SOUTHERN COPPER CORP/ Fair Value Disclosure
NOTE 15—FAIR VALUE MEASUREMENT:
Subtopic 820-10 of ASC “Fair value measurement and disclosures -Overall” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under Subtopic 820-10 are described below:
Level 1 -Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 -Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs. (i.e., quoted prices for similar assets or liabilities).
Level 3 -Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable (other than accounts receivable associated with provisionally priced sales) and accounts payable approximate fair value due to their short maturities. Consequently, such financial instruments are not included in the following table that provides information about the carrying amounts and estimated fair values of other financial instruments that are not measured at fair value in the consolidated balance sheet as of December 31, 2025 and December 31, 2024 (in millions):
At December 31, 2025 | At December 31, 2024 | |||||||||||
| Carrying Value | | Fair Value | | Carrying Value | | Fair Value | |||||
Liabilities: | ||||||||||||
Current portion of long-term debt level 1 | $ | — | $ | — | $ | 499.8 | $ | 498.4 | ||||
Long-term debt level 1 | $ | 6,699.5 | $ | 7,009.5 | $ | 5,707.3 | $ | 5,653.6 | ||||
Long-term debt level 2 | 51.2 | 55.1 | 51.2 | 53.1 | ||||||||
Total long-term debt | $ | 6,750.7 | $ | 7,064.6 | $ | 5,758.5 | $ | 5,706.7 | ||||
Long-term debt is carried at amortized cost and its estimated fair value is based on quoted market prices classified as Level 1 in the fair value hierarchy except for the case of the Yankee bonds, which qualify as Level 2 in the fair value hierarchy as they are based on quoted prices in markets that are not active.
Fair values of assets and liabilities measured at fair value on a recurring basis were calculated as of December 31, 2025 and 2024, as follows (in millions):
Fair Value at Measurement Date Using: | ||||||||||||
| | | Significant | | ||||||||
Fair Value | Quoted prices in | other | Significant | |||||||||
as of | active markets for | observable | unobservable | |||||||||
December 31, | identical assets | inputs | inputs | |||||||||
Description | 2025 | (Level 1) | (Level 2) | (Level 3) | ||||||||
Assets: | ||||||||||||
Short term investment: | ||||||||||||
—Trading securities | $ | 604.5 | $ | 604.5 | $ | — | $ | — | ||||
—Available-for-sale debt securities: | ||||||||||||
Asset backed securities |
| — | — | — | — | |||||||
Mortgage backed securities |
| 0.1 | — | 0.1 | — | |||||||
Accounts receivable: | ||||||||||||
—Embedded derivatives—Not classified as hedges: | ||||||||||||
Provisionally priced sales: | ||||||||||||
Copper |
| 1,297.5 |
| 1,297.5 | — | — | ||||||
Molybdenum | 383.8 | 383.8 | — | — | ||||||||
Zinc |
| 80.3 |
| 80.3 |
| — | — | |||||
Total | $ | 2,366.3 | $ | 2,366.2 | $ | 0.1 | $ | — | ||||
Fair Value at Measurement Date Using: | ||||||||||||
| | | Significant | | ||||||||
Fair Value | Quoted prices in | other | Significant | |||||||||
as of | active markets for | observable | unobservable | |||||||||
December 31, | identical assets | inputs | inputs | |||||||||
Description | 2024 | (Level 1) | (Level 2) | (Level 3) | ||||||||
Assets: | ||||||||||||
Short term investment: | ||||||||||||
—Trading securities | $ | 599.1 | $ | 599.1 | $ | — | $ | — | ||||
—Available-for-sale debt securities: | ||||||||||||
Asset backed securities |
| — | — | — | — | |||||||
Mortgage backed securities |
| 0.1 | — | 0.1 | — | |||||||
Accounts receivable: | ||||||||||||
—Embedded derivatives-Not classified as hedges: | ||||||||||||
Provisionally priced sales: | ||||||||||||
Copper |
| 589.5 |
| 589.5 | — | — | ||||||
Molybdenum |
| 274.5 |
| 274.5 |
| — | — | |||||
Total | $ | 1,463.2 | $ | 1,463.1 | $ | 0.1 | $ | — | ||||
The Company’s short-term trading securities investments are classified as Level 1 because they are valued using quoted prices of the same securities as they consist of bonds issued by public companies and publicly traded. The Company’s short-term available-for-sale investments are classified as Level 2 because they are valued using quoted prices for similar investments.
The Company’s accounts receivables associated with provisionally priced copper sales are valued using quoted market prices based on the forward price on the LME or on the COMEX. Such value is classified within Level 1 of the fair value hierarchy. Molybdenum prices are established by reference to the publication Platt’s Metals Week and are considered Level 1 in the fair value hierarchy. The Company’s accounts receivables associated with provisionally priced zinc sales are valued using quoted market prices based on the forward price on the LME and are considered Level 1 in the fair value hierarchy.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.