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Southern Copper’s Geographical Diversification

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Southern Copper’s geographical diversification

In the previous part of this series, we saw that copper accounted for more than two-thirds of Southern Copper’s (SCCO) 2014 revenues. In this part, we’ll look at the company’s geographical diversification. We’ll also analyze how Southern Copper’s geographical exposure has changed over the last few years.

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Diversified exposure

Mexico was Southern Copper’s (SCCO) biggest market in 2014, accounting for 29.5% of its revenues. Peru accounted for 4.9% of SCCO’s 2014 revenues. Latin America (ILF) accounted for 15.7% of the company’s 2014 revenues. The United States, Asia, and Europe accounted for 18.3%, 16.1%, and 15.4%, respectively, of Southern Copper’s 2014 revenues.

In contrast, Freeport-McMoRan (FCX) received almost half of its revenues from North America, while only 3.6% of its 2014 sales were from South America.

Historical trend

  • Southern Copper’s revenue exposure to Mexico increased to 29.5% in 2014 compared to 16.8% in 2010. The trend has continued into 2015 as well, and Mexico’s share in SCCO’s total revenues further increased to 37% in 1Q15. Mexico’s rising share in SCCO’s revenues exposes the company to concentration risk.
  • Asia accounted for 16.1% of SCCO’s 2014 revenues compared to 10.4% in 2010.
  • The United States accounted for 18.3% of SCCO’s 2014 revenues. In 2010, the United States accounted for 24.7% of the company’s revenues.
  • Southern Copper received 15.4% of its 2014 revenues from Europe. The corresponding figure was 20.5% in 2010.
  • Latin America ex-Mexico and Peru accounted for 15.7% of SCCO’s 2014 revenues compared to 21.5% in 2010.

Southern Copper’s revenue profile is changing

As you can see in the chart above, Southern Copper’s revenue profile has changed over the last few years. The company’s revenue exposure to Asia and Mexico has increased, while exposure to the United States, Europe, and the rest of Latin America has declined between 2010 and 2014.

Please note that Asia is the biggest market for miners, including BHP Billiton (BHP) and Rio Tinto (RIO).

As discussed previously, copper is the key driver of Southern Copper’s revenues. In the next part, we’ll talk about the company’s copper operations.

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