TEXT-Fitch rates Southern Copper proposed snr unsecured bond

(The following statement was released by the rating agency)

April 6 - Fitch Ratings has assigned a 'BBB' rating to
Southern Copper Corporation's (SCCO.N) (SCC) proposed senior
unsecured bond up to US$1.5 billion, which will be comprised of
two tranches with maturities of 2020 and 2040, respectively.

The bond will be issued directly through SCC and the
proceeds will be used for general corporate purposes including
capital expenditures.

SCC's Issuer Default Rating (IDR) and debt ratings are as
follows:

--Local currency IDR 'BBB';

--Foreign currency IDR 'BBB';

--Unsecured debt issuances 'BBB'.

The Rating Outlook is Stable. SCC had US$772 million of
cash and cash equivalents and US$1.3 billion of total debt, and
generated US$1.8 billion of EBITDA and US$1.4 billion of funds
from operations (FFO) as of Dec. 31, 2009.

These last two figures represent a decline from US$2.5
billion and US$1.6 billion, respectively, during 2008. The drop
in SCC's profitability in 2009 was a result of lower average
copper prices of around US$2.49 as well as lower sales
volumes.

Despite the difficult market conditions during the first
half of last year, SCC ended 2009 with a strong credit profile
relative to its rating category.

The company's FFO interest coverage was a comfortable 14.3
times (x), while its net debt/EBITDA ratio was 0.3x and FFO
adjusted leverage was 0.9x, respectively.

SCC also has a comfortable liquidity position for its
rating category, with only US$10 million of short-term debt
maturing during each year from 2010 to 2013.

The company's EBITDA margin for the year was 48.6%,
reflecting SCC's low cash cost of copper production of US$0.36
per lb including by-products and US$1.36 per lb excluding
by-products. 70% of SCC's sales in 2009 were derived from
copper, 12% from molybdenum, 7% silver, 5% zinc and 6% other
material that includes gold, lead and sulfuric acid.

Supplementing the company's strong financial profile,
Fitch's credit ratings of SCC continue to reflect its leading
market position in copper, with the company ranking eighth
globally for copper production in 2009 with 485,000 metric tons
of mined copper.

SCC owns and operates four geographically diversified
large-scale open pit mines that possess the highest ranking
average mine life among global copper producers, calculated at
81 years (pro forma for Cananea production).

In addition, SCC ranks first worldwide in terms of
contained copper reserves with 55 million metric tons, followed
by Codelco with 53 million metric tons and Freeport with 36.3
million metric tons, as calculated by reserves divided by 2009
production levels.

Fitch's base case forecast for SCC during 2010 results in a
growth in EBITDA to approximately US$2 billion with an EBITDA
margin of over 50%, and conservatively excludes this year's
tentative contributions from Cananea. The main drivers for this
growth include improved copper prices vis-a-vis 2009 that are
conservatively expected to average around US$2.85 per lb for
2010, along with sustained demand fuelled by China which
accounted for over 36% of global copper demand last year.

The projected leverage ratio including the proposed
unsecured bond issuance is expected at the end of the year in
the region of 1.4x total debt to EBITDA. Other factors expected
to contribute to improved operating profits during 2010 are the
completion of copper production expansion projects along with
the reactivation of operations at Cananea following the Federal
Court's ruling on Feb. 11, 2010 in favor of SCC.

This ruling has effectively put an end to the strike that
has lasted over 2.5 years, with SCC permitted to terminate all
existing labor contracts and begin the process of paying
severance to the workers. The company expects to regain control
of the mine in the second quarter of 2010 with a start-up cost
of around US$50 million-US$60 million, and anticipates rehiring
a proportion of former workers under new contracts and
affiliated to a different union.

Production at Cananea is expected to reach full capacity
between three to six months after SCC regains access to the
mine, which has a standalone production capacity of
approximately 180,000 metric tons per year. SCC is continuing
with its sizeable capital expenditure program with around
US$800 million expected for 2010 and US$1.2 billion in 2011,
respectively. The majority of this investment is being used for
production expansion at La Caridad, Cuajone and Toquepala along
with the Greenfield Tia Maria project in Peru, which is
expected to produce an additional 120,000 metric tons per year
on a standalone basis by 2011.

The Toquepala concentrator expansion is expected to be
completed by 2012 with an annual estimated production of
100,000 metric tons. The combined investment program is
expected to add approximately 342,000 metric tons of additional
copper production to SCC's current copper production capacity.
SCC's credit ratings reflect its position as Grupo Mexico's
main operating subsidiary, and the priority position of its
creditors.

Further supporting the ratings, the company's net debt to
EBITDA ratio during the last five years has averaged just 0.2x.
At the consolidated Grupo Mexico, S.A. de C.V. (Grupo Mexico:
IDR rated 'BBB-' by Fitch) parent level in 2009, cash and
marketable securities were US$1.4 billion and total debt was
US$3.4 billion, with EBITDA and FFO of US$2.1 billion and
US$1.3 billion, respectively. SCC contributed 80% of
consolidated EBITDA to Grupo Mexico for 2009. Possible rating
concerns involve common themes in large mining companies, such
as event risk and cyclicality of prices and demand. However,
SCC's position as a leading low-cost copper producer combined
with its comfortable liquidity position and conservative
capital structure maintained over the past five years ensures
it is well placed to weather a significant downturn in the
market.

Assuming no change in current financial policies, a key
factor in upward mobility of the rating will be an increase in
SCC's operational and financial scale combined with a
substantially diversified product and geographic mix.