LA CARIDAD

On March 16, 2010, as part of a remediation program, the Company announced the closing of the San Luis Potosi copper smelter, which was in operation for almost one hundred years. The company believes operating efficiencies will increase with La Caridad replacing the copper smelting capacity of San Luis Potosi. Company´s modern San Luis Potosi zinc refinery will not be affected by the smelter’s closing and a potential expansion that could double its capacity is under study.

As of Dec/09, Grupo Mexico announced the approval of the Caridad Mine Expansion. This project will increase the current milling capacity at the concentrator from 90,000 to 120,000 tons per day, which will require the current mining rate to be increased. Annual copper production will be increased by 40,000 tons. This project requires a total investment of US$230 million, US$77 million of which will be invested in 2010. Additionally, the company plans the construction of an Electrical Power Plant; This project consists of the construction of a combined cycle electrical power plant that will have one gas and one steam turbine and a capacity of 250 MW. The plant will be located in Sonora, 17 kilometers north of the city of Nacozari de García. The plant will cover the Grupo México's current power needs in Sonora and will be left ready for a second phase that would double its capacity to cover future needs.

The results for 2Q09 together with the positive trend for copper have improved the Company’s future financial expectations. The total budget for Tía María is $934 million, of which $187 million has been spent to date. This project is expected to be completed by 2011 and will produce 120,000 tons of copper cathode per year. Additionally, $72.0 million have been invested in the Toquepala expansion. This project will increase annual copper production by 100,000 tons. The investments at the Railroad Division have been mainly to improve tracks and operating safety. Sales reached $824.5 million in 2Q09, compared to $1.461 billion for the same period in 2008. This decrease was due to lower metals prices. However, this was partially offset by an increase in the sales volumes of all SCC’s metal products (copper 6.7%, molybdenum 12.8%, zinc 1.7%, silver 25.7%, sulfuric acid 9.5%, gold 50.6%). Copper production during the 2Q09 was 119,277 tons, representing an increase of 1.7% over 2Q08. This increase was mainly the result of higher production at La Caridad mine (+2,479 tons) and at Toquepala mine (+3,131 tons), due to better ore grades and recovery at both mines. Molybdenum production continues to increase. Production was 4,389 tons in 2Q09, compared to a production of 3,897 tons in 2Q08. This 12.6% increase was due to higher ore grade and improved recovery at La Caridad mine and higher recovery at Cuajone mine.