend was paid in the amount of $237.2 and on May 14, 2012, a 0.50 peso per share dividend was paid in the amount of $295.6. Both dividends were paid out of Railway segment retained earnings. ITM - Defined Benefit Pension Plans In ITM and subsidiaries the liabilities and costs pertaining to the seniority premiums to which employees are entitled During 2012, the Board of Directors of the Company approved two dividends in accordance with the resolutions taken after 15 years of service are recognized on the basis of actuarial studies performed by independent experts. in the Ordinary Stockholders’ Meeting held on April 30, 2012 for a total amount of $386.2 which was paid as follows: on August 9, 2012, a 0.40 peso per share dividend was paid in the amount of $228.1 and on November 7, 2012 a ITM has also established plans to cover dismissal indemnities on the basis of actuarial studies, performed by indepen- 0.26 peso per share dividend was paid in the amount of $158.1. Both dividends were paid of retained earnings. dent experts. At 2013 and 2012 labor liabilities were immaterial. Dividends paid are not subject to income tax if the dividends come from the Net Tax Profit Account (CUFIN, for its GMS - Corporate Services acronym in Spanish). Any dividends paid in excess of this account are subject to a tax equivalent to 38.89%. The tax Grupo México Servicios, S. A. de C. V. (GMS, direct subsidiary of GMEXICO) provides various professional services to is payable by the Company and may be credited against its income tax in the same year or in the following two years. its affiliates. Currently GMS has 79 executives. As of December 31, 2013 and 2012 the labor liabilities were immaterial. Dividends paid from previously taxed profits are not subject to tax withholding or additional tax payment. In the event

68 69 of a capital reduction, any excess of stockholders’ equity over capital contributions, the latter restated in accordance The shares of SCC are used for general corporate purposes, including, among others, for awards under the Directors’ with the provisions of the Income Tax Law, is accorded the same tax treatment as dividends. Stock Award Plan. GMEXICO’s shares are used to grant awards under both the Employee Stock Purchase Plan and the Executive Stock Purchase Plan. At December 31, 2013 and 2012, the CUFIN amounted to $46,635.0 million of Mexican pesos (equal to $3,566.3) and $42,333.5 million of Mexican pesos (equal to $3,253.9), respectively. Directors Stock Award Plan - SCC established a stock award compensation plan for certain directors who are not compensated as employees of the Company. Under this plan, participants will receive 1,200 shares of common stock Appropriated Retained Earnings - As of December 31, 2012, the Company’s management set aside 2.0 billion upon election and 1,200 additional shares following each annual meeting of stockholders thereafter 600,000 shares of unremitted earnings of its Mexican subsidiary MM, as appropriated retained earnings. It is the Company’s of the Company´s common stock have been reserved for this plan. The fair value of the award is measured each year intention to indefinitely invest these funds in Mexico. These amounts are earmarked for the Company’s Mexican at the date of the grant. expansion program. Reserve for purchase of shares - In April 2005, the Company established a reserve of $201.7 to repurchase shares, Treasury Stock - Included in treasury stock are shares of SCC and SCC’s common stock carried at cost. Activity in of which $10.0 will be included in the Action Plan of the Company for future sales to employees. During 2013, the treasury stock was as follows: Company repurchased $254.0 own actions.

2013 2012 Employee Stock Purchase Plan - During 2007, the Company offered to eligible employees a stock purchase plan (the “Employee Stock Purchase Plan”) through a trust that acquires shares of the Company´s stock for sale to its employ- GMEXICO common shares Balance as of January 1 $ 805 $ 810 ees, employees of subsidiaries, and certain affiliated companies. The purchase price is established at the approximate Other activity, including received dividends, interest and fair market value on the grant date. Every two years employees will be able to acquire title to 50% of the shares paid currency translation effect – Net 254 (5) in the previous two years. The employees will pay for shares purchased through monthly payroll deductions over the eight year period of the plan. At the end of the eight year period, the Company will grant the participant a bonus of 1 Balance as of December 31 $ 1,059 $ 805 share for every 10 shares purchased by the employee. At December 31, 2013 and 2012, treasury stock holds 49,278,536 shares and 39,045,536 shares of SCC’s common stock, respectively with a cost of $1,011.0 and $729.8, respectively. The shares of SCC’s common stock held in trea- If Grupo Mexico pays dividends on shares during the eight year period, the participants will be entitled to receive the sury are used for general corporate purposes. dividend in cash for all shares that have been fully purchased and paid as of the date that the dividend is paid. If the participant has only partially paid for shares, the entitled dividends will be used to reduce the remaining liability owed In 2008, the Company’s Board of Directors authorized a $500 million share repurchase program. On July 28, 2011, for purchased shares. the Company’s Board of Directors authorized an increase of the share repurchase program to $1 billion and on Oc- tober 17, 2013, the Company’s Board of Directors authorized an additional increase to $2 billion. Pursuant to this In the case of voluntary resignation of the employee, the Company will pay to the employee the fair market sales price program, the Company purchased common stock as shown in the table below. These shares are available for general at the date of resignation/termination of the fully paid shares, net of costs and taxes. When the fair market sales value corporate purposes. The Company may purchase additional shares of its common stock from time to time, based of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the on market conditions and other factors. This repurchase program has no expiration date and may be modified or employee based on a decreasing schedule specified in the plan for each case. discontinued at any time.

70 71 In case of retirement or death of the employee, the Company will render the buyer or his legal beneficiary, fair market proximately $2.05) for the initial subscription. The terms of the New Employee Stock Purchase Plan are similar to the value as of the date of retirement or death of the shares effectively paid, net of costs and taxes. terms of the Employee Stock Purchase Plan.

The stock based compensation expense for the years ended on December 31, 2013 and 2012 and the remaining The stock based compensation expense for the years ended December 31, 2013 and 2012 and the remaining balance balance of the unrecognized compensation expense under the Employee Stock Purchase Plan were as follows: of the unrecognized compensation expense under the New Employee Stock Purchase Plan, were as follows:

2013 2012 2013 2012

Stock based compensation expense $ 2.1 $ 2.1 Stock based compensation expense $ 0.6 $ 0.6 Unrecognized compensation expense $ 2.1 $ 4.2 Unrecognized compensation expense $ 2.6 $ 3.2

The unrecognized compensation expense under this plan is expected to be recognized over the remaining one The unrecognized compensation expense under this plan is expected to be recognized over the remaining five years period. year period. The following table presents the stock award activity of the New Employee Stock Purchase Plan for the years ended The following table presents the stock award activity of the Employee Stock Purchase Plan for the years ended Decem- December 31, 2013 and 2012: ber 31, 2013 and 2012: Shares Unit weighted average grant date fair value Acciones Valor razonable unitario a la fecha de adjudicación Outstanding shares at January 1, 2012 3,807,14 6 2.05 Exercised (772,850) 2.05 Outstanding shares at January 1, 2012 7,270,341 1.16 Forfeited (89,554) 2.05 Exercised (220,430) 1.16 2,944,742 Forfeited (94,339) 1.16 6,955,572 1.16 Outstanding shares at December 31, 2012 Granted 226,613 2.05 Outstanding shares at December 31, 2012 Exercised (38,098) 2.05 Exercised (2,474,814) 1.16 Forfeited (120,793) 2.05 Forfeited (31,159 ) 1.16

Outstanding shares at December 31, 2013 3,012,464 2.05 Outstanding shares at December 31, 2013 4,449,599 1.16

Executive Stock Purchase Plan - The Company also offers a stock purchase plan for certain members of its exec- During 2010, the Company offered to eligible employees a new stock purchase plan (the “New Employee Stock Pur- utive management and the executive management of its subsidiaries and certain affiliated companies. Under this chase Plan”) through a trust that acquires series B shares of Grupo Mexico stock for sale to its employees, employees plan, participants will receive incentive cash bonuses which are used to purchase shares of the Company which are of subsidiaries, and certain affiliated companies. The purchase price was established at 26.51 Mexican pesos (ap- deposited in a trust.

72 73 19. Income tax, asset tax and flat tax The Company files income tax returns in three jurisdictions, Peru, Mexico and the United States. For the years presented above the statutory income tax rates for Peru and the United States were 30% and 35%, respectively. The statutory The components of the provision (benefit) for each jurisdiction for current and deferred income tax in 2013 and 2012 income tax rate for Mexico was 30% in 2013 and 2012. were as follows: The CompanyThe Company has chosen to use the U.S. income tax rate of 35% for this tax rate reconciliation because For the year ended December 31. 2013 most of the distributable retained earnings relate to AMC, a U.S. company. Peruvian income tax provision is the largest Mexico EUA Peru Total component of tax the expense for each of the three years presented. For all of the years presented, both AMC and

Income tax: the Company filed separate tax returns in their respective tax jurisdictions. Although the tax rules and regulations im- Current $ 565.8 $ 35.9 $ 416.1 $ 1,017.8 posed in the separate tax jurisdictions may vary significantly, similar permanent items exist, such as items which are Deferred 57.0 (31.8) (85.8) (60.6) nondeductible or nontaxable. Some permanent differences relate specifically to the US taxes such as the allowance for percentage depletion. Total provision for income tax $ 622.8 $ 4.1 $ 330.3 $ 957.2

Although the tax rules and regulations imposed in the separate tax jurisdictions may vary significantly, similar perma- For the year ended December 31. 2012 nent items exist, such as items which are nondeductible or nontaxable. Some permanent differences relate specifically Mexico EUA Peru Total to the US taxes such as the allowance for percentage depletion.

Income tax: Current $ 715.1 $ 28.2 $ 432.6 $ 1,175.9 Temporary differences and carryforwards that gave rise to deferred tax liabilities, assets and related valuation allow- Deferred 111.4 48.6 20.6 180.6 ances were as follows:

Total provision for income tax $ 826.5 $ 76.8 $ 453.2 $ 1,356.5 2013 2012

The reconciliation of the statutory income tax rate to the effective tax rate is as follows: Assets: Inventories $ 33.6 $ 157.7 2013 2012 Minimum tax credits 85.7 79.2 Posterior benefit obligations 98.1 134.9 Expected tax 35.0% 35.0% Pension obligations 26.7 58.0 Effect of income taxed at a rate other than the statutory rate (3.2) (5.3) Capitalized exploration expenses 24.4 23.1 Depletion (5.3) (4.7) Foreign tax credit carryforward 681.1 709.3 Dividends - 1.9 Reserves 62.1 89.1 Permanent differences 1.7 1.1 Tax loss carryforwards 9.0 31.4 Peru tax on net income deemed distributed 0.9 0.9 Valuation allowance (50.9) (50.9) Increase in unrecognized tax benefits for uncertain tax positions (1.5) 4.0 Effect on U.S. tax Peruvian deferred tax liabilities 68.6 33.8 Other 2.3 (1.0) Other 144.0 181.3

Effective income tax rate 29.9% 31.9% Total deferred tax assets $ 1,182.4 $ 1,446.9

74 75 2013 2012 Company does not expect to be able to utilize a portion of credits due to separate company limitations. There were no other material U.S. tax credits at December 31, 2013. Liabilities: Property and equipment $ (737.6 ) $ (665.9) Peruvian Tax Matters- Investments (37.2) (60.5) Deferred charges (79.6) (81.6) SCC obtains income tax credits in Peru for value-added taxes paid in connection with the purchase of capital equip- Retained earnings (7.5) (41.3) ment and other goods and services, employed in its operations and records these credits as a prepaid expense. Under Mexican tax consolidated dividends (31.5) (34.6) current Peruvian law, SCC is entitled to use the credits against its Peruvian income tax liability or to receive a refund. Other (110.2) (101.3) The carrying value of these Peruvian tax credits approximates their net realizable value. Total deferred tax liabilities (1,003.6) (985.2)

Total net deferred tax assets $ 178.8 $ 461.7 Special Mining tax- In September 2011, the Peruvian government enacted a new tax for the mining industry. This tax is based on operating AMC, Asarco and SCC/U.S. and PERU income and its rate ranges from 2% to 8.4%. It begins at 2% for operating income margin and up to 10% and increases by 0.4% of operating income for each additional 5% of operating income until 85% of operating income margin is U.S. Tax Matters reached. SCC made provisions for this tax of $25.5 and $49.6 in 2013 and 2012, respectively. These provisions are In September 2013 the Internal Revenue Service (IRS) issued the final Tangible Property Regulations. These regu- included as “income tax” in the consolidated statement of earnings. lations are effective January 1, 2014 with some elective retroactive application available. These regulations look to provide a framework for distinguishing capital expenditures from deductible business expenses and they attempt to Mexican Tax Matters find the middle ground where taxpayers and the IRS often disagreed. The Company has reviewed these regulations In 2013, the Mexican Congress enacted tax law changes that become effective on January 1, 2014. Among others, and has concluded that they should not have a material effect on its financial statements. this new law: i) establishes a mining royalty at the rate of 7.5% on taxable EBITDA and an additional royalty of 0.5% over gross income from sales of gold, silver and platinum; ii) establishes that exploration expenses will be depreciated As of December 31, 2013, AMC considers its ownership of the stock of Minera Mexico to be essentially permanent in at 10% per year instead of the 100% that was applied until 2013; iii) replaces the consolidation tax regime and creates duration. The excess of the amount for financial reporting over the tax basis of the investment in this stock is estimated a more restrictive tax consolidation regimen; iv) establishes a 10% withholding on dividends distributed to Mexican to be at least $4.4 billion. individuals or foreign residents (individuals or corporations) and applies to net income generated after 2013; v) limits (at 47 or 53%) deductions for tax-exempt salaries as well as for contributions to pension plans; vi) maintains the Mexican AMC has provided a deferred tax liability of $7.4 as of December 31, 2013 for the U.S. income tax effects of $76.2 of statutory income tax rate at 30% thereby eliminating the scheduled reductions for 2014 and 2015; and vii) eliminates foreign earnings that may potentially be repatriated in the future by Minera Mexico. the flat tax.

At December 31, 2013, there were $681.1 of foreign tax credit available for carryback or carryforward. These credits Related to these tax changes, in 2013 SCC recognized a deferred income tax charge of $34.7. have limited carryback and carryforward periods and can only be used to reduce U.S. income tax on foreign earnings included in the annual U.S. consolidated income tax return. At December 31, 2013, there were $85.7 of minimum tax Accounting for Uncertainty in Income Taxes- credits available for carryforward. A valuation allowance again $50.9 of the minimum tax credits exists because the The total amount of unrecognized tax benefits in 2013 and 2012 were as follows:

76 77 2013 2012 underground operations) produce copper, with production of by-products of molybdenum, silver and other material, the Branch and Asarco include integrated copper extraction, smelting and refining operations, produce copper, with Unrecognized tax benefits, opening balance $ 415.1 $ 228.6 production of by-products of molybdenum, silver and other material, mainly in Peru and the U.S., respectively. ITM carries out railway transportation activities through its subsidiaries ITF and GFM in México. Infraestructure activities are Gross (decreases) increases - tax positions in prior period (218.2) 36.9 Gross increases - current-period tax positions 0.6 149.6 mainly performed by CIPEME, MCC and CIEM which main operations are oil well drilling services, construction services and the construction of electricity plants, respectively. The corporate and other amounts are originated from corporate Unrecognized tax benefits, ending balance $ 197.5 $ 415.1 activities performed in the U.S.

The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $164.4 at Decem- Information by segments is shown in the same format used by the Company’s management to evaluate each business. ber 31, 2013 and $211.5 at December 31, 2012. These amounts relate entirely to U.S. income tax matters. AMC has An operating segment is defined as a component of the Company dedicated to business activities from which the no unrecognized Peruvian or Mexican tax benefits. Company generates income and incurs costs and expenses, with respect to which information for decision-making is prepared and in respect of which the Company’s management evaluates the allocation of resources periodically. The As of December 31, 2013 and 2012, SCC’s liability for uncertain tax positions included no amount and $21.8, respec- accounting policies of the segments are described in the summary of significant accounting policies. The Company tively for accrued interest and penalties due to the excess foreign tax credits. assesses the performance by segment based on the operating income or (loss) before these expenses.

Management does not expect that any of the open years will result in a cash payment within the upcoming twelve The most significant data by business segment in 2013 and 2012 were as follows: months ending December 31, 2014. AMC’s reasonable expectations about future resolutions of uncertain items did not materially change during the year ended December 31, 2013. In August 2013, AMC reached agreement with the 2013 IRS and settled tax years 2005, 2006, and 2007 relating to the consolidated filing for AMC. Corporate MM The Branch Asarco ITM Infraestructure and other Total

The following tax years remain open to examination and adjustment by the Company’s three major tax jurisdictions: Sales of product and services $ 3,252 $ 2,614 $ 1,413 $ 1,836 $ 242 $ - $ 9,357 Income from operations $ 1,525 $ 1,024 $ 353 $ 470 $ 80 $ (11) $ 3,441 Peru: 2009 up to 2013 (years 2009 and 2010 are being examinated in 2014) General expenses $ 77 $ 27 $ (75) $ 60 $ 12 $ (4) $ 97 Depreciation and amortization $ 216 $ 180 $ 111 $ 151 $ 30 $ 4 $ 692 U.S.: 2005 through 2007 for AMC and Asarco; and 2008 and all future years for all companies Comprehensive financing result $ 9 $ (186) $ (10) $ (29) $ (29) $ 7 $ (238) Mexico: 2007 and all future years Controlling interest net income $ 431 $ 850 $ 322 $ 197 $ 29 $ 16 $ 1,845 Total assets, not including In the fourth quarter of 2011, the IRS commenced its U.S. federal income tax audit of AMC for the years 2008 through 2010. investment in shares of associated companies $ 5,700 $ 5,271 $ 2,980 $ 2,887 $ 2,134 $ 360 $ 19,332 Total liabilities $ 747 $ 4,874 $ 932 $ 889 $ 1,413 $ 78 $ 8,933 20. Business segments Net investment in property, plant and equipment $ 3,953 $ 2,523 $ 1,636 $ 1,897 $ 1,410 $ 46 $ 11,465 Capital expenditures $ (1,278) $ (426) $ (168) $ (415) $ (571) $ - $ (2,858) The Company’s segments are organized using the management approach by industry and geographical region, resulting in five primary reportable segments: MM, the Branch, Asarco, ITM and Infraestructure. The MM (open pit and

78 79 2012 21. Derivative instruments MM The Branch Asarco ITM Infraestructure Corporate Total and other SCC’s copper swaps:

Sales of product and services $ 3,692 $ 2,952 $ 1,705 $ 1,661 $ 173 $ - $ 10,183 From time to time SCC has entered into derivative contracts to protect a fixed copper or zinc price for a portion of its Income from operations $ 2,102 $ 1,035 $ 501 $ 437 $ 39 $ (10) $ 4,104 metal sales. General expenses $ 28 $ 45 $ 31 $ 49 $ 18 $ 11 $ 182 Depreciation and amortization $ 165 $ 161 $ 101 $ 124 $ 26 $ - $ 577 Comprehensive financing result $ 2 $ (159) $ (54) $ 113 $ (15) $ 255 $ 142 In 2011 and 2012, the Company held copper zero cost collar derivative contracts and copper swap contracts to reduce Controlling interest net income $ 1,476 $ 87 $ 3 55 $ 257 $ 12 $ 215 $ 2,402 price volatility and to protect a portion of its sales value. These transactions meet the requirements of hedge account- Total assets, not including ing. The realized gain was recorded in net sales on the consolidated statement of earnings and included in operating investment in shares of associated companies $ 4,916 $ 5,433 $ 3,517 $ 2,738 $ 1,832 $ 68 $ 18,504 activities on the consolidated statement of cash flows. Total liabilities $ 721 $ 4,854 $ 1,764 $ 891 $ 1,127 $ 112 $ 9,469 Net investment in property, The following table summarizes the copper derivative activity related to copper sales transactions realized in 2012: plant and equipment $ 2,891 $ 2,265 $ 1,616 $ 1,641 $ 884 $ (5) $ 9,292 Capital expenditures $ (869) $ (183) $ (175) $ (259) $ (632) $ - $ (2,118) 2012 The company made direct sales to customers and rendered railway transportation services in the following areas: Zero cost collar contracts: 2013 Pounds (in millions) 46.3 Country MM The Branch Asarco ITM Infraestructure Total Average LME cap price $ 5.2 Average LME floor price $ 3.5 U.S. $ 1,002 $ 28 $ 1,413 $ - $ - $ 2,443 México 1,316 1 - 1,836 242 3,395 Europe - 325 - - - 325 The hedge instruments are based on LME copper prices. SCC performed statistical analysis on the difference between Peru 291 766 - - - 1,057 the average monthly copper price on the LME and the COMEX exchanges and determined that the correlation coef- China and Asia 97 811 - - - 908 Latin America, except Mexico and Peru 546 683 - - - 1,229 ficient is greater than 0.999. Based on this analysis SCC considers that the LME underlying price matches its sales priced at COMEX prices. These cash flow hedge relationships qualify as critical matched terms hedge relationships and Grand total $ 3,252 $ 2,614 $ 1,413 $ 1,836 $ 242 $ 9,357 as a result have no ineffectiveness. SCC performs periodic quantitative assessments to confirm that the relationship

2012 was highly effective and that the ineffectiveness was de minimis. Country MM The Branch Asarco ITM Infraestructure Total During 2013 at as of December 31, 2013, SCC did not hold copper derivative contracts. U.S. $ 1,307 $ 260 $ 1,705 $ - $ - $ 3,272 México 1,644 8 - 1,661 173 3,486 Europe 389 976 - - - 1,365 Transactions under these metal price protection programs are accounted for as cash flow hedges under ASC 815-30 Peru - 296 - - - 296 “Derivatives and Hedging-Cash Flow Hedges” as they meet the requirements for this treatment and are adjusted to China and Asia 19 744 - - - 763 fair market value based on the metal prices as of the last day of the respective reporting period with the gain or loss Latin America, except Mexico and Peru 333 668 - - - 1,001 recorded in other comprehensive income until settlement, at which time the gain or loss is reclassified to net sales in Grand total $ 3,692 $ 2,952 $ 1,705 $ 1,661 $ 173 $ 10,183 the consolidated statements of earnings.

80 81 Asarco’s copper collar call $10.9950 per dollar, to cover the payment of principal and interest on two loans, denominated in that currency for the At December 31, 2012, the Company no longer held any zero-cost copper collar contracts. The Company recognized amount of $25,000 thousand, the CCS also change profile of interest payments of US-rate 3-month LIBOR + 0.45% $7.6 in net gains out of accumulated other comprehensive income (loss) that was reclassified into earnings during 2012. and 0.55% at a 28-day TIIE + 0.61% and 0.71%. The derivatives have the same expiration date of the liabilities covered.

A summary of the amounts recognized in income on derivatives qualified as hedge accounting for the year ended On June 6, 2007 Ferrosur contracted two interest rate hedges (IRS) for its acronym in English “Interest Rate Swap”, December 31, 2012, is as follows: through which pay fixed interest rates and receives variable interest rates. One of the swaps whose notional amount is $121.5 expired on June 6, 2013. During 2013 and 2012, the IRS Ferrosur paid interest rates 8.51% and received Derivative designated as a weighted average interest rate of 5.198% and 5.363% respectively. The IRS fair value at December 31, 2013 and Hedging Instruments Gain recognized in income Recognized in income 2012 were recognized as a liability of $1.4. The amount recognized in 2013, comprehensive income within stockhold- 2013 2012 ers’ equity was increased by $1.1 recycled to the financial income by way of interest, and a record $(0.3) an asset Zero cost collar contracts: Revenue $ - $ 7.6 representing deferred taxes.

Total $ - $ 7.6 22. Financial instruments

Ferromex interest rate swap Subtopic 810-10 of ASC “Fair value measurement and disclosures - Overall” establishes a fair value hierarchy that On March 17, 2008, Ferromex contracted with BBVA Bancomer S. A. (Bancomer) an interest rate swap (for a notional prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to un- amount of $80.0), with the purpose of managing interest rate risks on its outstanding loans with Crédit Agricole CIB adjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority and Export- Import Bank of United States (EXIMBANK) and Crédit Agricole CIB, through which Ferromex pays amounts to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under Subtopic 810-10 are calculated with base on interest fixed rates and receives amounts calculated with base on interest changeable rates. described below: The swap whose notional amount to December 31, 2013 is $26.7, expires on June 15, 2016, (in both cases as the notional amount as due dates coincide with the risk positions.) During 2013, the Company paid an interest rate of 2.8 Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. % and received an interest Libor average of 0.5233%. The difference was recorded in the integral result of financing,

in addition to the variable rate of the loan. Bancomer had the option to cancel the fixed rate on March 16, 2010, how- Level 2 – Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs. (i.e., ever the Bank did not exercise that option, the annual fixed rate remained at 2.8%. The valuation of interest rate swap quoted prices for similar assets or liabilities). as of December 31, 2013 is unfavorable by $0.8 ($1.6 unfavorable on December 31, 2012). The effect for variation Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measure- among contracted rates against the swap in 2013 was $0.8. ment and unobservable (i.e., supported by little or no market activity).

Ferrosur’s Cross Currency Swaps and Interest Rate The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable (other Ferrosur used the following methods and assumptions to determine the fair value of financial instruments: than accounts receivable associated with provisionally priced sales) and accounts payable approximate fair value due to their short maturities. Consequently, such financial instruments are not included in the following table that provides On September 29, 2006, Ferrosur hired two Cross Currency Swaps (CCS) on liabilities denominated in dollars with information about the carrying amounts and estimated fair values of other financial instruments that are not measured notional amount of $25 thousands who conquered and settled on June 6, 2013. The CCS fix an exchange rate of at fair value in the consolidated balance sheet as of December 31, 2013:

82 83 Balance at December 31, 2013 Quoted prices in Carrying Value Fair Value active markets Significant other Significant Balance at for identical observable unobservable Liabilities - Long-term debt (*) $ 5,810.8 $ 5,481.6 December 31, assets inputs inputs 2013 (Level 1) (Level 2) (Level 3)

Liabilities: Balance at December 31, 2012 Carrying Value Fair Value Other current liabilities: -Liability derivatives - Classified as Liabilities - Long-term debt (*) $ 5,583.9 $ 6,240.6 cash flow hedges: Swap (26.7) - (26.7) - (*) Long-term debt is carried at amortized cost and its estimated fair value is based on quoted market prices classified as Level 1 in the fair value hierarchy.

Total $ 1,221.0 $ 1,237.9 $ (21.0) $ 4.1 Fair values of assets and liabilities measured at fair value on a recurring basis were calculated as of December 31, 2013 and 2012, as follows: Quoted prices in active markets Significant other Significant Balance at for identical observable unobservable Quoted prices in December 31, assets inputs inputs active markets Significant other Significant 2012 (Level 1) (Level 2) (Level 3) Balance at for identical observable unobservable December 31, assets inputs inputs 2013 (Level 1) (Level 2) (Level 3) Assets: Short-term investments: $ 237.3 $ 237.3 $ - $ - Assets: -Trading securities Short-term investments: -Available for sale debt securities: -Trading securities $ 246.3 $ 242.2 $ - $ 4.1 Corporate bonds 0.4 - 0.4 - -Available for sale debt securities: Asset backed obligations 0.1 - 0.1 - Corporate bonds 0.4 - 0.4 - Mortgage backed securities 6.0 - 6.0 - Asset backed obligations 0.1 - 0.1 - Mortgage backed securities 5.2 - 5.2 - Accounts receivable: -Derivatives - Not classified as Accounts receivable: hedges: -Derivatives - Not classified as hedges: Provisionally priced sales: Provisionally priced sales: Copper 70.8 70.8 - - Copper 53.9 53.9 - - Molybdenum 102.9 102.9 - - Molybdenum 100.2 100.2 - - Investments in equity securities 841.6 841.6 - - Investments in equity securities 939.1 939.1 - -

84 85 Quoted prices in Financial instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash active markets Significant other Significant and cash equivalents, short-term investments and trade accounts receivable. Balance at for identical observable unobservable December 31, assets inputs inputs 2012 (Level 1) (Level 2) (Level 3) The Company invests or maintains available cash with various banks, principally in the United States, Mexico, Europe and Peru, or in commercial papers of highly-rated companies. As part of its cash management process, the Company Liabilities: regularly monitors the relative credit standing of these institutions. At December 31, 2013, SCC had invested its cash Other current liabilities: and cash equivalents as follows: Liability derivatives - Classified as cash flow hedges: % in one institution Swap ( 37.4 ) - ( 37.4 ) - Country Amount % of total cash (1) Of country of total cash

United States $ 1,020.0 54.2 45.8 24.9 Total $ 1,319.2 $ 1,350.1 $ (30.9) $ - Peru 94.0 5.0 73.7 3.7 Mexico 147.1 7.8 95.1 7.4 Switzerland 619.9 33.0 100.0 33.0 The Company’s short-term trading securities investments are classified as Level 1 because they are valued using

quoted prices of the same securities as they consist of bonds issued by public companies and publicly traded. SCC’s Total cash and short-term short-term available-for-sale investments are classified as Level 2 because they are valued using quoted prices for investment $ 1,881.0 100.0

similar investments. (1) 98.7% of the Company’s cash is in U.S. dollars.

The Company’s accounts receivables associated with provisionally priced copper sales are valued using quoted market During the normal course of business, AMC provides credit to its customers. Although the receivables resulting prices based on the forward price on the LME or on the COMEX. Such value is classified within Level 1 of the fair value from these transactions are not collateralized, AMC has not experienced significant problems with the collection of hierarchy. Molybdenum prices are established by reference to the publication Platt’s Metals Week and are considered receivables. Level 1 in the fair value hierarchy. AMC is exposed to credit loss in cases where the financial institutions with which it has entered into derivative trans- 23. Concentration of risk actions (commodity, foreign exchange and currency/interest rate swaps) are unable to pay when they owe funds as a result of protection agreements with them. To minimize the risk of such losses, AMC only uses highly-rated financial The Company operates four open-pit copper mines, five underground poly-metallic mines, two smelters and eight institutions that meet certain requirements. AMC also periodically reviews the creditworthiness of these institutions to refineries in Peru and Mexico and substantially all of its assets are located in these countries. There can be no assur- ensure that they are maintaining their ratings. AMC does not anticipate that any of the financial institutions will default ances that The Company’s operations and assets that are subject to the jurisdiction of the governments of Peru and on their obligations. Mexico will not be adversely affected by future actions of such governments. Much of the Company’s products are exported from Peru and Mexico to customers principally in the United States, Europe, Asia and South America. Mining Division’s largest customers as percentage of accounts receivable and total sales were as follows:

86 87 2013 2012 S/.255 million (approximately $100 million) for development projects in the province. In the second quarter of 2013, SCC made a first contribution of S/.45 million (approximately $17 million) to the development fund of the Candarave Accounts receivable trade as of December 31 province SCC continued working with the authorities of the Candarave province and in June 2013 signed an agreement Five largest customers 32.0% 34.9% with the National Water Authority, local authorities and the Candarave Board of Water Users for the hydrogeologic study Largest customer 10.5% 9.1% of the Locumba river basin in order to improve the water utilization in the province. Total sales in year Five largest customers 23.5% 23.0% In November 2013, SCC reached a final agreement with the Jorge Basadre province which commits SCC to fund Largest customer 6.9% 5.9% S/.100 million (approximately $36 million) for social development projects in the province. In addition, SCC has agreed to fund various other social programs with the use of advance income tax payments. 24. Commitments The contributions to Candarave and Jorge Basadre provinces are contingent upon receiving approval for the project Mining segment and will be expended through the life of the Toquepala expansion project. With these agreements SCC is close to establishing accords with the principal communities and interested parties in the area. Peruvian Operations Mexican Operations Power purchase agreement - Enersur In 1997, SCC sold its Ilo power plant to an independent power company, Enersur S.A. (“Enersur”). In connection with Power purchase agreement - MGE the sale, a power purchase agreement (“PPA”) was also completed under which SCC agreed to purchase all of its MGE, a subsidiary of GMEXICO, has completed the construction of one of the two power plants in Mexico designed power needs for its current Peruvian operations from Enersur for twenty years, commencing in 1997. to supply power to some of MGE’s Mexican operations. It is expected that MGE will supply approximately 12% of its power output to third-party energy users. In December 2012, MGE signed a power purchase agreement with MGE, SCC signed in 2009 a Memorandum of Understanding (“MOU”) with Enersur regarding its PPA. The MOU contains whereby MGE will supply MGE with power through 2032. The first plant was completed in June 2013 and began to new economic terms that SCC believes better reflects current economic conditions in the power industry in Peru. The supply power to MGE in December 2013. It is expected that the second plant will be completed by the end of the new economic conditions agreed to in the MOU have been applied by Enersur to its invoices to SCC since May 2009. second quarter 2014. Additionally, the MOU includes an option for providing power for the Tia Maria project. However, due to the delay at the Tia Maria project the final agreement was put on hold, see caption “Tía María” above. For an estimate of the Company’s contractual obligations for power purchases, please see, “Contractual Obligations” under Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations. Toquepala Concentrator Expansion In connection with the EIA for the Toquepala expansion project, some community groups raised concerns related to American Operations: water usage and pollution. As a result of these issues the Peruvian government started discussions with the local com- Asarco has entered into several lease agreements, substantially all for mining equipment and has options to purchase munities and the regional authorities to resolve this impasse. In February 2013, SCC reached a final agreement with that equipment. The options are at fixed prices prior to expiration of the leases and at fair value upon expiration. The the province of Candarave, one of the three provinces neighboring the Toquepala unit, which commits SCC to funding leases have been accounted for as operating leases.

88 89 Minimum future rental payments under non-cancelable operating leases having initial and remaining terms in excess have been carried out concerning environmental impact, noise control and hazardous residues. The Environment and of one year in the aggregate at December 31, 2013, are as follows: Natural Resources Ministry may impose administrative and criminal sanctions against companies that breach environmental laws and it has authority to partially or entirely close any facilities that fail to comply with such regulations. Period ended December 31

As of December 31, 2012, there are five administrative records with Procuraduría Federal de Protección al Ambiente 2014 $ 9.1 2015 0.9 (PROFEPA) related to material spills, in which minor economic sanctions could be imposed, remediation actions were 2016 0.9 carried out. That event did not affect Ferromex financial statements. All rail accidents with material spills affecting 2017 0.9 environment that are greater than 50,000 USD are covered by insurance for environmental damages. 2018 1.0 Thereafter 1.5 Under the terms of the concession, the Federal Government has the right to receive payments from Ferromex and Fer- Total $ 14.3 rosur equal to 0.5% of the gross revenue during the first 15 years of the concession and 1.25% during the remaining years of the concession. For the years ended on December 31, 2013 and 2012, such payments amounted to $18.7 Total rental expense was $27.0 and $20.8 for the years ended December 31, 2013 and 2012, respectively, and is and $8.2, respectively. included in costs of revenue in the consolidated statements of income. Included in total rental expenses are land royalty payments, contingent rental fees based on production, for $12.0 and $8.5 for the years ended December 31, 2013 Under the terms of the concession, the Port Authority of Coatzacoalcos (APICOA) is entitled to receive from Transgolfo, and 2012, respectively. Asarco guarantees 100% of an operating lease of SBM, which is 75% owned by Asarco. For S. A. de C. V. (subsidiary), a monthly fee per square meter of surface of the Terminal. For the years ended on Decem- the years ended December 31, 2013 and 2012, $5.1 and $5.2, respectively, are related to the SBM lease. ber 31, 2013 and 2012, such payments amounted to $0.4.

Letters of Credit, Surety Bonds, and Guarantees - Asarco had outstanding surety bonds totaling $13.8 at December 31, 2013 and 2012. These bonds are primarily associated with reclamation and permit obligations of $13.5 and other Ferromex leases the building where its main offices are located, the lease agreement is for ten years beginning from miscellaneous bonds of $0.3 and $0.3 as of December 31, 2013 and 2012, respectively. The underlying liabilities April 1, 2003. In addition, Ferromex and Ferrosur lease certain equipment, such as hoppers, boxcars, flatcars and associated with the above-referenced financial assurances are reflected in the consolidated balance sheets as envi- tanker cars. ronmental remediation obligations. Commitments for minimum payments under lease agreements for the following years are as follows: At December 31, 2013 and 2012, Asarco had a guarantee outstanding for 100% of an operating lease at SBM, of which 75% is owned by Asarco. The lease expires in June of 2014. The maximum potential amount of future payments Total under the guarantee is approximately $7.7 at December 31, 2013. Payment would be required if SBM defaults on its 2013 $ 85.1 lease obligations. 2014 79.0 2015 73.2 Railway segment 2016 62.7 2017 Thereafter 153.6 Ferromex and Ferrosur operations are subject to Mexican federal and state laws, and to regulations related to environ-

mental protection. Under these laws, guidelines have been issued concerning air, soil and water pollution, and studies Total $ 453.6

90 91 Ferromex entered into a fuel purchase agreement with PEMEX, under which SCC is required to purchase, at market Peruvian operations: SCC’s operations are subject to applicable Peruvian environmental laws and regulations. The value, a minimum of 15,030 meters and a maximum cubic 30,060 meters cubic of diesel per month, although this Peruvian government, through the Environmental Ministry conducts annual audits of SCC’s Peruvian mining and met- limit may be exceeded, without any repercussions, according to the contract of sale of first-hand petroleum products allurgical operations. Through these environmental audits, matters related to environmental commitments, compliance for consumption concluded between PEMEX Refining and Ferromex which took effect from September 15, 2011. The with legal requirements, atmospheric emissions, and effluent monitoring are reviewed. SCC believes that it is in mate- contract is valid for four years, renewable for an additional two years and thereafter renewable each year. rial compliance with applicable Peruvian environmental laws and regulations.

On January 5, 2001, Ferrosur entered into a contract with PEMEX refining for own consumption, which establishes a Peruvian law requires that companies in the mining industry provide for future closure and remediation. In accordance contractual volume in relation to any month that PEMEX refinery is forced to sell and Ferrosur to buy and indicating a with the requirements of this law SCC’s closure plans were approved by MINEM. As part of the closure plans, SCC is maximum contract amount and a minimum contract volume by center assigned shipper, (volume 2,075 cubic meters providing guarantees to ensure that sufficient funds will be available for the asset retirement obligation. See Note 11, (m3) minimum and maximum volume 10,500 m3 in total) that contract is effective from the date above and continues “Asset retirement obligation”, for further discussion in this matter. in force for an indefinite term until terminated by either party at the end of any month upon notice to the other party with at least three months in advance. On June 29, 2007 amended the contract and is valid for four years, after which In 2008, the Peruvian government enacted environmental regulations establishing more stringent air quality standards written request may be made to extend for a term of two years and won it, for another year and so on for each year. (“AQS”) for daily sulfur dioxide (“SO2”) concentration for the Peruvian territory.

25. Contingencies These regulations, as amended in 2013, recognize distinct zones/areas, such as atmospheric basins, with significant population density and industrial activity. As part of these regulations the Ministry of Environment (MINAM) was re- Mining Segment quired to carry-out a 12 month ambient air monitoring period, prior to January 1, 2014, to establish SO2 levels. Those areas with a mean 24-hour concentration of SO2 equal or less than 20 micrograms per cubic meter (“ug/m3”) are re- Environmental matters quired to develop programs to maintain this level of compliance. Those areas or cities which are in excess of the mean 24-hour SO2 concentration equal to 20 ug/m3 will be required to establish an Action Plan to address this problem and Peruvian and Mexican Operation are required to achieve the 20 ug/m3 AQS in the future and meanwhile they are required to achieve mean 24-hour SCC has instituted extensive environmental conservation programs at its mining facilities in Peru and Mexico. SCC’s AQS equal to 80 ug/m3 of SO2. MINAM has established three atmospheric basins that require further attention to environmental programs include, among other features, water recovery systems to conserve water and minimize im- comply with these new air quality standards. The Ilo basin is one of these three areas and SCC’s smelter and refinery pact on nearby streams, reforestation programs to stabilize the surface of the tailings dams and the implementation of are part of the area. SCC expects to join the local government of Ilo, other industries and stakeholders in the Ilo basin scrubbing technology in the mines to reduce dust emissions. to develop the action plan and evaluate alternatives and their feasibility in order to achieve these new AQS.

Environmental capital expenditures in years 2013 and 2012, were as follows : In 2013, the Peruvian government enacted new soil environmental quality standards applicable to any existing facility or project that generates or could generate risk of soil contamination in its area of operation or influence. The rule applies 2013 2012 to any existing facility or project and requires SCC to report a soil testing analysis. The rule requires SCC to report the results to the authorities. If the results identify any contamination, SCC must prepare a soil decontamination plan Peruvian operations $ 20.9 $ 6.7 that should be completed in three years. SCC will have twelve months after the issuance of the regulations to update Mexican operations 39.8 20.7 its approved environmental programs to comply with the requirements of the rule. SCC is waiting the complementary Total $ 60.7 $ 27.4 regulations to this rule in order to determine its financial impact.

92 93 Mexican operations: SCC’s operations are subject to applicable Mexican federal, state and municipal environmental ation and the construction of a second confinement by the end of 2014. SCC expects that once the site is remediated, laws, to Mexican official standards, and to regulations for the protection of the environment, including regulations re- SCC will decide if it will sell the property or promote an urban development to generate a net gain on the disposal of lating to water supply, water quality, air quality, noise levels and hazardous and solid waste. the property.

The principal legislation applicable to SCC’s Mexican operations is the Federal General Law of Ecological Balance and SCC believes that all of its facilities in Peru and Mexico are in material compliance with applicable environmental, min- Environmental Protection (the “General Law”), which is enforced by the Federal Bureau of Environmental Protection ing and other laws and regulations. (“PROFEPA”). PROFEPA monitors compliance with environmental legislation and enforces Mexican environmental laws, regulations and official standards. PROFEPA may initiate administrative proceedings against companies that SCC also believes that continued compliance with environmental laws of Mexico and Peru will not have a material violate environmental laws, which in the most extreme cases may result in the temporary or permanent closing of adverse effect on SCC’s business, properties, result of operations, financial condition or prospects and will not result non-complying facilities, the revocation of operating licenses and/or other sanctions or fines. Also, according to the in material capital expenditures. federal criminal code, PROFEPA must inform corresponding authorities regarding environmental non-compliance. American operations Environmental Litigation and Related Matters - In connection with the matters referred to below, Asarco is working with In January 2011, Article 180 of the General Law was amended. This amendment, gives an individual or entity the abil- federal and state agencies to resolve environmental issues. Asarco accrues for losses when such losses are deemed ity to contest administrative acts, including environmental authorizations, permits or concessions granted, without the probable and reasonably estimable. Such accruals are adjusted as new information comes to Asarco’s attention or need to demonstrate the actual existence of harm to the environment, natural resources, flora, fauna or human health, circumstances change. These environmental liabilities are not discounted to present value. Recoveries of environmental because it will be sufficient to argue that the harm may be caused. In addition in 2011, amendments to the Civil Federal remediation and related costs from insurance carriers and other parties are recorded when realized. Remedial action Procedures Code (“CFPC”) were published in the Official Gazette and are now in force. These amendments establish is being undertaken by Asarco at the following site: three categories of collective actions, by means of which 30 or more people claiming injury derived from environmental, consumer protection, financial services and economic competition issues will be considered to be sufficient in order Hayden - The Environmental Protection Agency (EPA) notified Asarco that it was considering listing certain areas to have a legitimate interest to seek through a civil procedure restitution or economic compensation or suspension of surrounding Asarco’s Hayden Smelter in Hayden, Arizona, on the Federal Superfund’s National Priorities List. The the activities from which the alleged injury derived. The amendments to the CFPC may result in more litigation, with basis of the listing was ostensibly that emissions from the smelter have contributed to elevated levels of metals in soil. plaintiffs seeking remedies, including suspension of the activities alleged to cause harm. Asarco, the EPA and the Arizona Department of Environmental Quality (ADEQ) entered into negotiations to address environmental conditions at the Hayden site without resorting to such a listing. The parties participated in extensive In June 2013, the Environmental Liability Federal Law was published in the Official Gazette and became effective one negotiations regarding the scope of actions to be taken at the Hayden site, which resulted in an agreement regarding month thereafter. The law establishes general guidelines in order to determine which environmental actions will be con- cleanup of the site. Pursuant thereto, Asarco has completed work on certain residential yards that the EPA deemed to sidered to cause environmental harm that will give rise to administrative responsibilities (remediation or compensations) be a high priority. and criminal responsibilities. Also economic fines could be established. As required under the approved settlement agreement, Asarco established and funded a $15.0 trust on July 3, 2008, In March 2010, SCC announced to the Mexican federal environmental authorities the closure of the copper smelter to secure its obligations. The funds in the Hayden trust are to be used to pay for (I) required cleanup of the residential plant at San Luis Potosi. SCC initiated a program for plant demolition and soil remediation with a revised budget of areas surrounding the smelter and (II) to pay for additional investigative work at the Hayden site to identify any releases $62.4 million, of which SCC has spent $35.7 million through December 31, 2013. Plant demolition and construction of hazardous substances if any such releases are not otherwise being addressed under any other regulatory program of a confinement area at the south of the property were completed in 2012 and SCC expects to complete soil remedi- for cleanup. Under the settlement agreement, Asarco’s liability for cleanup of the residential areas is limited to $13.5,

94 95 while there is no cap on Asarco’s liability for the cost of the required investigation activities of on-site remediation. The In relation to the issuance of “labor shares” by the Branch in Peru, the Branch is a defendant in the following lawsuits: residential cleanup is substantially complete and management believes the funds in the Hayden site trust are adequate to cover the expected investigative activities. The amounts reserved in Asarco’s consolidated balance sheets as of (1) Mr. Garcia Ataucuri seeks delivery, to himself and each of the approximately 900 former employees of the Peruvian December 31, 2013 and 2012, were $2.0 and $6.7, respectively. Branch, of the 3,876,380,679.65 old peruvian soles or 38,763,806.80 “labor shares” (acciones laborales), as required by Decree Law 22333 (a former profit sharing law), to be issued proportionally to each former employee On November 10, 2011, the EPA issued Asarco a finding of violation (FOV) stating it believed the Hayden smelter was in accordance with the time of employment of such employee with SCC’s Branch in Peru, plus dividends on such a major source of Hazardous Air Pollutants (HAPs). In 2012 Asarco completed an anode ventilation project at the shares. The 38,763,806.80 labor shares sought in the complaint, with a face value of 100.00 old soles each, rep- smelter and is currently evaluating additional smelter upgrades to comply with the newly implemented sulfur dioxide resent 100% of the labor shares issued by the Branch during the 1970s until 1979 for all of its employees during regulations. Asarco believes that these upgrades will reduce HAPs emissions to a verifiable degree sufficient to resolve that period. The plaintiffs do not represent 100% of the Branch´s eligible employees during that period. the FOV. Further discussions and negotiations have continued with the EPA and Department of Justice on this matter through the end of 2013. Asarco has recorded a contingent liability to cover potential litigation costs in the amount of It should be noted that the lawsuit refers to a prior Peruvian currency called “sol de oro” or old soles, which was $1.0 at December 31, 2013 and 2012, respectively. later changed to the “inti”, and then into today´s “nuevo sol.” Due to past period of high inflation between 1985 and 1990, one billion of old soles is equivalent to today’s one nuevo sol. Litigation matters: After lengthy proceedings before the civil courts in Peru on September 19, 2001, on appeal from the Branch, the Peruvian operations Peruvian Supreme Court annulled the proceedings noting that the civil courts lacked jurisdiction and that the matter had to be decided by a labor court (the “2000 appeal”). Garcia Ataucuri and Others against SCC’s Peruvian Branch: In April 1996, the Branch was served with a complaint filed in Peru by Mr. Garcia Ataucuri and approximately 900 In October 2007, in a separate proceeding initiated by the plaintiffs, the Peruvian Constitutional Court nullified the former employees seeking the delivery of a substantial number of “labor shares” (acciones laborales) plus dividends September 19, 2001 Peruvian Supreme Court decision and ordered the Supreme Court to decide again on the on such shares, to be issued to each former employee in proportion to their time of employment with SCC’s Peruvian merits of the case accepting or denying the Branch’s 2000 appeal. Branch, pursuant a former Peruvian mandated profit sharing law. In May 2009, the Supreme Court rejected the 2000 appeal of the Branch affirming the adverse decision of the The labor share litigation is based on claims of former employees for ownership of labor shares that the plaintiffs state appellate civil court and lower civil court. While the Supreme Court has ordered SCC’s Peruvian Branch to deliver that the Branch did not issue during the 1970s until 1979 under the said former Peruvian mandated profit sharing law. the labor shares and dividends, it has clearly stated that SCC’s Peruvian Branch may prove, by all legal means, In 1971, the Peruvian government enacted legislation providing that mining workers would have a 10% participation its assertion that the labor shares and dividends were distributed to the former employees in accordance with the in the pre-tax profits of their employing enterprises. This participation was distributed 40% in cash and 60% in an profit sharing law then in effect, an assertion which SCC’s Peruvian Branch continues to make. None of the court equity interest of the enterprise. In 1978, the equity portion, which was originally delivered to a mining industry workers’ decisions state the manner by which the Branch must comply with the delivery of such labor shares or make a organization, was set at 5.5% of pre-tax profits and was delivered, mainly in the form of “labor shares” to individual liquidation of the amount to be paid for past dividends and interest, if any. workers. The cash portion was set at 4.0% of pre-tax earnings and was delivered to individual employees also in proportion to their time of employment with the Branch. In 1992, the workers’ participation was set at 8%, with 100% On June 9, 2009, SCC’s Peruvian Branch filed a proceeding of relief before a civil court in Peru seeking the nullity payable in cash and the equity participation was eliminated from the law. of the 2009 Supreme Court decision and, in a separate proceeding, a request for a precautionary measure. The civil

96 97 court rendered a favorable decision on the nullity and the precautionary measure, suspending the enforcement of the negotiations with the plaintiffs, and after the plaintiffs, which were all the stockholders of Excomet, approved Supreme Court decision, for the reasons indicated above and other reasons. In February 2012, the Branch was noti- the transaction in a general stockholders’ meeting. Excomet was at the time owner of the “Virgen Maria” mining fied that the civil court had reversed its prior decisions. On appeal by the Peruvian Branch the Superior Court affirmed concession. In October 2011, the civil court dismissed the case on the grounds that the claim had been barred by the lower court’s decisions regarding the nullity of the 2009 Supreme Court decision and the precautionary measure. the statute of limitations. On appeal by the plaintiffs, the superior court reversed the lower court´s decision. As of As a result, the nullity of the precautionary measure became final and is not appealable. However, the nullity of the December 31, 2013, the case remains pending without further developments. 2009 Supreme Court decision has been appealed by the Branch before the Constitutional Court. As of December 31, 2013 this appeal is pending resolution. In view of this, SCC´s Peruvian Branch continues to analyze the manner b) Sociedad Minera de Responsabilidad Limitada Virgen Maria de Arequipa (SMRL Virgen Maria): In August 2010, a in which the Supreme Court decision may be enforced and what financial impact, if any, said decision may have. lawsuit was filed against SCC’s Branch and others by SMRL Virgen Maria, a company which until July 2003 owned the mining concession Virgen Maria. SMRL Virgen Maria sold this mining concession in July 2003 to Excomet (2) In addition, there are filed against SCC’s Branch the following lawsuits, involving approximately 800 plaintiffs, which (see a) above). The plaintiff alleges that the sale of the mining concession Virgen Maria to Excomet is null and void seek the same number of labor shares as in the Garcia Ataucuri case, plus interest, labor shares resulting from cap- because the persons who attended the shareholders’ meeting of SMRL Virgen Maria, at which the purchase was ital increases and dividends: Armando Cornejo Flores and others v. SCC’s Peruvian Branch (filed May 10, 2006); agreed upon, were not the real owners of the shares. The plaintiff is also pursuing the nullity of all the subsequent Alejandro Zapata Mamani and others v. SCC’s Peruvian Branch (filed June 27, 2008); Edgardo Garcia Ataucuri, in acts regarding the mining property (acquisition of the shares of Excomet by SCC’s Branch, noted above, and the representation of 216 of SCC’s Peruvian Branch former workers, v. SCC’s Peruvian Branch (filed May 2011); Juan sale of this concession to SCC’s Branch by Excomet). In October 2011, the civil court dismissed the case on the Guillermo Oporto Carpio v. SCC’s Peruvian Branch (filed August 2011); Rene Mercado Caballero v. SCC’s Peruvi- grounds that the claim had been barred by the statute of limitations. Upon appeal by the plaintiffs, the superior an Branch (filed November 2011); Enrique Salazar Alvarez and others v. SCC’s Peruvian Branch (filed December court remanded the proceedings to the lower court, ordering the issuance of a new decision. On June 25, 2013, 2011); Indalecio Carlos Perez Cano and others v. SCC Peruvian Branch (filed March 2012); Jesus Mamani Chura the lower court dismissed the case due to procedural defects. Upon appeal by the plaintiff, on December 2, 2013 and others v. SCC’s Peruvian Branch (filed March 2012); Armando Cornejo Flores, in representation of 37 of SCC’s the Superior Court reversed the lower court’s decision due to procedural defects and ordered the issuance of a new Peruvian Branch former workers v. SCC’s Peruvian Branch (filed March 2012), Porfirio Ochochoque Mamani and resolution. As of December 31, 2013, the case remains pending without further developments. others v. SCC´s Peruvian Branch (filed July 2012); Alfonso Flores Jimenez and others v. SCC’s Peruvian Branch (filed July 2013) and Micaela Laura Alvarez de Vargas and others v. SCC’s Peruvian Branch (filed August 2013). c) Omar Nunez Melgar: In May 2011, Mr. Omar Nunez Melgar commenced a lawsuit against the Peruvian Mining and SCC’s Peruvian Branch has answered the complaints and denied the validity of the claims. Metallurgical Institute and MINEM challenging the denial of his request of a new mining concession that conflicted with SCC’s Branch’s Virgen Maria mining concession. SCC’s Branch has been made a party to the proceedings as SCC’s Peruvian Branch asserts that the labor shares were distributed to the former employees in accordance with the the owner of the Virgen Maria concession. SCC’s Branch has answered the complaint and denied the validity of the profit sharing law then in effect. The Peruvian Branch has not made a provision for these lawsuits because it believes claim. As of December 31, 2013, the case remains pending without further developments. that it has meritorious defenses to the claims asserted in the complaints. Additionally, the amount of this contingency cannot be reasonably estimated by management at this time. SCC asserts that the lawsuits are without merit and is vigorously defending against these lawsuits.

The “Virgen Maria” Mining Concessions of the Tia Maria Mining Project Special Regional Pasto Grande Project (“Pasto Grande Project”) a) Exploraciones de Concesiones Metalicas S.A.C. (“Excomet”): In August 2009, a lawsuit was filed against SCC’s In the last quarter of 2012, the Pasto Grande Project, an entity of the Regional Government of Moquegua, filed a lawsuit Branch by the former stockholders of Excomet. The plaintiffs allege that the acquisition of Excomet’s shares by the against SCC’s Peruvian Branch alleging property rights over a certain area used by the Peruvian Branch and seeking Branch is null and void because the $2 million purchase price paid by the Branch for the shares of Excomet was not the demolition of the tailings dam where SCC’s Peruvian Branch has deposited its tailings from the Toquepala and fairly negotiated by the plaintiffs and the Branch. In 2005, the Branch acquired the shares of Excomet after lengthy Cuajone operations since 1995. The Peruvian Branch has had title to use the area in question since 1960 and has

98 99 constructed and operated the tailing dams also with proper governmental authorization, since 1995. SCC’s Peruvian In addition to the above claims, there was a substantial contribution claim by Sterlite (USA), Inc., and Sterlite Industries Branch asserts that the lawsuit is without merit and is vigorously defending against the lawsuit. Upon a motion filed by (India) Ltd., (collectively, “Sterlite”) in the amount of $56.2 that was denied by the Bankruptcy Court in 2011. Asarco also the Peruvian Branch the lower court has included the Ministry of Energy and Mines as a defendant in this lawsuit. The filed a claim against Sterlite related to the breach of an asset purchase agreement to acquire assets of Asarco. In Febru- Ministry of Energy and Mines has answered the complaint and denied the validity of the claim. As of December 31, ary 2012, the Bankruptcy Court entered judgment in favor of Asarco in the net amount of $82.8 related to the breach of 2013, the case remains pending without further developments. an asset purchase agreement. The $82.8 Asarco was awarded includes $102.8 in interest damages, $30.0 in additional professional fees, less $50.0 representing a letter of credit Sterlite posted as security, which was previously drawn by American operations Asarco in November 2009. The judgment is open for appeal to seek reconsideration. Asarco has not recorded a gain in the consolidated financial statements as of and for the year ended December 31, 2013, related to this judgment. Disputed Claims Reserve (“DCR”): Certain claims of Asarco’s bankruptcy settlement, which became effective in December 2009, were not settled on the Labor matters: effective date; therefore, Asarco has provided funds to the Parent’s plan administrator (“PPA”) for the ultimate settle- In recent years SCC has experienced a positive labor environment in its operations in Mexico and Peru which is allowing ment of contingent liabilities that relate to the following: an increase productivity as well as helping to achieving the goals of its capital expansion program.

– Administrative claims, of labor unions, medical plan administration fees and other miscellaneous items; Peruvian operations Approximately 65.3% of SCC’s 4,430 Peruvian employees were unionized at December 31, 2013, represented by – Enhancement claims, by legal firms, consulting firms and other professionals participating in the bankruptcy pro- seven separate unions. Three of these unions, one at each major production area, represent the majority of SCC´s ceedings, and; workers. Also, there are four smaller unions, representing the balance of workers. SCC conducted negotiations with the unions whose collective bargaining agreements expired in 2012. In the first quarter of 2013, SCC signed three-year – Substantial contribution claims, by previous officers, board members and plan participants. agreements with all the unions. The agreements included, among other things, annual salary increases of 6.5%, 5% and 5% for each of the three years. The full face value of claims remaining in the DCR on December 31, 2013, is approximately $21.5. Asarco has recorded liabilities in the amounts of $18.0 and $21.0 at December 31, 2013 and 2012, respectively, representing manage- Mexican operations ment’s best estimate to ultimately settle and pay these claims. In recent years, the Mexican operations have experienced a positive improvement of their labor environment, as its workers, opted to change their affiliation from the Sindicato Nacional de Trabajadores Mineros, Metalurgicos y The PPA has reserved cash in the DCR for future payments of these unsettled administrative general unsecured claims Similares de la Republica Mexicana (National Union of Mine and Metal Workers and Similar Activities of the Mexican and any successful remaining administrative claims listed above and related administrative costs. On December 31, 2013 Republic or the “National Mining Union”) led by Napoleon Gomez Urrutia to other less politicized unions. and 2012, the DCR restricted cash balances were $40.3 and $52.2, respectively. Any residual cash in the DCR will be returned to Asarco and any deficiency will be funded by Asarco. During 2013 and 2012, various claims and adminis- The workers of the San Martin and Taxco mines, however, are still under the National Mining Union, have been on strike trative fees were settled and paid in the amount of $4.0 and $7.7, respectively. As claims continue to be settled Asarco since July 2007. On December 10, 2009, a federal court confirmed the legality of the San Martin strike. In order to periodically petitions the Bankruptcy Court to have a portion of the DCR returned, based on the current status of the recover the control of the San Martin mine and resume operations, on January 27, 2011, SCC filed a court petition re- remaining unsettled claims. In December 2013 and 2012, the court ordered the PPA to return to Asarco $8.0 and $70.0, questing that the court, among other things define the termination payment for each unionized worker. The court denied respectively from the DCR, the amounts were received on December 27, 2013 and December 21, 2012, respectively. the petition alleging that, according to federal labor law, the union was the only legitimate party to file such petition. Management believes the remaining amount of restricted cash is sufficient to pay the final disputed claims in full. On appeal by SCC, on May 13, 2011, the Mexican federal tribunal accepted the petition. In July 2011, the National

100 101 Mining Union appealed the favorable court decision before the Supreme Court. On November 7, 2012, the Supreme Asarco Court affirmed the decision of the federal tribunal. SCC filed a new proceeding before the labor court on the basis of Asarco is a defendant in lawsuits in Arizona, the earliest of which commenced in 1975, involving the United States, the Supreme Court decision, which recognized the right of the labor court to define responsibility for the strike and the Native Americans and other Arizona water users. These suits seek damages for usage and alleged contamination of termination payment for each unionized worker. A favorable decision of the labor court in this new proceeding would ground water. The lawsuits could affect Asarco’s use of water at its Ray Complex, Mission Complex and other Arizona have the effect of terminating the protracted strike at San Martin. As of December 31, 2013, the case remains pending operations. Asarco is also involved in multiple suits and claims against it arising from such matters as workers’ com- without further developments. On August 1, 2013, the National Union of Workers Engaged in Exploration, Exploitation pensation claims and employment-related claims, among other matters. Management has analyzed the issues and and Processing of Mines in the Mexican Republic, which is the union operating at Mexicana del Cobre and IMMSA, has accrued approximately $7.3 and $4.9 to settle these additional litigation matters as of December 31, 2013 and filed a new petition before the labor authorities to replace the National Mining Union at the San Martin mine, because it 2012, respectively. believes that it represents more workers at the San Martin mine than the National Mining Union. On August 12, 2013 another union which wanted to replace the existing unit at San Martin in order to expedite the restart of operations at San Corporate and railway segment Martin withdrew its petition. As of December 31, 2013, the proceeding remains pending without further developments. Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (“GAP”) In the case of the Taxco mine, following the workers refusal to allow exploration of new reserves, SCC commenced litiga- On June 13, 2011, GMéxico announced that its Board of Directors had approved the acquisition (directly or indirectly) of tion seeking to terminate the labor relationship with workers of the Taxco mine (including the related collective bargaining more than 30 % and up to 100% of the shares of GAP outstanding, excluding treasury shares, and, in connection with agreement). On September 1, 2010, the federal labor court issued a ruling approving the termination of the collective any such transactions GMéxico would be required to launch a mandatory public offering (the “MTO”), by up to 100 % bargaining agreement and all the individual labor contracts of the workers affiliated with the Mexican mining union at of the shares GAP in circulation, according to Mexican law and other applicable securities laws. GMéxico and ITM (the the Taxco mine. The mining union appealed the labor court ruling before a federal court. In September 2011, the federal “Informant people”) applied to the Comisión Nacional Bancaria y de Valores (the “CNBV”) authorization of a MTO. GAP court accepted the union’s appeal and requested that the federal labor court review the procedure. After several legal and related parties promoted certain claims in Mexico and obtained a suspension of the release of the tender offer. Infor- proceedings on January 25, 2013, SCC filed a new proceeding before the labor court on the basis of the Supreme Court mant people appealed the resolution requesting the suspension of the authorization of the CNBV and on May 29, 2012 decision in the San Martin case, which recognized the right of the labor court to define responsibility for the strike and informant people announced that no longer apply for the approval of the MTO to the CNBV, announced on June 13, 2011. the termination payment for each unionized worker. A favorable decision of the labor court in this new proceeding would have the effect of terminating the protracted strike at Taxco. As of December 31, 2013, this case is pending resolution. On April 16, 2013, GMéxico delivered a letter to certain holders of ADS and shares (the “Letter of Shareholders of April 16”), asking them to vote in favor of all the proposals included in the agenda of the Annual General Assembly of GAP, It is expected that operations at these mines will remain suspended until these labor issues are resolved. to be held on April 23, 2013 (the “Shareholders’ Meeting of April 23”). The Shareholders’ Meeting of April 16 was convened by GMéxico. All proposals on the agenda of the Shareholders’ Meeting of April 23 were suggested by GMéx- In view of these length strikes, SCC has reviewed the carrying value of the San Martin and Taxco mines to ascertain ico. The Letter of Shareholders of April 16 contains several proposals, including one by which cease to be mandatory whether impairment exists. SCC concluded that the assets located at these mines are not impaired. statutes GMéxico considers inconsistent with applicable Mexican law, including those that aim to: (i) limit the ability of a holder of shares of Aeropuertos Mexicanos del Pacífico, S.A. de C.V. (“AMP”) who is the controlling shareholder of Other legal matters: GAP, to own more than 10% of the total shares outstanding; (ii) limit the exercise of voting rights on shares that exceed SCC is involved in various other legal proceedings incidental to its operations, but SCC does not believe that decisions 10 % of the total outstanding shares of GAP and (iii) to exclude any person other than AMP to seek a change of control adverse to it in any such proceedings, individually or in the aggregate, would have a material effect on its financial of GAP. At the Shareholders’ Meeting of April 23, GMéxico also requested that shareholders approve the GAP appoint- position or results of operations. ment of an independent representative of the shareholders to conduct an investigation to determine whether some GAP

102 103 directors and senior officials have been involved in acts unlawful detriment of GAP and that could result in liability for the Company cannot assure that these or future claims, if successful, will not have a negative effect on GMéxico, AMC such directors and officers against it and against its minority shareholders. Also, on December 3, 2013 and based on or the Company. opinions issued by various experts in the field , GMéxico called another Shareholders’ Meeting, which most important proposal of the agenda was the non-renewal of the Technical Assistance Agreement and Technology Transfer. GMéxico Other contingencies: said and intends to continue to have discussions with the management of GAP, directors, shareholders and other third parties in connection with this and other issues mentioned above. Tia Maria: Tia Maria, a Peruvian investment project, was suspended by governmental action in April 2011 in light of protests and Informant people could continue looking, including but not limited to, through collective action or legal proceedings, disruptions carried out by a small group of activists who alleged, among other things, that the project would result in changes in statutes of GAP that informant people consider with applicable Mexican law and may continue seeking the severe environmental contamination and the diversion of agricultural water resources. nomination of the number of GAP’s members of the Board of administration who consider they are entitled under their proportionate interest therein, at any time. In 2014, the matter has been drawn to the Supreme Court of Justice, which SCC prepared a new EIA study taking into account local community concerns and new government guidance. SCC currently is being settled. considers that this new EIA will alleviate the concerns previously raised by the Tia Maria project’s neighboring communities, provide them with an independent source of information and reaffirm the validity of SCC’s assessment of Informant People could continue exploring the possibility of additional investments in the share of GAP, in accordance the project. with applicable Mexican and American law, but have not taken any decision regarding the number of shares intended to be purchased in that transaction, or how it will the deadline for the same . In the fourth quarter 2013 SCC successfully held the two workshops and the public hearing required as part of the EIA approval process and also submitted the new EIA for the Tia Maria project to the Ministry of Energy and Mines The Informant People may, from time to time, purchase or sell shares of GAP in the Mexican or new York’s stock mar- (“MINEM”). The new EIA is now being reviewed by the MINEM and SCC is confident that this study addresses major ket, public, private or otherwise or propose changes to the Board of Directors of GAP and in accordance with the same concerns of the project’s stakeholders. SCC expects to receive approval of this study by the end of the second quarter informant people measured at any time based on business performance and prospects of GAP, prices of shares and 2014 and resume work on the project, with the goal of production start-up late in 2016. However, no assurances can ADS, conditions in the securities and financial markets and GAP’s industry and general economy, regulatory develop- be given as to the specific timing of each such approval. ments affecting them and other factors deemed relevant. SCC has legal and valid title to the Tia Maria mining concessions and the over-lapping surface land in the area. None Additionally, informant people may, from time to time have discussions with the GAP’s management, executive officers of above noted activities have in any way challenged revoked, impaired or annulled SCC´s legal rights to the Tia Maria and other shareholders and third parties in connection with their investments and business and this strategy. mining concessions and/or the over-lapping surface land titles acquired in the past. All SCC’s property rights on these areas are in full force. The Company is involved in other lawsuits related to its operations, but believes that decisions that are adverse to any of them, either individually or in the aggregate would not have a material effect on its financial position or results In view of the delay in this project, SCC has reviewed the carrying value of this asset to ascertain whether impairment of operation. In addition, the Company does not believe that the outcome of the trials arising from purported class exists. Total spending on the project, through December 31, 2013, was $534.6 million of which $189.5 million has actions have a material adverse effect on its financial position or on its results of operations. While the defendants, been reassigned to other Company operations. SCC believes that it is in a better position than prior periods to obtain including GMéxico and its affiliates believe that the claims of derivative lawsuits purported class action are unfounded, the approval to develop the project. SCC does not believe that impairment exists.

104 105 Railway segment b. Actions for annulment against several official communications issued by the Ministry of Communications and Transportation (SCT) on trackage rights, and interconnection and terminal services. Currently three of these actions Negotiations being conducted with another Mexican railroad company are being processed before the Federal Court of Administrative and Fiscal Justice (Spanish acronym TFJFA), the ITM is owed net receivables by Kansas City Southern México, S.A. de C.V. (KCSM) formerly TFM, S.A. de C.V. (TFM) Supreme Court of Justice, the Collegiate Courts and the SCT. The Company is waiting for rulings to be issued on accrued from 1998 to 2010 and negotiations are currently being conducted to determine the amounts receivable by these actions. Currently the Entity is awaiting the relevant resolutions. segment (interline services and trackage and haulage rights) that are not clearly defined in the concession titles. As of December 31, 2013, net receivables were recorded in the amounts of $23.3. At December 31, 2013 Ferromex c. Inquiry into Monopolistic Practices IO-02-2006.- By means of official communication No. DGIPMAR- considers that these amounts have been properly assessed and therefore no additional contingencies have been re- CI-10-096-2008-001 dated January 14, 2008, the Federal Commission of Economic Competition (COFECO) corded in order to take into account any contingent positive or negative results ensuing from the negotiations and legal requested that ITM, GFM, Ferromex, ITF, Ferrosur and other companies submit sundry information, which Ferromex proceedings specified below. submitted on February 28, 2008. COFECO served Notices of Probable Responsibility to the companies which had participated in the stock acquisitions reported by ITM and ITF from November 2005 onwards. On January 22, Legal actions and administrative proceedings 2009, a ruling was issued in this inquiry proceeding. On January 30, 2009, COFECO notified Ferromex of its ruling, Ferromex is involved in various legal actions deriving from its normal operations. In regard to these actions, Ferromex finding that the Company together with other companies were responsible for monopolistic practices and imposed and its legal counsel are of the opinion that regardless of their outcome when taken as a whole, they would have no monetary sanctions, the one imposed on Ferromex amounting to $82.2 and GFM to $0.7. The entities subject to material adverse effect on the Company´s financial condition or on the results of its operations. The main legal actions this inquiry appealed for reconsideration. By ruling issued on June 9, 2009, COFECO decided to uphold its ruling of in which the Ferromex is involved are the following: January 22, 2009. This decision was challenged by an amparo action (Case File 887/2009). After several motions and actions at the different jurisdictional levels, by means of a ruling published on July 13, 2011, the Thirteenth a. Ordinary commercial actions against KCSM. Collegiate Circuit Court in Administrative Matters took cognizance of the review motion under case file number: R.A. i. For the period running from February 19, 1998 to August 31, 2001, the amounts claimed at the time action 262/2011. In addition, the case was also sent to the Supreme Court for it to give consideration to the matters set was filed (nominal value) were for a total of $792.7 Mexican pesos and $20.6 USD. After being processed at forth in the constitutional relief action filed regarding the unconstitutionality of section I of article 9 of the Federal all court levels, Ferromex was denied constitutional relief under a writ of “amparo”, although its right to sue Economic Competition Law (FLEC) under case file. R.A. 393/2012. This matter was resolved at the session held again was safeguarded. Since due to the judgment rendered on February 3, 2005, Ferromex’s right to sue on October 17, 2012, where the only pronouncement of the Supreme Court dealt with the unconstitutionality of again was safeguarded, it should be underscored that Ferromex is still entitled to recover the relevant amounts section I of article 9 of the FLEC and denied constitutional relief under the amparo, while upholding the jurisdictional and therefore, these will be claimed once the Ministry of Communications and Transportation (Spanish acro- control over the matter of the Thirteenth Collegiate Circuit Court in Administrative Matters (13 TCC), which will have nym SCT) issues the new official communication whereby the compensation to be paid by concessionaires to take cognizance of the matters regarding the legality or illegality of the judgment being challenged. On September will be determined. 30, 2013 Ferromex was served notice of the judgment rendered in case file of the amparo action for constitutional relief under review number R.A. 262/2011, by which relief under the amparo was granted in order to reverse the ii. On September 19, 2006, Ferromex filed an ordinary commercial action against KCSM, seeking that accounts resolution issued on June 9, 2009 by COFECO, under the appeal for reconsideration R.A. 08/2009 and all joined be rendered for the period running from January 2002 to December 2004, and claiming payment for the result- actions, ordering retrial as specified for another ruling to be rendered to cure the violations as set forth in the ruling ing amounts. After all motions and proceedings came to a close, the action filed by Ferromex was dismissed, of the Court. As regards the section of the amparo whereby relief was denied, it dealt with the replacement due to and Ferromex was ordered to pay legal costs and expenses at both jurisdictional levels. This court order has the absence of, and delegation of authority by, the defendant governmental party. By a ruling issued on October not yet been enforced. At present Ferromex is waiting for the official communication from the SCT regarding 10, 2013, receipt was acknowledged of official communication filed by the Head Counsel of COFECO remitting the payment of compensation so as to determine the legal action that should be taken. resolution issued on October 8, 2013 regarding RA-08-2008 by the Plenum of COFECO, by which the judgment

106 107 in the amparo action was executed under the following terms: (i)to annul the resolution issued in said case file on June 9, 2009; (ii)to reverse the challenged resolution issued in case file IO-002-2006; and (iii) to close case file IO-002-2006 and all joinders, since there are not sufficient elements to file action for liability against claimants.

d. Indirect Litigation. These are actions in which Company is a codefendant by virtue of labor actions filed against Ferrocarriles Nacionales de México (FNM), which due to their particular characteristics cannot be quantified. Nev- ertheless any financial impact they may have has to be absorbed by the entity in charge of the liquidation of FNM or by the Federal Government, under terms previously agreed upon.

e. Direct Litigation. These are labor-related actions filed against The Company as defendant. The amount of the entry recorded would have to be settled in the event the actions are lost and should there be no possibility of reaching a settlement. The amounts of the indemnities paid during 2013 and 2012 on labor-related actions were $1.7 and $1.0, respectively.

As of December 31, 2013 the Company believes that it has adequately valued accounts receivable and payable and, therefore, did not create a further estimate to cover a possible differential in favor or against that resulted from the negotiations and judgments mentioned above.

Tax contingency matters Tax contingencies are provided for under ASC 740 - 10 - 50 - 15 Uncertain tax position (see Note 7 “Income taxes”).

26. Subsequent events

The Company evaluated subsequent events after December 31, 2013, and through April 16, 2014, the date these consolidated financial statements were available for issuance, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.

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