Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Southern Copper disclosed 31 risk factors in its most recent earnings report. Southern Copper reported the most risks in the “Production” category.

Risk Overview Q3, 2024

Risk Distribution

32% Production

23% Finance & Corporate

19% Macro & Political

13% Legal & Regulatory

6% Tech & Innovation

6% Ability to Sell

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

2020

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Southern Copper Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q3, 2024

Main Risk Category

Production

With 10 Risks

Production

With 10 Risks

Number of Disclosed Risks

No changes from last report

S&P 500 Average: 31

No changes from last report

S&P 500 Average: 31

Recent Changes

0Risks added

0Risks removed

1Risks changed

Since Sep 2024

0Risks added

0Risks removed

1Risks changed

Since Sep 2024

Number of Risk Changed

No changes from last report

S&P 500 Average: 3

No changes from last report

S&P 500 Average: 3

See the risk highlights of Southern Copper in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 31

Production

Total Risks: 10/31 (32%)Above Sector Average

Manufacturing4 | 12.9%

Manufacturing - Risk 1

Our mining and metal production projects may expose us to new risks.

Our Company is in the midst of a large expansion program, which may expose us to additional risks in terms of industrial accidents. While we believe our contractors employ safety standards and other procedures to ensure these projects are completed with proper governance, it is possible that increased activity at our sites could cause environmental accidents or endanger human life.

Manufacturing - Risk 2

Our metals exploration efforts are highly speculative in nature and may be unsuccessful.

Metals exploration is highly speculative in nature because it involves many risks and is frequently unsuccessful. Once mineralization is discovered, it may take a number of years from the initial phases of drilling until production is possible. During such time the economic feasibility of production may change. Substantial expenditures must be made to determine proven and probable mineral reserves, which requires drilling to establish the metallurgical processes that will be needed to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. We cannot assure you that our exploration programs will result in the expansion or replacement of current production with new proven and probable mineral reserves. Development projects have no operating history upon which we can base estimates of proven and probable mineral reserves and estimates of future cash operating costs. Estimates are, to a large extent, based upon the interpretation of geological data obtained from drill holes and other sampling techniques and on pre-feasibility or feasibility studies that generate estimates of cash operating costs based upon anticipated tonnage and grades of ore to be mined and processed; the configuration of the ore body; expected recovery rates of the mineral from the ore; comparable facility and equipment operating costs; anticipated climatic conditions; and other factors. As a result, actual cash operating costs and economic returns based upon the development of proven and probable mineral reserves may differ significantly from those originally estimated. Moreover, significant decreases in actual or expected prices may mean reserves, once found, will be uneconomical to produce.

Manufacturing - Risk 3

We may be adversely affected by challenges relating to slope stability.

Our open-pit mines get deeper as we mine them, presenting certain geotechnical challenges including the possibility of slope failure. If we are required to decrease pit slope angles or provide additional road access to prevent such a failure, our stated reserves could be negatively affected. Furthermore, hydrological conditions relating to pit slopes, renewal of material displaced by slope failures and increased stripping requirements could also negatively affect our stated reserves. We take action to maintain slope stability, but we cannot assure you that we will not have to take additional action in the future or that our actions taken to date will be sufficient. Unexpected slope failures, or additional requirements to prevent slope failures, may negatively affect our results of operations and financial condition and may diminish our stated mineral reserves.

Manufacturing - Risk 4

Potential delays in the transport of products to customers and possible shortages of critical parts, equipment, and other resources may adversely affect our results of operations.

Current challenges in the global shipping industry have led to congestion in ports, a shortage in containers, and a lack of space on ships. Because of this situation, the Company faces a risk of potential supply chain disruptions that may adversely affect our operations and development projects. To address this potential issue, we have increased our safety stock levels and adjusted our replacement algorithms. Additionally, our revenues and collections may also be adversely affected by transportation delays, which could negatively impact our sales agreements. Although the recovery of the global economy is causing the aforementioned issues at ports and in the shipping industry, this situation is expected to be resolved gradually and to return to normal levels in the short term. However, if these issues continue in the long term, our supply chain and our sales flow could be adversely impacted.

Employment / Personnel1 | 3.2%

Employment / Personnel - Risk 1

We may be adversely affected by labor disputes.

In the last several years, we have experienced several strikes and other labor disruptions that have had an adverse impact on our operations and operating results. As of December 31, 2023, unions represented approximately 61% of our workforce in Peru and 70% of our workforce in Mexico. Currently, we have labor agreements in effect for our Mexican and Peruvian operations. Our Taxco mine in Mexico has been on strike since July 2007. It is expected that operations at this mine will remain suspended until these labor issues are resolved. In addition, workers at the San Martin mine were on strike from July 2007 to August 2018. After eleven years of an illegal stoppage, we resumed control of the San Martin mine in August 2018. During this period, the San Martin facilities deteriorated and we undertook a major renovation to restart operations during the second quarter of 2019 for a total expense of approximately $90.5 million. For additional information, see Item 2, "Properties-Mexican IMMSA Unit-San Martin and Taxco", and Note 13, "Commitments and Contingencies-Labor matters", to the consolidated financial statements. We cannot assure you when the pending strike will be settled, or that in the future we will not experience strikes or other labor related work stoppages that could have a material adverse effect on our financial condition and results of operations.

Costs5 | 16.1%

Costs - Risk 1

Our mining operations or metal production projects may be subject to stoppage and additional costs due to community actions and other factors.

In recent years, global mining activity has been pressured by neighboring communities for financial commitments to fund social benefit programs and infrastructure improvements. Our projects in Peru are not exempt from these demands. Our Tia Maria project in Peru has experienced delays while trying to resolve issues with community groups. Seemingly in the Peruvian mining environment, it is becoming crucial to obtain acceptance from local communities for projects in their areas, which may entail compliance with the demands for substantial investments in community infrastructure development and modernization to proceed with the mining projects. We are confident that we will move forward with the Tia Maria project. However, we cannot assure you when and that we will incur no additional costs for community infrastructure development and modernization to obtain approval from the communities for current or future mining projects. In 2022, violent protests by some of communities adjoining the Cuajone mine negatively affected the mine's operations. In February 2022, the railway between Cuajone and Ilo was blocked and Viña Blanca water reservoir facilities were seized, cutting off the water supply to some residents of the Cuajone mining camp. After numerous efforts to restore order through dialogue by the authorities, the Peruvian government declared a state of emergency in the Moquegua region in April 2022 and ordered the protestors to return the Viña Blanca facilities and the railway to the Company. After an evaluation of the damage, the Company resumed production at the Cuajone mining unit and the facilities are currently operating at full capacity. On April 30, 2022, the Peruvian government issued a Ministerial Resolution to set up a three-party-dialogue-table with members of the community, government and Company officials executives to better understand the concerns of all parties. Several meetings have been held, the last meeting was in June 2023 and it is expected to have a new meeting in March 2024. The Company has proposed plans to invest in social programs that address the needs voiced by the communities and has indicated interest in purchasing land near the Cuajone operations to establish a buffer zone to protect facilities and production in the future. The Community insist to receive a economic compensation. ? However, we cannot guarantee that any additional incidents will not arise or assert that any future incidents that occur will imply no adverse impacts for our facilities, the results of our operations or our financial position. In addition, several collective action lawsuits and civil action lawsuits have been filed against the Company in Mexico through both federal courts and state courts in Sonora. Several constitutional lawsuits have also been filed against various government authorities and the Company. These lawsuits are seeking damages and demand remediation actions to restore the environment. The Company believes that the lawsuits are without merit and that it is not possible to determine the extent of the damages sought. Moreover, the Company cannot offer any assurances that the outcome of these lawsuits will not have adverse effects on the Company.

Costs - Risk 2

Interruptions of energy supply or increases in energy, fuel and gas costs, shortages of water supply, critical parts, equipment, skilled labor and other production costs may adversely affect our results of operations.

We require substantial amounts of fuel oil, electricity, water and other resources for our operations. Fuel, gas and power costs constituted approximately 29% of our total production cost in 2023, 34% in 2022 and 31% in 2021. We rely upon third parties for our supply of the energy resources consumed in our operations. Therefore prices for and availability of energy resources may be subject to change or curtailment due to new laws or regulations; imposition of new taxes or tariffs; interruptions in production by suppliers; and variations in global prices or market conditions, among other factors. Regarding water consumption, although each of our operations currently has sufficient water supplies to cover its operational demands, the loss of some or all water rights for any of our mines or operations, in whole or in part, shortages relative to the water to which we have rights or a lack of additional back-up water supplies at an acceptable cost, or at all, could require us to curtail or shut down mining production and could prevent us from pursuing expansion opportunities, thereby increasing and/or accelerating costs or foregoing profitable operations. In addition, future shortages of critical parts, equipment and skilled labor could adversely affect our operations and development projects.

Costs - Risk 3

Our financial performance is highly dependent on the price of copper and the other metals we produce.

Our financial performance is significantly affected by the market prices of the metals that we produce, particularly the market prices of copper, molybdenum, zinc and silver. Historically, these prices have been subject to wide fluctuations and are affected by numerous and complex factors beyond our control. Market prices are affected by a number of factors, including global economic and political conditions in general, and in particular by: international policies and regulations in the ambits of trade, taxes and tariffs; levels of supply and demand; the availability and cost of substitutes; inventory levels maintained by users; actions of participants in the commodities markets; interest rates; expectations regarding future inflation rates; currency exchange rates and changes in technology. In addition, the market prices of copper and certain other metals have on occasion been subject to rapid short-term changes. At the start of the pandemic in 2020, copper prices were initially impacted by economic uncertainty. However, in mid-2020, copper prices began to rise and reached a record highs during 2021. Volatility in global economic growth, particularly in developing countries, has the potential to adversely affect future demand and prices for commodities. Geopolitical uncertainty and protectionism have the potential to inhibit international trade and negatively impact business confidence, which can create price volatility and constraints on our ability to trade in certain markets. In addition to the factors discussed above, copper prices may be affected by demand from China, which is currently the largest consumer of refined copper and concentrate in the world. Over the last three years, approximately 77.6% of our revenues have come from the sale of copper; 10.9% from molybdenum; 4.2% from silver; and 3.1% from zinc. Please see the distribution of our revenues per product on Item 8 "Financial Statements and Supplementary Data" Note 19 "Segment and Related Information-Sales value per segment". See also the historical average price of our products on Item 1 Business caption "Metals prices". We cannot predict if metals prices will rise or fall in the future. Extended significant future declines in metals prices, particularly copper, could have a material adverse impact on our results of operations, financial condition and value of our assets. Under very adverse market conditions, we might consider curtailing or modifying some of our mining and processing operations. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, in which case, we may incur losses, which may be material. Declines in the prices of metals we sell could also result in metals inventory adjustments and impairment charges for our long-lived assets. Other events that could result in the impairment of our long-lived assets include, but are not limited to, decreases in estimated proven and probable mineral reserves and any event that might have a material adverse effect on current and future expected mine production costs.

Costs - Risk 4

Volatility in metals prices may also impact the price of our outstanding securities.

Although our results of operations and cash flow will reflect fluctuations in the prices of copper and other metals we produce, short-term volatility in prices may generate significant fluctuations in the price of our securities. Such volatility in the price of our securities may not be reflective of our operating performance or financial results.

Costs - Risk 5

Our operations are subject to risks, some of which are not insurable.

The business of mining, smelting and refining copper, zinc and other metals is subject to a number of risks and hazards, including industrial accidents, labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment, environmental hazards, weather and other natural phenomena, such as seismic activity, wall failures and rock slides in our open-pit mines, structural collapses of our underground mines or tailings impoundments, and lower than expected ore grades or recovery rates. The Company's operations may also be affected by mudslides and flash floods caused by torrential rains. Such occurrences could result in damage to, or destruction of, mining operations resulting in monetary losses and possible legal liability. In particular, surface and underground mining and related processing activities present inherent risks of injury to personnel, loss of life and damage to equipment. The waste rock and tailings produced in our mining operations represent our largest volume of waste material. Managing the volume of waste rock and tailings presents significant environmental, safety and engineering challenges and risks. We maintain large tailings impoundments containing sand of ground rock, moistened with water, which are effectively large dams that must be engineered, built and monitored to assure structural stability and avoid leakages or structural collapse. Defects, errors and failures at tailings dams and in other impoundments at any of our mining operations could cause severe property and environmental damage and loss of life. The importance of careful design, management and monitoring of large impoundments was emphasized in recent years by large scale tailings dam failures at unaffiliated mines, which caused extensive property and environmental damage and resulted in the loss of life. For more information regarding our tailing dams, please see Item 2 "Properties-Slope Stability-Tailing Dams." During recent years, social and political demands has caused violence which could result in damage to, or destruction of, mining operations resulting in monetary losses and possible legal liability. In our proactive approach to managing operational sustainability risks, we have implemented the Critical Risk Registry, aligning with the International Council on Mining and Metals (ICMM) Good Practice Guide on Health and Safety Critical Control Management. This robust system addresses both environmental and health and safety risks, ensuring compliance with best practices. By focusing on critical controls through this approach, we optimize resource allocation and bolster our efforts in sustainability risk management. To enhance the monitoring of controls, we recently introduced a comprehensive company procedure and digital tool. This platform facilitates detailed oversight by establishing clear roles, responsibilities, timelines, reminders, and notifications. It streamlines the chain of command, enabling the prompt identification of deviations from established protocols and facilitating the implementation of corrective actions along with subsequent monitoring. Through the digital tool, we can measure, verify, and audit controls, promptly identifying instances of incorrect implementation or threshold breaches. In addition, we maintain insurance against many of these and other risks, which under certain circumstances may not provide adequate coverage. Insurance against certain risks, including certain liabilities for environmental damage or hazards as a result of exploration and production, is not generally available to us or other companies within the mining industry. Nevertheless, recent environmental legal initiatives contemplate requirements for environmental damage insurance. If these regulations come into force, we will have to analyze the need to obtain said insurance. We do not have nor do we intend to obtain, political risk insurance. We cannot assure you that these and other uninsured events will not have an adverse effect on our business, properties, operating results, financial condition or prospects.

Finance & Corporate

Total Risks: 7/31 (23%)Below Sector Average

Share Price & Shareholder Rights1 | 3.2%

Share Price & Shareholder Rights - Risk 1

We are controlled by Grupo Mexico, which exercises control over our affairs and policies and whose interests may be different from yours.

As of December 31, 2023, Grupo Mexico owned indirectly 88.9% of our capital stock. Some of our officers and directors, and those of Minera Mexico, are also directors and/or officers of Grupo Mexico and/or of its affiliates. We cannot assure you that the interests of Grupo Mexico will not conflict with those of our minority stockholders. Grupo Mexico has the ability to determine the outcome of substantially all matters submitted for a vote to our stockholders and thus exercises control over our business policies and affairs, including the following: - the composition of our Board of Directors and, as a result, any determinations of our Board concerning our business direction and policy, including the appointment and removal of our officers;- determinations concerning mergers and other business combinations, including those that may result in a change of control;- whether dividends are paid or other distributions are made and the amount of any dividends or other distributions;- sales and dispositions of our assets;- the amount of debt financing that we incur; and - the approval of capital projects. We cannot assure you that an increase in the financial obligations of Grupo Mexico or AMC, which may be attributable to financing or to other reasons, will not result in a scenario in which our parent corporations obtain loans, increase dividends or receive other funding from us. In addition, we have in the past engaged in, and expect to continue engaging in, transactions with Grupo Mexico and its other affiliates that are related party transactions and may present conflicts of interest. For additional information regarding the share ownership of, and our relationships with, Grupo Mexico and its affiliates, see Note 18 "Related Party Transactions" to the consolidated financial statements.

Accounting & Financial Operations4 | 12.9%

Accounting & Financial Operations - Risk 1

Applicable law restricts the payment of dividends from our Minera Mexico subsidiary to us.

Our subsidiary, Minera Mexico, is a Mexican company and, as such, may pay dividends only out of net income that has been approved by shareholders. Shareholders must also approve the actual dividend payment, after mandatory legal reserves have been created and losses for prior fiscal years have been satisfied. These legal constraints may limit the ability of Minera Mexico to pay dividends to us, which in turn, may have an impact on our ability to pay stockholder dividends or to service debt.

Accounting & Financial Operations - Risk 2

We may not pay a significant amount of our net income as cash dividends on our common stock in the future.

We have distributed a significant amount of our net income as dividends since 1996. Our dividend practice is subject to change at the discretion of our Board of Directors at any time. The amount that we pay in dividends is subject to a number of factors, including the results of our operations; our financial condition; cash requirements; tax considerations; future prospects; legal restrictions; contractual restrictions in credit agreements; limitations imposed by the government of Peru, Mexico and other countries where we have significant operations; and other factors that our Board of Directors may deem relevant. Depending on our capital investment program and global economic conditions, it is possible that future dividend distributions will be lower than the levels seen in recent years.

Accounting & Financial Operations - Risk 3

Our ability to recognize the benefits of deferred tax assets is dependent on future cash flows and taxable income.

Through 2023, the Company recognized the expected future tax benefit from deferred tax assets when the tax benefit was considered more likely than not to be realized. A valuation allowance is provided for those deferred tax assets for which management believes that the related benefits will not be realized. Determining the amount of the valuation allowance and assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income and existing tax laws. There can be no assurance that the Company will be able to recognize the expected future benefits of deferred tax assets; this inability could have a material adverse effect on the Company's financial results.

Accounting & Financial Operations - Risk 4

Our actual reserves and resources may not conform to our current estimates of our ore deposits and our long-term viability depends on our ability to replenish mineral reserves and resources.

There is a degree of uncertainty attributable to the estimation of reserves and resources. Until reserves are actually mined and processed, the quantity of ore and grades must be considered estimates only. We disclose proven and probable reserves and measured, indicated and inferred resources, each as defined in Item 1300 of Regulation S-K ("S-K 1300"). Additionally, the scientific and technical information concerning our mineral projects in this Form 10-K has been reviewed and approved by third-party "qualified persons" pursuant to S-K 1300. We may be required in the future to revise our reserves and resources estimates based on our actual production. We cannot assure you that our actual reserves and resources conform to geological, metallurgical or other expectations or that the estimated volume and grade of ore will be recovered. Market prices of our metals, increased production costs, reduced recovery rates, short-term operating factors, royalty charges and other factors may render proven and probable reserves uneconomic to exploit and may result in revisions of reserves data from time to time. Reserves data may not be indicative of future results of operations. Our reserves are depleted as we mine. We depend on our ability to replenish our mineral reserves and resources for our long-term viability. We use several strategies to replenish and increase our mineral reserves and resources, including exploration and investment in properties located near our existing mine sites and investing in technology that could extend the life of a mine by allowing us to cost-effectively process ore types that were previously considered uneconomic. Acquisitions may also contribute to increasing mineral reserves and resources, and we review potential acquisition opportunities on a regular basis. However, we cannot assure you that we will be able to continue with our strategy to replenish reserves indefinitely.

Debt & Financing2 | 6.5%

Debt & Financing - Risk 1

Our business requires levels of capital investments that we may not be able to maintain.

Our business is capital intensive. Significant capital investments are required specifically for the exploration and exploitation of copper and other metal reserves, mining, smelting and refining costs, the maintenance of machinery and equipment and compliance with laws and regulations. We must continue to invest capital to maintain or increase the amount of copper reserves that we exploit and the amount of copper and other metals we produce. We cannot assure you that we will be able to maintain our production at levels that generate sufficient cash, or that we will have access to sufficient financing to continue our exploration, exploitation and refining activities at or above present levels.

Debt & Financing - Risk 2

Restrictive covenants in the agreements governing our indebtedness and the indebtedness of our Minera Mexico subsidiary may restrict our ability to pursue our business strategies.

Our financing instruments and those of our Minera Mexico subsidiary include financial and other restrictive covenants that, among other things, limit our and Minera Mexico's abilities to incur additional debt and sell assets. If either we or our Minera Mexico subsidiary fails to comply with these obligations, we could be in default under the applicable agreements. This situation, if not addressed or waived, could require immediate repayment of debt obligations. Our Minera Mexico subsidiary is further limited by the terms of its outstanding notes, which also restrict the Company's applicable incurrence of debt and liens. In addition, future credit facilities may contain limitations on our capacity to incur additional debt and liens, dispose of assets, or pay dividends to our common stockholders.

Macro & Political

Total Risks: 6/31 (19%)Above Sector Average

Economy & Political Environment2 | 6.5%

Economy & Political Environment - Risk 1

Changed

Mexican economic and political conditions, as well as drug related violence, may have an adverse impact on our business

On April 29 2023, Mexican Senate approved a fast-track bill that would impact the mining industry. The main aspects that will be affected by the legislation are changes in mining concession period from 50 to 30 years; new restrictions and conditions on water use; provide of guarantees for closure and remediation of operations, sets 5% contribution of net earnings to indigenous communities for new projects and finally significant changes to exploration activities. In the future, the aforementioned changes could trigger amendments, additions and repeals to provisions of a number of laws, including the Mining Law, the National Water Law, the General Law for Ecological Balance and Environmental Protection and the General Law for the Prevention and Management of Mine Waste. Although the Company believes that there would be no material impact on the Company's operations or financial condition, we cannot assure you that future developments in these laws will not affect our current business as well as our organic growth portfolio.

Economy & Political Environment - Risk 2

Peruvian economic and political conditions, as well as illegal mining activities may have an adverse impact on our business.

A significant portion of our operations is conducted in Peru. Accordingly, our business, financial condition or results of operations could be affected by changes in the political, regulatory or economic developments in the country and changes in the economic or other policies of the Peruvian government. Over the past several decades, Peru has had a succession of regimes with differing political agendas and policies. In the twentieth century, past governments have frequently intervened in the nation's economy and social structure. Among other actions, past governments have imposed controls on prices, exchange rates and local and foreign investments; placed limitations on imports; restricted companies' abilities to dismiss employees and have prohibited the remittance of profits to foreign investors. Between 2019 and 2023, Peru experienced heightened political instability in a context marked by ongoing investigations into allegations of corruption and confrontation on the political front. Significant political turmoil in Peru led to a shutdown of the Peruvian Congress and the removal of three Peruvian presidents. On December 7, 2022, the Peruvian congress invoked its powers under the Constitution to remove the current President from office. The Vice President immediately assumed the presidency, which has led to considerable turmoil, particularly in the south of Peru, where acts of vandalism and violence escalated. Roadblocks were scattered throughout the country, which negatively affected the normal course of business in various regions. Fortunately, our operations were not impacted. This climate of violence gradually subsided during the year and was replaced by a general concern about the economic recession and personal insecurity. Because we have significant operations in Peru, we cannot provide any assurance that political developments and economic conditions, including any changes to economic policies or the adoption of other reforms proposed by existing or future administrations in Peru and/or other factors will have no material adverse effects on market conditions, the prices of our securities, our ability to obtain financing, our results of operations, or our financial condition.

International Operations1 | 3.2%

International Operations - Risk 1

Developments in the United States, Europe and emerging market countries may adversely affect the Company business, our common stock price and our debt securities.

The business, market value and trading price of securities of companies with significant operations in Peru and Mexico is, to varying degrees, affected by the economic policies and market conditions in the United States, Europe and emerging market countries. Although economic policies and conditions in these countries may significantly differ from policies and conditions in Peru or Mexico, the market's reactions to developments in any of these countries may adversely affect the Company's business causing a fluctuation on the market value or the trading price of our securities, including debt securities. In addition, in recent years economic conditions in Mexico have shown to have an increased correlation to U.S. economic conditions. Therefore, changes in economic policies and conditions in the United States could also have a significant adverse effect on Mexican economic conditions, affecting our business and the price of our common stock or debt securities. In 2017, the United States, Canada and Mexico began a discussion to update the North American Free Trade Agreement ("NAFTA"). In September 2018, the three countries reached an agreement on a new trade deal, which will be known as the United States-Mexico-Canada Agreement ("USMCA"). In June 2019, Mexico's senate ratified the UMSCA. In December 2019, the three countries agreed to a new review of its regional trade pact, also concluding that the USMCA would replace NAFTA. On January 29, 2020, the President of the U.S. ratified and signed the USMCA into law. On July 1, 2020, the USMCA came into effect. Although recent developments in the U.S. have reduced political instability, lifted consumer confidence and boosted the U.S. stock market, it is unclear whether the U.S. government will enact new policies towards China, that will reduce or eliminate trade tensions between the two countries. Despite being the epicenter of the COVID-19 pandemic, China began 2021 with a relatively optimistic economic growth outlook and represents approximately 50% of the world's copper demand. A slowing in China's economic growth, coupled with continued trade tensions with the U.S. could result in lower copper prices which could have a material adverse impact on our business and results of operations. The adoption and expansion of trade restrictions; changes in the current U.S.-China relations, including on-going trade tensions; or other changes in governmental policies related to taxes, tariffs, trade agreements or any other policies are difficult to predict, and could adversely affect the demand for our products, our costs, our customers, our suppliers and the U.S. economy, and consequently could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations. We cannot assure you that the market value or trading prices of our common stock and debt securities, will not be adversely affected by events in the United States or elsewhere, including emerging market countries.

Natural and Human Disruptions1 | 3.2%

Natural and Human Disruptions - Risk 1

We may be adversely affected by natural disasters, pandemics (including the recent coronavirus outbreak) and other catastrophic events, and by man-made problems such as terrorism, which could disrupt our business operations and our business continuity. Furthermore, disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters, adverse weather conditions, floods, pandemics (including the recent coronavirus outbreak), acts of terrorism and other catastrophic or geo-political events may cause damage or disruption to our operations, international commerce and the global economy, which could have an adverse effect on our business, operating results, and financial condition.

Capital Markets2 | 6.5%

Capital Markets - Risk 1

Peruvian inflation and fluctuations in the sol exchange rate may adversely affect our financial condition and results of operations.

Although the U.S. dollar is our functional currency and our revenues are primarily denominated in U.S. dollars, as we operate in Peru, portions of our operating costs are denominated in Peruvian soles. Accordingly, when inflation or deflation in Peru is not offset by a change in the exchange rate of the sol, our financial position, results of operations, cash flows and the market price of our common stock could be affected. Inflation in Peru in 2023, 2022 and 2021 was 3.2%, 8.5% and 6.4%, respectively. In 2023, the value of the sol appreciated by 2.8% against the U.S. dollar, versus a 4.5% appreciation in 2022 and a 10.3% depreciation in 2021. Although the Peruvian government's economic policy reduced inflation and the economy has experienced significant growth in the past decade, we cannot assure you that inflation will not increase from its current level or that such economic growth will continue in the future at similar rates or at all. Additionally, a global financial economic crisis could negatively affect the Peruvian economy. To manage the volatility related to the risk of currency rate fluctuations, we may enter into forward exchange contracts. We cannot assure you, however, that currency fluctuations will not have an impact on our financial condition and results of operations.

Capital Markets - Risk 2

Mexican inflation, restrictive exchange control policies and fluctuations in the peso exchange rate may adversely affect our financial condition and results of operations.

Although all of our Mexican operations' sales of metals are priced and invoiced in U.S. dollars, a substantial portion of its costs are denominated in pesos. Accordingly, when inflation in Mexico increases without a corresponding depreciation of the peso, the net income generated by our Mexican operations is adversely affected. Inflation in Mexico was 4.7% in 2023, 7.8% in 2022 and 7.4% in 2021. The value of the peso appreciated by 12.7% against the U.S. dollar in 2023, versus a 5.9% apreciation in 2022 and a 3.2% of depreciation in 2021. The peso has been subject in the past to significant volatility, which may not have been proportionate to the inflation rate and may not be proportionate to the inflation rate in the future. Currently, the Mexican government does not restrict the ability of Mexican companies or individuals to convert pesos into dollars or other currencies. While we do not expect the Mexican government to impose any restrictions or exchange control policies in the future, it is an area we closely monitor. We cannot assure you the Mexican government will maintain its current policies with regard to the peso or that the peso's value will not fluctuate significantly in the future. The imposition of exchange control policies could impair Minera Mexico's ability to obtain imported goods and to meet its U.S. dollar-denominated obligations and could have an adverse effect on our business and financial condition.

Legal & Regulatory

Total Risks: 4/31 (13%)Below Sector Average

Regulation2 | 6.5%

Regulation - Risk 1

There is uncertainty as to the termination and renewal of our mining concessions.

Under the laws of Peru and Mexico, mineral resources belong to the state and government. Therefore, concessions are required in both countries to explore or exploit mineral reserves. In Peru, our mineral rights derive from concessions from Ministry of Energy and Mines ("MINEM") for our exploration, exploitation, extraction and/or production operations. In Mexico, our mineral rights derive from concessions granted, on a discretionary basis, by the Ministry of Economy, pursuant to Mexican mining law and regulations thereunder. Mining concessions in both Peru and Mexico may be terminated if the obligations of the concessioner are not satisfied. In Peru, we are obligated to pay certain fees for our mining concession. In Mexico, we are obligated, among other things, to explore or exploit the relevant concession, to pay any relevant fees, to comply with all environmental and safety standards, to provide information to the Ministry of Economy and to allow inspections by the Ministry of Economy. Any termination or unfavorable modification of the terms of one or more of our concessions, or failure to obtain renewals of such concessions subject to renewal or extensions, could have a material adverse effect on our financial condition and prospects.

Regulation - Risk 2

Our Company is subject to health and safety laws that may restrict our operations, result in operational delays or increase our operating costs and adversely affect our financial results of operations.

We are required to comply with occupational health and safety laws and regulations in Peru and Mexico where our operations are subject to periodic inspections by the relevant governmental authorities. These laws and regulations govern, among others, health and safety workplace conditions, including high risk labor and the handling, storage and disposal of chemical and other hazardous substances. We believe our operations comply in all material respects with applicable health and safety laws and regulations in the countries in which we operate. Compliance with existing and new laws and regulations that may be applicable to us in the future could increase our operating costs and adversely affect our financial results of operations and cash flows. Our objective is to preserve the health and safety of our workforce by implementing occupational health and training programs and safety incentives at our operations that meet all regulatory requirements and enhance employee performance. Despite the Company's efforts, we are not exempt from accidents. These are reported to Mexican and Peruvian authorities as required. Regarding non-fatal accidents, during the last four years, the Company's Dart rate (rate to measure workplace injuries severe enough to warrant Day Away from work, job Restrictions and/or job Transfers) was much lower than the MSHA Dart rate (the MSHA Dart rate is published by the U.S.'s Mine Safety and Health Administration, and is used as an industry benchmark). In 2023, we recorded five fatalities (two contractors and three employees). In 2022, we recorded four fatalities (two contractors and two employees) and in 2021, three employee fatalities were registered. The amounts paid to the Mexican and Peruvian authorities for reportable accidents had no adverse effects on our results. Under Mexican and Peruvian law penalties and fines for safety violations are generally monetary, but in certain cases may lead to the temporary or permanent shutdown of the affected facility or the suspension or revocation of permits or licenses. Additionally, violations of security and safety laws and regulations at our Peruvian operations can be considered criminal activity and punishable by a sentence of up to 10 years of prison.

Litigation & Legal Liabilities1 | 3.2%

Litigation & Legal Liabilities - Risk 1

Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies may adversely affect our financial condition and results of operations.

We are currently, and may in the future become, subject to litigation, arbitration or other legal proceedings with other parties. If rulings are against the Company, these legal proceedings, or others that could be brought against us in the future, may adversely affect our financial position or prospects. For further detailed discussion of pending litigation, please see Note 13 "Commitment and Contingencies-Litigation matters" of the consolidated financial statements.

Environmental / Social1 | 3.2%

Environmental / Social - Risk 1

Environmental regulation, climate change and other regulations may increase our costs of doing business, restrict our operations or result in operational delays.

Our exploration, mining, milling, smelting and refining activities are subject to a number of Peruvian and Mexican laws and regulations, including environmental laws and regulations, and certain industry technical standards. Additional matters subject to regulation include, but are not limited to, concession fees, transportation, production, water use and discharge, power use and generation, use and storage of explosives, surface rights, housing and other facilities for workers, reclamation, taxation, labor standards, mine safety and occupational health. As the world and the countries in which we operate become more conscious of the importance of environmental aspects, we expect additional environmental laws and regulations will be enacted over time. Please refer to Note 13 "Commitments and Contingencies-Environmental matters" of our financial statements for further information on this subject. The potential physical impacts of climate change on our operations are highly uncertain and depend on the geographic location of our facilities. These may include droughts and the associated changes in rainfall patterns, water shortages, changes in sea levels, and high temperatures. These effects may adversely impact the cost, production and financial performance of our operations. In addition, substantial weather-related conditions could impact our relationships and arrangements with our major customers and suppliers by materially affecting the normal flow of our transactions, especially seaborne transactions. For example, severe weather events could damage transportation infrastructures and lead to interruptions or delays in the supply of key inputs and raw materials or sold products. We monitor fluctuations in weather patterns in the areas where we operate. Aligned with government efforts, we measure our carbon footprint and have updated our climate strategy to reduce the contributions to greenhouse gas emissions of our operations. We also evaluate our water demand, as weather changes may result in increases or decreases that affect our needs. Efforts to comply with more stringent environmental protection programs in Peru and Mexico and with relevant trade agreements could impose constraints on operations and imply additional costs. Consequently, we may need to make significant investments in this regard in the future. We cannot assure you that current or future legislative, regulatory or trade developments will not have adverse effects on our business, properties, operating results, financial condition or prospects.

Tech & Innovation

Total Risks: 2/31 (6%)Below Sector Average

Technology2 | 6.5%

Technology - Risk 1

Our business depends upon information technology systems that may be adversely affected by disruptions, damage, cyber-attacks, failure and risks associated with implementation and integration.

Our operations depend upon information technology systems that may be subject to disruption, damage or failure from different sources, including, without limitation, the installation of malicious software, computer viruses, security breaches, cyber-attacks and defects in design. In recent years, cybersecurity incidents have increased in frequency and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. We have taken appropriate preventive measures to mitigate potential risks by implementing an information security management system that conducts frequent monitoring; which ensures the application of controls that are frequently reviewed and tested. In March 2021, we experienced a Ransomware cyber-attack, which was carried out by individual hackers. This cyber-attack encrypted a total of 420 servers and units of personal equipment. However, due to the quick response of our Information Technology team, our Enterprise Resource Planning software was not affected by the aforementioned attack. Given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to manipulation or improper use of our systems and networks, operational delays, situations that compromise confidential or otherwise protected information, destruction or corruption of data, security breaches, or financial losses from remedial actions, any of which could have a material adverse effect on the cash flows, competitive position, financial condition or results of our operations.

Technology - Risk 2

Our business is exposed to certain risks associated with artificial intelligence ("AI") and other new technologies.

Information and operational technology systems continue to evolve and, in order to remain competitive, we must implement new technologies in a timely, cost-effective and efficient manner. For example, nowadays a major number of software, hardware, services and in general technological solutions vendors are including AI components for a very wide range of applications; and we may find improvement opportunities by developing and applying AI in several of our business and operational processes. These applications may become important in our operations over time. Our ability to implement new technologies, including AI, may affect our competitiveness and, consequently, our results of operations. In addition, we may utilize AI and other new technologies in software provided by third parties to enhance our capabilities in producing copper, improving business processes and responding to threats to our technology platforms. The use of AI when lacking of a strategy and a governance model may increase our exposure to cybersecurity risks and additional risks relating to the protection of data.

Ability to Sell

Total Risks: 2/31 (6%)Below Sector Average

Competition1 | 3.2%

Competition - Risk 1

Global and local market conditions, including the high competitiveness in the copper mining industry, may adversely affect our profitability.

Our industry is cyclical in nature and fluctuates with economic cycles. Therefore, we are subject to the risks arising from adverse changes in domestic and global economic and political conditions, such as a potential global recession, Russia's invasion of Ukraine, lower levels of consumer and corporate confidence, lower business investment, higher unemployment, reduced income and asset values in many areas, currency volatility and limited availability of credit and access to capital. Additionally, we face competition from other copper mining and producing companies around the world. Along these lines, significant competition exists to acquire properties that produce or are capable of producing copper and other metals, and some of our main competitors have consolidated, which makes them more diversified than we are. We cannot assure you that changes in market conditions, including competition, will not adversely affect our ability to compete in the future on the basis of price or other factors with companies that may benefit from future favorable trading or other arrangements.

Demand1 | 3.2%

Demand - Risk 1

Changes in the demand level for our products and copper sales agreements could adversely affect our revenues.

Our financial results may be affected by fluctuations in demand for the refined, semi-refined metal products and concentrates we sell at both the industrial and consumer level, and may also be affected by changes in the global economy, including economic upturns and downturns of differing magnitudes. Changes in technology, industrial processes, concerns over weaknesses in the global economy and consumer habits may affect the level of demand to the extent that those increase or decrease the need for our metal products. Our revenues may also be adversely affected by events of force majeure that could have a negative impact on our sales agreements. These events include acts of nature, labor strikes, fires, floods, wars, transportation delays, government actions or other events that are beyond the control of the parties to the agreement. However, the success of the energy transition is intrinsically linked to copper, our key product, critical for the production of technological solutions to the decrease the global greenhouse gas (GHG) emissions. Given copper's crucial role in electrification and the generation of clean energies, there exists an increasing expectation from both corporate entities and societal stakeholders that copper sourcing should emanate from entities committed to rigorous and responsible production practices. This commitment has driven us to pledge certifications for all our copper production under international standards.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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