The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Southern Copper Corporation and its subsidiaries (collectively, "SCC", "the Company", "our", and "we"). This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report. Additionally, the following discussion and analysis should be read in conjunction with the Management Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements included in Part II of our annual report on Form 10-K for the year ended December 31, 2008.

EXECUTIVE OVERVIEW

Business: Our business is primarily the production and sale of copper. In the process of producing copper, a number of valuable metallurgical by-products are recovered, such as molybdenum, zinc, silver, lead and gold, which we also produce and sell. Market forces outside of our control largely determine the sales prices for our products. We, therefore, focus on copper production, cost control, production enhancement and maintaining a prudent capital structure to remain profitable. We believe we achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our aim is to remain profitable during periods of low copper prices and to maximize financial performance in periods of high copper prices.

Earnings: Copper prices have improved steadily during the first three quarters of 2009 from the lows experienced late in 2008. Prices for other metals have also improved during this period. During the third quarter of 2009 per pound LME spot copper prices ranged from $2.19 to $2.94 and averaged $2.66, as compared to $2.12 in the second quarter and $1.56 in the first quarter. While in the near term the outlook for copper could be volatile we believe that the copper market outlook remains strong for the next few years. Limited supplies from existing mines, the absence in the near term of any major new development projects and increasing demand from Asia, we believe, supports this outlook. The LME spot price for copper closed at $2.94 a pound on October 28, 2009.

Third quarter 2009 sales of $1,152 million and net earnings of $312.5 million reflects the continuing recovery of copper prices and prices of our other metal products, as well as companywide productivity improvements which have increased our production and sales. This allows us to continue with our capital projects to increase production levels and be ready to improve our profitability when the copper market and the world's economy recover.

Production: Third quarter 2009 mined copper production was 1.3% higher than the third quarter of 2008. In addition, we increased our production of molybdenum mined, by 14.3%, zinc mined and refined, by 3.5% and 4.2%, respectively, and silver mined and refined, by 9.6% and 7.6%, respectively.

Cananea strike: Operations at our Cananea, San Martin and Taxco facilities remained closed during the third quarter of 2009, due to continuing strike activity. These strikes began in July 2007, and despite our efforts, remain unresolved. On April 14, 2009, the Mexican Federal Labor Court issued a resolution, based on force majeure, approving the termination of Cananea's labor relationship with individual and unionized employees, as well as the termination of its collective bargaining agreement with its employees and with the National Mining and Metal Workers Union. This ruling has been

challenged before federal tribunals and, based on our understanding of the proceeding, it is expected that it will be resolved in the fourth quarter of 2009.

The Company, the state of Sonora and the Mexican federal government are working to restore the necessary legal and safety conditions to resume operations at Cananea.

Due to the lengthy work stoppage we have performed an impairment analysis on the assets at the Cananea mine. We have determined through our impairment analysis that no impairment exists as of September 30, 2009. Should estimates of future copper and molybdenum prices decrease significantly, such determination could change.

Reevaluation of capital expenditures: We are continuing with the Tia Maria project using internally generated cash flow. This project will increase annual copper production by 120,000 tons and is scheduled to commence operations in 2011. Also we are continuing with the Toquepala concentrator expansion project which is expected to increase annual copper output by 100,000 tons by the second half of 2012. In addition, we are continuing our evaluation of the El Arco copper deposit in Mexico.

KEY MATTERS:

We discuss below several matters that we believe are important to understand our results of operations and financial condition. These matters include, (i) our "operating cash costs" as a measure of our performance, (ii) metal prices,
(iii) business segments, (iv) the effect of inflation and other local currency issues, and (v) our expansion and modernization program and environmental protection programs.

Operating Cash Costs: An overall benchmark used by us and a common industry metric to measure performance is operating cash costs per pound of copper produced. Operating cash cost is a non-GAAP measure that does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies. A reconciliation of our operating cash cost per pound to the cost of sales (exclusive of depreciation, amortization and depletion) as presented in the condensed consolidated statement of earnings, is presented under the subheading "Non-GAAP Information Reconciliation," below. We have defined operating cash cost per pound as cost of sales (exclusive of depreciation, amortization and depletion); plus selling, general and administrative charges, treatment and refining charges, and by-products revenue and sales premiums; less workers' participation and other miscellaneous charges, including the Peruvian mine royalty charge and the change in inventory levels; divided by total pounds of copper produced and purchased by us. In our calculation of operating cash cost per pound of copper produced, we credit against our costs the revenues from the sale of by-products, principally molybdenum, zinc, silver and the premium over market price that we receive on copper sales. We account for the by-product revenues in this way because we consider our principal business to be the production and sale of copper. We believe that our Company is viewed by the investment community as a copper company, and is valued, in large part, by the investment community's view of the copper market and our ability to produce copper at a reasonable cost. We also include copper sales premiums as a credit, as these amounts are in excess of published copper prices. The increase in recent years in the price of molybdenum as well as increases in silver and zinc, has had a significant effect on our traditional calculation of cash cost and its comparability between periods. Accordingly, we present cash costs with and without crediting the by-products revenues against our costs.

We exclude from our calculation of operating cash cost depreciation, amortization and depletion, which are considered non-cash expenses. Exploration is considered a discretionary expenditure and is also excluded. Workers' participation provisions are determined on the basis of pre-tax earnings and are also excluded. Additionally, excluded from operating cash cost are items of a non-recurring nature and the mine royalty charges.

Our operating cash costs per pound, as defined, are presented in the table below, for the three and nine months ended September 30, 2009 and 2008.

                                      Three Months Ended        Nine Months Ended
                                        September 30,             September 30,
                                      2009         2008         2009         2008
                                      (cents per pound)         (cents per pound)
Cash cost per pound of copper
produced and purchased                   27.4         18.0         47.5          3.5
Less:
By-products revenue                     136.0        184.5        103.8        175.4
Cash cost per pound of copper
produced and purchased without
by-products revenue                     163.4        202.5        151.3        178.9

As seen on the chart above, our per pound cash cost for the three and nine months ended September 30, 2009 when calculated with by-products revenue are costs of 27.4 cents per pound and 47.5 cents per pound, respectively, compared with a cost of 18.0 cents per pound and 3.5 cents per pound in the same periods of 2008. The decrease in the by-products credit in the 2009 periods was principally due to lower molybdenum, zinc and silver prices. See average metal prices below. Increases in the volume of molybdenum, zinc and silver sales in both the three and nine-month periods of 2009, partially reduced the price decline.

Our cash cost, excluding by-product revenues, was lower by 39.1 cents per pound and 27.6 cents per pound for the three and nine months ended September 30, 2009 than the comparable 2008 periods due to lower power, fuel and material repair costs and to increased production of all our principal metals in the third quarter of 2009 and increases in all our byproduct production in the nine month 2009 period. In addition, lower copper production at Cananea due to the ongoing strike partially offset the improvements noted.

Metal Prices. The profitability of our operations is dependent on, and our financial performance is significantly affected by, the international market prices for the products we produce, especially for copper, molybdenum, zinc and silver. Metal prices historically have been subject to wide fluctuations and are affected by numerous factors beyond our control. These factors, which affect each commodity to varying degrees, include international economic and political conditions, levels of supply and demand, the availability and cost of substitutes, inventory levels maintained by producers and others and, to a lesser degree, inventory carrying costs and currency exchange rates. In addition, the market prices of certain metals have on occasions been subject to rapid short-term changes due to speculative activities.

We are subject to market risks arising from the volatility of copper and other metal prices. Assuming that expected metal production and sales are achieved, that tax rates are unchanged, giving no effect to potential hedging programs, metal price sensitivity factors would indicate the following change in estimated 2009 net income attributable to SCC resulting from metal price changes:

                                      Copper       Molybdenum        Zinc         Silver
Change in metal prices (per
pound, except silver - per
ounce)                              $      0.01    $      1.00    $     0.01    $      1.00
Annual change in net income
attributable to SCC (in
millions)                           $       6.3    $      23.4    $      1.3    $       9.7

Business Segments.

We view our Company as having three operating segments and manage on the basis of these segments. These segments are our (1) Peruvian operations, (2) our Mexican open-pit operations and (3) our Mexican underground operations, known as our IMMSA unit. Our Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities which service both mines. The Peruvian operations produce copper, with significant by-product production of molybdenum, silver and other material. Our Mexican open-pit operations include La Caridad and Cananea mine complexes, the smelting and refining plants and support facilities which service both mines. The Mexican open pit operations produce copper, with significant by-product production of molybdenum, silver and other material. Our IMMSA unit includes five underground mines that produce zinc, lead, copper, silver and gold, a coal mine which produces coal and coke, and several industrial processing facilities for zinc, copper and silver.

Segment information is included in our review of "Results of Operations" and also in Note M of our condensed consolidated financial statements.

Inflation and Devaluation of the Peruvian Nuevo Sol and the Mexican Peso.

Our functional currency is the U.S. dollar. Portions of our operating costs are denominated in Peruvian Nuevos Soles and Mexican Pesos. Since our revenues are primarily denominated in U.S. dollars, when inflation/deflation in Peru or Mexico is not offset by a change in the exchange rate of the Nuevo Sol or the Peso, respectively, to the dollar, our financial position, results of operations and cash flows could be adversely affected to the extent that the inflation/devaluation effects are passed onto us by our suppliers or reflected in our wage adjustments. In addition, the dollar value of our net monetary assets denominated in Nuevos Soles or Pesos can be affected by devaluation of the Nuevo Sol or the Peso, resulting in a remeasurement loss in our financial statements. Recent inflation and devaluation rates are provided in the table below for the three and nine months ended September 30, 2009 and 2008:

                                      Three Months Ended          Nine Months Ended
                                        September 30,               September 30,
                                     2009           2008         2009           2008
Peru:
Peruvian inflation rate                 (0.1 )%         1.7 %       (0.1 )%         5.3 %
Nuevo Sol/dollar devaluation
/(appreciation) rate                    (4.2 )%         0.3 %       (8.2 )%        (0.7 )%

Mexico:
Mexican inflation rate                   1.0 %          1.8 %        2.3 %          3.9 %
Peso/dollar devaluation
/(appreciation) rate                     2.3 %          4.9 %       (0.3 )%        (0.8 )%

Capital Expansion and Exploration Program.

We made capital expenditures of $110.6 million and $316.7 million for the three and nine months ended September 30, 2009, respectively, compared with $137.6 million and $320.6 million in the same periods of 2008. In general, the capital expenditures and projects described below are intended to increase production and/or decrease costs.

In light of the current business environment we have suspended many of our capital investments in new as well as in expansion projects. Set forth below are descriptions of some of our current expected capital expenditures. We expect to meet the cash requirements for these projects from cash on hand, internally generated funds and from additional external financing, if required.

Peruvian Operations:

Tia Maria project: This project, which includes the Tia Maria and La Tapada deposits in the Peruvian region of Arequipa, is expected to produce about 260 million pounds of SX-EW copper cathodes per year. The approved budget for the project is $934 million. Through September 30, 2009, $250.4 million has been spent on this project. The detailed engineering is in progress. Current work on the project includes equipment fabrication and some early construction work (access roads and platforms). The environmental impact assessment (EIA) for the power line and support facilities has been approved by the Peruvian authorities and construction is underway. Bids for the construction management contract are being evaluated, while additional drilling is continuing to evaluate water resources.

In August the Company's third and final public presentation of the EIA was disrupted by protesters. The Company is working with the Peruvian Ministry of Energy and Mines to reschedule this presentation and to get the EIA approved before year end.

Toquepala concentrator expansion: As of September 30, 2009, the Company has expended $74.9 million on the Toquepala concentrator expansion. Proposals for detailed engineering are in the final evaluation and work is scheduled to commence in the fourth quarter of this year. One 320 ton truck and two 49HR drilling machines were put in operation, while the second 73 cubic yard shovel is in its final stage of assembly. Civil works for the push back substation expansion were completed, and electrical equipment installation is almost finished. The environmental impact study is currently being conducted and is also expected to be completed in the fourth quarter of 2009.

Ilo Smelter Modernization: A complimentary project to the Ilo smelter modernization is the construction of a marine trestle to offload directly to offshore ships the sulfuric acid produced at the smelter. At September 30, 2009 this project reached 88.0% completion and is expected to be completed in 2009. The completed project is expected to ease congestion in our Ilo area.

Tailings disposal at Quebrada Honda: This project will increase the height of the existing Quebrada Honda dam to impound future tailings from the Toquepala and Cuajone mills. The procurement of the main equipment and materials was finished. Construction of the principal civil, mechanical and electrical installations for the main and lateral dams has been completed. The equipment to build the lateral dam was commissioned in December 2008 and the equipment to continue building the main dam was commissioned in March 2009. At this time there are some pending issues in order to get to the design capacity. Progress on the first stage of this project is 99.8% complete, with final completion expected in the last quarter of 2009. The total cost of this project is estimated to be $66.0 million, with $40.7 million expended through September 30, 2009.

Mexican operations:

After expending $15.7 million the by-product treatment plant at the La Caridad metallurgical complex was completed in September and is currently in operation. This plant was recently distinguished winning the first prize in a nationwide contest to promote waste recycling.

With a total investment of $17.2 million, the lime plant at Agua Prieta, which is 100 kilometers north of the La Caridad mine, was fully modernized to comply with environmental regulations and to meet the lime requirements of the Mexican operations. A vertical Maerz furnace will reduce the consumption of natural gas to a third of its current level and we expect costs to be reduced by 45%. No-load tests and refractory drying were started in September. The start of operations has been scheduled for October 2009.

Other capital expenditures:

The El Arco project is a major copper deposit in the central part of the Baja California peninsula, with estimated mineralized resources of over 1.3 billion tons. This project is expected to produce 190,000 tons of copper and 105,000 ounces of gold annually. We have recently invested $5.4 million in land acquisition related to the project. In addition, a set of studies have been completed evaluating alternatives to provide El Arco with water and electric power needs. We will consider the development of this project subject to appropriate investment conditions.

ACCOUNTING ESTIMATES

Our discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with US GAAP. Preparation of these condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: ore reserves, revenue recognition, estimated mine stripping ratios, leachable material and related amortization, the estimated useful lives of fixed assets, asset retirement obligations, litigation and contingencies, valuation allowances for deferred tax assets, tax positions, fair value of financial instruments and inventory obsolescence. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

PRODUCTION

Three months:

Mine copper production in the third quarter of 2009 was higher than planned and increased 1.3% to 265.1 million pounds from 261.6 million pounds in the same period of 2008. The increase of 3.5 million pounds was mainly due to 8.3 million pounds of higher production at the Toquepala mine and 2.9 million pounds at the La Caridad mine, both due to higher ore grades and improved recoveries. These increases were partially offset by 7.0 million pounds of lower production at the Cuajone mine principally due to lower ore grade and 0.9 million pounds of lower SX-EW production at the Toquepala and La Caridad mines due to lower material processed and lower PLS grade at La Caridad mine.

In the third quarter of 2009, molybdenum production increased 14.3% to 11.4 million pounds, from 10.0 million pounds in the third quarter of 2008. This increase was due to 1.6 million pounds of higher production at the Cuajone mine due to higher grades and improved recovery and 1.4 million pounds of higher production at the La Caridad mine due to higher recovery. These increases were partially offset by 1.6 million of lower production at the Toquepala mine, due to lower grades.

Zinc mine production in the third quarter of 2009 was 3.5% higher than the comparable period of 2008. Charcas and Santa Barbara mines had higher grades and the Santa Eulalia and Charcas mines increased recovery. The refined zinc production was also

4.2% higher for the same period as a result of the improved performance of the San Luis Potosi zinc refinery.

Nine months:

Mine copper production in the nine months ended September 30, 2009 was lower than the comparable 2008 period decreasing 1.2% to 792.1 million pounds from 802.0 million pounds. The decrease of 9.9 million pounds was mainly due to 9.1 million pounds of lower production at the Cuajone mine as a result of lower ore grades and recoveries and zero production at the Cananea mine and SX-EW plant in 2009 compared to production of 34.4 million pounds in the 2008 period. These decreases were partially offset by 18.0 million pounds of higher production at the Toquepala mine due to higher ore grade and improved recoveries, 11.8 million pounds and 3.3 million pounds of higher mine and SX-EW production at La Caridad mine, respectively, and 0.5 million pounds of higher production from IMMSA.

In the nine months ended September 30, 2009, molybdenum production increased 10.3% to 30.1 million pounds, from 27.3 million pounds in the comparable 2008 period. This increase was due to 4.3 million pounds higher production from the La Caridad mine and 2.1 million of higher production from the Cuajone mine; both due to higher ore grades and recoveries, partially offset by a decrease in production of 3.6 million pounds at the Toquepala mine, due to lower ore grade and recovery.

Zinc mine production in the nine months ended September 30, 2009 was 4.2% higher than the comparable period of 2008. Charcas and Santa Barbara mines had higher grades and Santa Eulalia and Charcas mines increased recovery. The refined zinc production was also 4.7% higher for the same period as a result of the improved performance of the San Luis Potosi zinc refinery.

RESULTS OF OPERATIONS



The following highlights key financial and operating results for the three and
nine months ended September 30, 2009 and 2008 (in millions):



                                       Three Months Ended           Nine Months Ended
                                          September 30,               September 30,
                                       2009           2008          2009          2008
Net sales                           $   1,151.8    $  1,440.1    $  2,598.3    $  4,401.1
Operating costs and expenses             (643.1 )      (764.2 )    (1,642.2 )    (2,068.0 )
Operating income                          508.7         675.9         956.1       2,333.1
Non-operating income (expense)            (26.8 )        (5.8 )       (59.5 )       (29.1 )
Income before income taxes                481.9         670.1         896.6       2,304.0
Income taxes                             (167.6 )      (249.7 )      (327.1 )      (764.6 )
Net income attributable to
non-controlling interest                   (1.8 )        (2.6 )        (3.4 )        (8.1 )
Net income attributable to SCC      $     312.5    $    417.8    $    566.1    $  1,531.3

Average Metal Prices



The table below outlines the average metal prices during the three and nine
months ended September 30, 2009 and 2008:



                                  Three Months Ended September 30,
                                  2009           2008        % Change
Copper ($ per pound - LME)     $      2.66    $      3.48       (23.6 )
Copper ($ per pound - COMEX)   $      2.67    $      3.45       (22.6 )
Molybdenum ($ per pound)       $     14.50    $     33.27       (56.4 )
Zinc ($ per pound - LME)       $      0.80    $      0.80           -
Silver ($ per ounce -COMEX)    $     14.76    $     14.92        (1.1 )

                                  Nine Months Ended September 30,
                                  2009           2008       % Change
Copper ($ per pound - LME)     $      2.11    $      3.62      (41.7 )
Copper ($ per pound - COMEX)   $      2.13    $      3.59      (40.7 )
Molybdenum ($ per pound)       $     10.78    $     33.01      (67.3 )
Zinc ($ per pound - LME)       $      0.67    $      0.95      (29.5 )
Silver ($ per ounce -COMEX)    $     13.71    $     16.57      (17.3 )

Net Sales. Net sales for the three and nine months ended September 30, 2009 decreased by $288.3 million and $1,802.8 million, respectively, compared with the same periods of 2008. These 20.0% and 41.0% decreases were due to lower metal sales prices partially offset by higher sales volume of copper and our significant by-products as shown below.

. . .