SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

Annual Report Pursuant to Section 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2003
Commission File Number 333-08430

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MINERA MÉXICO, S.A. DE C.V.(Exact name of registrant as specified in its charter)

MINING MEXICO(Translation of registrant's name into English)

United Mexican States(Jurisdiction of incorporation or organization)

Minera México, S.A. de C.V.
Baja California 200
Col. Roma Sur
06760 México, D.F.(Address of principal executive offices)

Securities
registered or to be registered pursuant to Section 12(b) of the Act: None

Securities
registered or to be registered pursuant to Section 12(g) of the Act: None

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act: 8.25% Series A Guaranteed Senior Notes due 2008
9.25% Series B Guaranteed Senior Notes due 2028

Indicate the number of outstanding shares of each of the Issuer's classes of capital or common stock as of the close of the period covered by the annual report. Shares of common stock:
769,604,346 Class I Series B Shares

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    ý                No    o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17    o                Item 18    ý



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TABLE OF CONTENTS

|PRESENTATION OF INFORMATION
|---------------------------
|FORWARD-LOOKING STATEMENTS 
|PART I.                    
|ITEM 1.                    
|ITEM 2.                    
|ITEM 3.                    
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|ITEM 4.                    
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|ITEM 5.                    
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|ITEM 6.                    
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|ITEM 7.                    
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|ITEM 8.                    
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|ITEM 9.                    
|ITEM 10.                   
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|ITEM 11.                   
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|ITEM 12.                   
|PART II.                   
|ITEM 13.                   
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|ITEM 14.          |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|----------------- |  | ----------------------------------------------------------------------------
|ITEM 15.          |  | CONTROLS AND PROCEDURES                                                     
|ITEM 16.          |  | [RESERVED]                                                                  
|ITEM 16A.         |  | AUDIT COMMITTEE FINANCIAL EXPERT                                            
|ITEM 16B.         |  | CODE OF ETHICS                                                              
|ITEM 16C.         |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      
|ITEM 16D.         |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  
|ITEM 16E.         |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      
|PART III.        
|ITEM 17.          |  | FINANCIAL STATEMENTS                                                        
|ITEM 18.          |  | FINANCIAL STATEMENTS                                                        
|ITEM 19.          |  | EXHIBITS                                                                    
|Annex A           |  | Glossary of Certain Mining Terms                                            
|Annex F           |  | Financial Statements of Minera México, S.A. de C.V.                         
|Annex F-1         |  | Financial Statements of Mexicana de Cobre, S.A. de C.V.                     
|Annex F-2         |  | Financial Statements of Mexicana de Cananea, S.A. de C.V.                   
|Annex F-3         |  | Financial Statements of Industrial Minera México, S.A. de C.V.              
|Index to Exhibits

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PRESENTATION OF INFORMATION

We are Minera México, S.A. de C.V. (formerly, Grupo Minero México, S.A. de C.V.), a corporation (sociedad
anónima de capital variable) organized under the laws of the United Mexican States ("México"). As part of a corporate restructuring, Grupo
México, S.A. de C.V. ("Grupo México"), an entity registered pursuant to Mexican law, was reconstituted and changed its name to Minera México, S.A. de C.V.
("Minera México" or the "Company") and Grupo Minero México, S.A. de C.V. was merged into Minera México, and the Company became the mining division of Grupo
México in Mexico after the restructuring. Please see Item 4. "Information on the CompanyHistory and Development of the Company." We file an annual report on
Form 20-F pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 15d-1 thereunder, because we issued
the 8.25% Series A Guaranteed Senior Notes due 2008 (the "Series A Notes") and 9.25% Series B Guaranteed Senior Notes due 2028 (the "Series B Notes" and together with the
Series A Notes, the "Notes"). The Notes were issued and sold pursuant to a registration statement on Form F-1 under the Securities Act of 1933, as amended (the "Act")
(Commission File No. 333-08430).

In
order to enhance the transparency of our operating and financial results, we present our financial statements in U.S. dollars and in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP"). Minera México is a majority-owned indirect subsidiary of Grupo México and comprises substantially all the assets
and liabilities of Grupo México associated with its mining operations in Mexico. For foreign exchange purposes and basis of presentation and measurement, the Company's functional
currency is the U.S. dollar. Minera México maintains its books in Mexican Pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current exchange rates
except for inventory, property, plant and equipment and other non-monetary assets, which are remeasured at historical exchange rates. Revenues and expenses are generally translated at
average exchange rates in effect during the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates.

In
addition to our Financial Statements, also included herein are audited consolidated financial statements as of December 31, 2002 and 2003 and for the years ended
December 31, 2001, 2002 and 2003, together with notes thereto, for each of Mexicana de Cobre, S.A. de C.V., our 95.74%-owned subsidiary ("Mexcobre"), Mexicana de Cananea, S.A. de C.V., our
98.49%-owned subsidiary ("Mexcananea") and Industrial Minera México, S.A. de C.V., our 100.0%-owned subsidiary ("Immsa"). Mexcobre, Mexcananea, Immsa and two of our other subsidiaries
have guaranteed, jointly and severally, the Notes, the securities in respect of which this Annual Report on Form 20-F has been filed. The financial statements of Mexcobre,
Mexcananea and Immsa are set forth herein at Annex F-1, Annex F-2 and Annex F-3, respectively.

References
in this Annual Report to "U.S. dollars" or "$" are to the lawful currency of the United States of America. References in this Annual Report to "pesos" or "Ps." are to the
lawful currency of Mexico.

Unless
otherwise indicated, all references herein to volumes of ore, concentrates and other metal products are expressed in metric tons. One metric ton equals approximately 2,204.62
pounds.

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FORWARD-LOOKING STATEMENTS

In this document we may from time to time make forward-looking statements. In the future, we may also make such forward-looking statements in our periodic reports
to the Securities and Exchange Commission (the "SEC") on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and
other written materials, and in oral statements made by any of our officers, directors or employees to analysts, institutional investors, representatives of the media and others. These statements
appear in a number of places in this Annual Report and include statements regarding our current intent, belief or expectations or those of our officers with respect to trends affecting our financial
condition or results of operations. When used in this Annual Report, the words "anticipate", "believe," "estimate," "expect," "intend," "plan," "project" and similar expressions, as they relate to us
or our management are intended to identify such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual
results may differ materially from those in the forward-looking statements as a result of various factors. The information contained in this Annual Report, including, without limitation, the
information under Item 4. "Information on the Company" and Item 5. "Operating and Financial Review and Prospects", identifies important factors that could cause such differences. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. We undertake no obligation to release publicly the result of any revisions to these
forward-looking statements, which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our business strategy or planned capital expenditures,
or to reflect the occurrence of unanticipated events.

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PART I.

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.    KEY INFORMATION

SELECTED FINANCIAL DATA

The selected historical data presented below as of and for the five years ended December 31, 2003, includes certain information that has been derived from
our consolidated financial statements, including the Financial Statements included elsewhere in this Annual Report. This information should be read in conjunction with, and is qualified in its
entirety by reference to, the Financial Statements, including the notes thereto, and Item 5. "Operating and Financial Review and Prospects."

We
present our financial statements in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Minera
México is a majority-owned indirect subsidiary of Grupo México, an entity registered pursuant to Mexican law. Minera México comprises substantially all the
assets and liabilities of Grupo México associated with its mining operations in Mexico. For foreign exchange purposes and basis of presentation and measurement, the Company's functional
currency is the U.S. dollar. Minera México maintains its books in Mexican Pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current exchange rates
except for inventory, property, plant and equipment and other non-monetary assets, which are remeasured at historical exchange rates. Revenues and expenses are generally translated at
average exchange rates in effect during the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates.

For
purposes of this Annual Report on Form 20-F, we have restated the reconciliation of net income (loss) and stockholders' equity to U.S. GAAP as of and for the years
ended December 31, 2002 and 2001 previously reported by our predecessor, Grupo Minero México, S.A. de C.V., to give effect to the identification of the U.S. dollar as the
functional currency. The effect of the restatement is further discussed in Note 18 to our audited consolidated financial statements.

|                                      |                                         | As of and for the year ended December 31, |  
|------------------------------------- | --------------------------------------- | ----------------------------------------- | -
|
|
|Consolidated Statement of Operations: |                                         |                                           |  
|                                      | Net sales                               |                                           | $
|                                      | Operating costs and expenses(2)         |                                           |  
|                                      | Operating income                        |                                           |  
|                                      | Income (loss) before extraordinary gain |                                           |  
|                                      | Extraordinary gain, net of tax          |                                           |  
|                                      | Net income (loss)                       |                                           |  
|Per Share amounts:                    |                                         |                                           |  
|                                      | Earnings (loss) per share               |                                           |  
|                                      | Number of outstanding shares            |                                           |  
|Consolidated Balance Sheets:          |                                         |                                           |  
|                                      | Total assets                            |                                           |  
|                                      | Cash and cash equivalents               |                                           |  
|                                      | Total debt                              |                                           |  
|                                      | Stockholders' equity                    |                                           |  
|                                      |                                         |                                           |  

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|Consolidated Statement of Cash Flows: |                                          |  |  |         |     |  |         |   |  |         |   |  |         |  |  |        
|------------------------------------- | ---------------------------------------- |  |  | ------- | --- |  | ------- | - |  | ------- | - |  | ------- |  |  | -------
|                                      | Cash provided from operating activities  |  |  | 369.4   |     |  | 76.7    |   |  | 160.3   |   |  | 86.4    |  |  | (90.2  
|                                      | Capital expenditures                     |  |  | 918.8   | (6) |  | 144.8   |   |  | 127.7   |   |  | 43.2    |  |  | 54.6   
|                                      | Depreciation, amortization and depletion |  |  | 141.9   |     |  | 83.3    |   |  | 89.6    |   |  | 89.8    |  |  | 103.5  
|                                      | Dividends paid                           |  |  | 30.5    |     |  |        |   |  |        |   |  |        |  |  |       
|Capital Stock:                        |                                          |  |  |         |     |  |         |   |  |         |   |  |         |  |  |        
|                                      | Weighted average of shares outstanding   |  |  | 634,035 |     |  | 630,292 |   |  | 659,463 |   |  | 659,463 |  |  | 738,717
|                                      | Book value per share                     |  |  | 2.85    |     |  | 1.13    |   |  | 0.82    |   |  | 0.97    |  |  | 0.96   
|                                      | BV/E ratio                               |  |  | 28.5    |     |  | (9.4    | ) |  | (356.5  | ) |  | 746.2   |  |  | (242.5 
|Financial Ratios:                     |                                          |  |  |         |     |  |         |   |  |         |   |  |         |  |  |        
|                                      | Current assets to current liabilities    |  |  | 1.51    |     |  | 0.91    |   |  | 1.11    |   |  | 1.26    |  |  | 1.45   
|                                      | Debt as % of capitalization(7)           |  |  | 64.5    |     |  | 65.7    |   |  | 71.1    |   |  | 67.4    |  |  | 65.1   
|                                      | Employees (at year end)                  |  |  | 12,279  |     |  | 11,344  |   |  | 10,594  |   |  | 9,139   |  |  | 9,147  

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SELECTED OPERATING DATA

The following tables present our selected production and other operating data on a consolidated basis and that of the Mexcobre, Immsa and Cananea Units (as such
terms are defined under Item 4. "Information on the CompanyOrganizational Structure"). Our selected operating data presented on a consolidated basis eliminate intercompany sales and
include metal contained in concentrates produced from our own mines and copper cathodes produced by the Cananea and Mexcobre Units. The data for each of our operating units include production sold to
the other operating units.

|                                           |                          | Year ended December 31,
|------------------------------------------ | ------------------------ | -----------------------
|
|
|Minera México                              |                          |                        
|Copper production:                         |                          |                        
|                                           | Metric tons              |                        
|                                           | Thousands of pounds      |                        
|Zinc production:                           |                          |                        
|                                           | Metric tons              |                        
|                                           | Thousands of pounds      |                        
|Lead production:                           |                          |                        
|                                           | Metric tons              |                        
|                                           | Thousands of pounds      |                        
|Silver production:                         |                          |                        
|                                           | Metric tons              |                        
|                                           | Thousands of ounces      |                        
|Gold production:                           |                          |                        
|                                           | Kilograms                |                        
|                                           | Thousands of ounces      |                        
|Mexcobre Unit                              |                          |                        
|Material moved (metric tons in thousands)  |                          | 81,931                 
|Ore milled (metric tons in thousands)      |                          | 33,439                 
|Ore grade (average % copper for period)    |                          | 0.54                   
|Leach ore (metric tons in thousands)       |                          | 17,814                 
|Waste (metric tons in thousands)           |                          | 30,679                 
|Stripping ratio(1)                         |                          | 1.45                   
|Concentrate production:                    |                          |                        
|                                           | Copper                   |                        
|                                           | Molybdenum               |                        
|Metal contained in concentrate production: |                          |                        
|                                           | Copper                   |                        
|                                           | Silver                   |                        
|                                           | Gold (kilograms)         |                        
|                                           | Molybdenum               |                        
|Smelter(2) and SX-EW production:(3)        |                          |                        
|                                           | Copper anodes            |                        
|                                           | Copper cathodes          |                        
|                                           | Sulfuric acid            |                        
|Refinery production:(4)                    |                          |                        
|                                           | Copper cathodes          |                        
|                                           | Refined silver           |                        
|                                           | Refined gold (kilograms) |                        
|Rod plant production:                      |                          |                        
|                                           | Copper rod               |                        

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|                                            |                          | Year ended December 31,
|------------------------------------------- | ------------------------ | -----------------------
|
|
|Immsa Unit                                  |                          |                        
|Ore milled (metric tons in thousands)       |                          | 6,284                  
|Concentrate production:                     |                          |                        
|                                            | Zinc                     |                        
|                                            | Copper                   |                        
|                                            | Lead                     |                        
|Metal contained in concentrate production:  |                          |                        
|                                            | Zinc                     |                        
|                                            | Copper                   |                        
|                                            | Silver                   |                        
|                                            | Gold (kilograms)         |                        
|                                            | Lead                     |                        
|San Luis Potosi  zinc refinery production: |                          |                        
|                                            | Refined zinc             |                        
|                                            | Cadmium                  |                        
|San Luis Potosicopper smelter production:  |                          |                        
|                                            | Copper blister           |                        
|                                            | Arsenic trioxide         |                        
|Refinery production:(5)                     |                          |                        
|                                            | Refined silver           |                        
|                                            | Refined gold (kilograms) |                        
|                                            | Refined lead             |                        
|Nueva Rosita facilities production:         |                          |                        
|                                            | Coal                     |                        
|                                            | Coke                     |                        
|Cananea Unit                                |                          |                        
|Material moved (metric tons in thousands)   |                          | 84,477                 
|Ore milled (metric tons in thousands)       |                          | 20,955                 
|Ore grade (average % copper for period)     |                          | 0.50                   
|Leach ore (metric tons in thousands)        |                          | 22,147                 
|Waste (metric tons in thousands)            |                          | 41,375                 
|Stripping ratio(1)                          |                          | 3.03                   
|Copper concentrate production               |                          | 329,302                
|Metal contained in concentrate production:  |                          |                        
|                                            | Copper                   |                        
|                                            | Silver                   |                        
|                                            | Gold (kilograms)         |                        
|SX-EW(3) production:                        |                          |                        
|                                            | Copper cathodes          |                        

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RISK FACTORS

We are subject to various changing competitive, economic, political and social risks and conditions which are described
below.

Certain Factors Relating to Our Business

Fluctuations in the market price of the metals we produce may significantly affect our financial performance.

Our financial performance is significantly affected by the market prices of the metals that we produce and, in particular, market prices of copper, zinc and
silver. These prices have historically been subject to wide fluctuations and are affected by numerous factors beyond our control, including international economic and political conditions, levels of
supply and demand, expectation of inflation, actions of commodity market participants, consumption and demand patterns, 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 occasion been subject to rapid
short-term changes due to speculative activities. For information on copper, zinc and silver prices for each of the years in the five-year period ended December 31,
2003, see Item 4. "Information on the CompanyBusiness OverviewMetals Prices."

Our
results were adversely affected in 2001 and 2002 by decreases in copper prices. Copper prices averaged $0.81 per pound during 2003, as compared to an average of $0.72 per pound
during 2002 and $0.73 per pound during 2001. The price of copper was $1.04 per pound on December 31, 2003, and the lowest price of copper during 2003 was $0.71 per pound on April 3,
2003. The price of copper was $1.21 per pound on June 25, 2004. Copper prices rebounded slightly during 2003 and the first quarter of 2004. In the event of a substantial and sustained decline
in the price of copper, negative trends in operating results may occur, and we might, in very adverse market conditions, consider curtailing or modifying certain of our mining and processing
operations. See Item 5. "Operating and Financial Review and
ProspectsOperating ResultsCommodity Prices;Summary of Prices, Volumes Sold and Net Sales."

Despite our financial restructuring, our financial condition and liquidity may not improve.

Under pressure due to low metals prices and the resulting drop in liquidity, we restructured our debt in 2003 because of our failure to make scheduled payments
and our noncompliance with certain financial covenants contained in our credit agreements. This restructured indebtedness imposes financial and other restrictions on us and our subsidiaries, including
limitations on the incurrence of additional debt and liens and on our ability to dispose of assets. These restrictions may reduce our flexibility in responding to changing business or economic
conditions. In addition, this restructured indebtedness is secured by substantially all of our assets, including our concession rights. Failure by us to comply with the provisions of the restructured
indebtedness will give the relevant lenders the right to retain the proceeds of the collateral, to declare the indebtedness to be in default, to accelerate the maturity of the indebtedness or to take
other enforcement action against us. See Item 5. "Operating and Financial Review and ProspectsOperating ResultsLiquidity and Capital Resources." Any such enforcement action
would have an adverse effect on our financial position. We continue to be exposed to the other risks enumerated in these "Risk Factors" even after the restructuring. There can be no assurance that we
will be able to comply with the terms of our indebtedness or that we will not be in payment default in the future.

We may be adversely affected by the imposition of more stringent environmental regulations that would require us to spend additional funds.

The mining and processing industries in Mexico are subject to federal and state laws and regulations (including certain industry technical standards) governing
protection and remediation of the environment, mining operations, occupational health and safety and other matters. Mexican

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environmental
regulations have become increasingly stringent over the last decade. This trend is likely to continue and may be influenced by the environmental agreement entered into by Mexico, the
United States and Canada in connection with the North American Free Trade Agreement ("NAFTA"). Accordingly, although we believe that all of our facilities are in material compliance with currently
applicable environmental, mining and other laws and regulations, there can be no assurance that more stringent enforcement of existing laws and regulations or the adoption of additional laws and
regulations would not have an adverse effect on our business, properties, results of operations, financial condition or prospects. See Item 4. "Information on the CompanyBusiness
OverviewEnvironmental and Other Regulations."

Our actual reserves may not conform to current expectations.

The proven and probable ore reserve data included in this Annual Report are estimates based on standard evaluation methods generally used in the international
mining industry. Reserve estimates may require revision based on actual production experience. There can be no assurance that actual reserves will conform to geological, metallurgical or other
expectations or that the estimated volume and grade of ore will be recovered. Lower market prices, increased production costs, reduced recovery rates, short-term operating factors and
other factors may render proven and probable reserves uneconomic to exploit and may result in revision of reserve data from time to time. Reserve data are not indicative of future results of
operations. See Item 4. "Information on the CompanyDescription of Property, Plant and EquipmentReserves."

Our metals exploration efforts are highly speculative in nature and may be unsuccessful.

Metals exploration is highly speculative in nature, involves many risks and frequently is unsuccessful. Once mineralization is discovered, it may take a number of
years from the initial phases of drilling before production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven
and probable ore reserves through drilling, to determine metallurgical processes to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities.
As a result of the foregoing uncertainties, no assurance can be given that our exploration programs will result in the expansion or replacement of current production with new proven and probable ore
reserves. See Item 4. "Information on the CompanyDescription of Property, Plant and EquipmentExploration."

Development
projects have no operating history upon which to base estimates of proven and probable ore reserves and estimates of future cash operating costs. Such estimates are, to a
large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility studies which derive estimates of cash operating costs based upon
anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, expected recovery rates of the mineral from the ore, comparable facility and equipment operating
costs, anticipated climatic conditions and other factors. As a result, it is possible that actual cash operating costs and economic returns based upon development of proven and probable ore reserves
may differ significantly from those originally estimated. Moreover, significant decreases in actual over expected prices may mean reserves, once found, will be uneconomical to produce. It is not
unusual in new mining operations to experience unexpected problems during the start-up phase.

New development activities require substantial capital expenditures.

New development activities require substantial capital expenditures for the extraction, production and processing stages and for machinery, equipment and
experienced personnel. There can be no assurance that the Company will generate sufficient cash flow and/or that it will have access to sufficient external sources of funds in the form of outside
investment or loans to continue development activities at the same or higher levels than in the past.

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Our insurance coverage may be insufficient to cover our losses.

The business of mining, smelting and refining copper, zinc and other metals is generally subject to a number of risks and hazards, including industrial accidents,
labor disputes, unusual or unexpected geological conditions, changes in the regulatory environment, environmental hazards and weather and other natural phenomena such as earthquakes. Such occurrences
could result in damage to, or destruction of, mining operations resulting in monetary losses and possible legal liability. We maintain insurance against these and other risks, which may not provide
adequate coverage in certain circumstances. Insurance against certain risks (including certain liabilities for environmental pollution or other hazards as a result of exploration and production) is
not generally available to us or to other companies within the industry.

We are uncertain as to the termination and renewal of our concessions.

Under Mexican law, mineral resources belong to the Mexican state and a concession from the Mexican federal government is required to explore for or exploit
mineral reserves. Our mineral rights derive from concessions granted by the Secretaría de Economía, formerly known as Secretaría de Comercio y Fomento
Industrial (the "Secretary of Economy") pursuant to the Ley Minera (the "Mining Law") and regulations thereunder.

Mining
concessions may be terminated if the obligations of the concessionaire are not satisfied. A concessionaire of a mining concession is obligated, among other things, to explore or
exploit the relevant concession, to pay any relevant fees, to comply with all environmental and safety standards, and to provide information to the Secretary of Economy and permit inspections by the
Secretary of Economy. See Item 4. "Information on the CompanyDescription of Property, Plants and EquipmentMining Concessions and Properties."

Changes in the level of industrial and consumer users' demand for our metal products may adversely affect our product sales revenues.

The level of our product sales revenues is dependent on the level of industrial and consumer users' demand for the concentrates and refined and
semi-refined metal products we sell. Changes in technology, industrial processes and consumer habits may affect the level of that demand to the extent that such changes increase or
decrease the need for our metal products. Technological developments in industries as diverse as fiber optics (in which communications network links are fabricated from glass fiber rather than copper
wire) and digital photography (which employs memory chips in lieu of traditional film that relies on developing techniques using silver) may affect overall levels of demand for certain metals.

Certain Factors Relating to Mexico and Elsewhere May Adversely Affect Our Business, Results of Operations and Financial Condition

Mexican economic and political conditions may have an adverse impact on our business.

In the past, Mexico has experienced both prolonged periods of weak economic conditions and dramatic deterioration in economic conditions, characterized by
exchange rate instability and significant devaluation of the peso, increased inflation, high domestic interest rates, a substantial outflow of capital, negative economic growth, reduced consumer
purchasing power and high unemployment. A recent economic crisis occurred in the context of a series of internal disruptions and political events including a large current account deficit, civil
unrest in the southern state of Chiapas, the assassination of two prominent political figures, a substantial outflow of capital and a significant devaluation of the peso. There can be no assurance
that such conditions will not recur or that such conditions will not have a material adverse effect on our financial condition and results of operations.

The
annual inflation rate in Mexico was 12.8% in 1999, 9.0% in 2000, 4.4% in 2001, 5.7% in 2002 and 4.0% in 2003. The Mexican government has publicly announced that it does not expect
inflation to exceed 3.0% in 2004. Interest rates on 28-day Cetes or Mexican treasury bills were an average of

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16.25%
per annum in 1999, 15.24% per annum in 2000, 11.26% per annum in 2001, 7.09% per annum in 2002 and 6.24% per annum in 2003. On June 24, 2004, the 28-day Cetes rate was 5.99%
per annum. Mexico's gross domestic product increased at an annual rate of 3.7% in 1999 and 6.9% in 2000, decreased 0.3% in 2001 and increased .09% in 2002 and 1.3% in 2003. Gross domestic product
decreased at an annualized rate of 3.7% in the first three months of 2004. International reserves were $30.7 billion at December 31, 1999, $33.6 billion at December 31,
2000, $40.9 billion at December 31, 2001, $48.0 billion at December 31, 2002, $57.4 billion at December 31, 2003 and $58.4 billion at June 25,
2004.

On
July 2, 2000, Vicente Fox of the Partido Accion Nacional or PAN was elected president. Although his election ended more than 70 years of presidential rule by the Partido
Revolucionario Institucional or PRI, neither the PAN nor the PRI succeeded in securing a majority in the Mexican congress. The resulting legislative gridlock has impeded the progress of reforms in
Mexico, which could adversely affect economic conditions in Mexico or our results of operations. Furthermore, economic plans of the Mexican government in the past have not, in certain respects, fully
achieved their objectives, and there can be no assurance that these and other economic plans of the Mexican government will achieve their stated goals. Future Mexican governmental actions could have
an adverse effect on market conditions, prices and returns on Mexican securities (including our securities) and Mexican companies (including us, our business, results of operations, financial
condition, ability to obtain financing and prospects).

Inflation, restrictive exchange control policies and devaluation of the peso may adversely affect our financial condition and results of operations.

The inflation rate in Mexico, as measured by the NCPI, was 12.3% in 1999, 9.0% in 2000, 4.4% in 2001, 5.7% in 2002 and 4.0% in 2003. At the same time, the peso
has been subject in the past to significant devaluation, which may not have been proportionate to the inflation rate and may not be proportionate to the inflation rate in the future. The value of the
peso declined by 4.2% in 1999 and 0.81% in 2000, appreciated by 4.48% in 2001 and declined by 12.47% in 2002 and 8.44% in 2003.

Although
all of our sales of metals are priced and invoiced in U.S. dollars, a substantial portion of our cost of sales (approximately 74% in 2003) is denominated in pesos. Accordingly,
when inflation in Mexico increases without a corresponding devaluation of the peso, as it did in 2000, 2001 and 2002, our net income is adversely affected.

We
recorded net remeasurement gain of $19.7 million in 2003. The peso has been subject to significant devaluation in the past and has caused us to suffer net remeasurement losses.
There can be no assurance that such devaluation will not occur in the future or that it will not result in net remeasurement losses for us. See Item 11. "Quantitative and Qualitative Disclosure about
Market RiskForeign Exchange Risk."

The
Mexican government has instituted restrictive exchange control policies in the past due to then-current account balance of payment deficits and shortages in foreign
exchange reserves. In the event of renewed shortages of foreign currency, no assurance can be given that the Mexican government will not institute restrictive exchange control policies in the future.
The imposition of such policies in the future could impair our ability to obtain imported goods and to meet our U.S. dollar-denominated obligations (including our Notes) and could have an adverse
effect on our business and financial condition.

Developments in other emerging market countries and in the United States may adversely affect the market price of the Notes.

The market value of securities of Mexican companies is, to varying degrees, affected by economic and market conditions in other emerging market countries.
Although economic conditions in such countries may differ significantly from economic conditions in Mexico, investors' reactions to developments in any of these other countries may have an adverse
effect on the market value of

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securities
of Mexican issuers. In the past, economic crises in Asia, Russia, Brazil and other emerging market countries adversely affected the Mexican economy.

In
addition, in recent years economic conditions in Mexico have increasingly become correlated to U.S. economic conditions. Therefore, adverse economic conditions in the United States
could have a significant adverse effect on Mexican economic conditions. There can be no assurance that the market value of the Notes would not be adversely affected by events elsewhere, especially in
emerging market countries.

You may be unable to enforce judgments against us in Mexican courts.

We are a Mexican corporation (sociedad anónima de capital variable). Our directors and executive
officers are residents of Mexico, and a significant portion of the assets of our directors and executive officers, and our assets, are located in Mexico. You may experience difficulty in effecting
service of
process upon our company or our directors and executive officers in the United States, or, more generally, outside of Mexico, and in enforcing civil judgments of non-Mexican courts in
Mexico, including judgments predicated on civil liability under U.S. federal securities laws, against us, or our directors and executive officers. We have been advised by Mexican counsel that there is
doubt as to the enforceability in original actions in Mexican courts of liabilities predicated solely on U.S. federal securities laws.

Certain Factors Relating to the Notes

Our ability to repay the Notes is dependent on cash flows from our subsidiaries.

In repaying the Notes, we will rely on cash flows from our subsidiaries. See Item 4. "Information on the CompanyOrganizational Structure" and Item 5.
"Operating and Financial Review and ProspectsOperating ResultsLiquidity and Capital Resources." The ability of our subsidiaries to make payments with respect to advances from
us or to advance funds to us will be affected by the obligations of the subsidiaries to their creditors, and claims of the holders of the Notes against the cash flows and assets of our subsidiaries
other than the subsidiaries which are guarantors of the Notes (the "Guarantors") will be effectively subordinated to claims of such creditors. At December 31, 2003, approximately 99% of our
consolidated stockholders' equity was in these non-Guarantor subsidiaries. The ability of our subsidiaries to pay dividends will be subject to applicable provisions of Mexican corporate
law, the by-laws of each subsidiary and applicable contractual restrictions. The Guarantors will be subject to similar limitations on the ability of their respective subsidiaries to make
payments to them.

We may not have sufficient assets to satisfy claims with respect to any guarantee of the Notes that is held to be unenforceable.

To the extent that the guarantees with respect to the Notes (the "Guarantees") are valid and enforceable in accordance with the laws of the State of New York and
the United States (subject to bankruptcy, insolvency and other circumstances in which such enforceability may be limited), the laws of Mexico do not prevent the Guarantees from being valid, binding
and enforceable against the Guarantors in accordance with their terms. In the event that U.S. federal or state fraudulent conveyance or similar laws are applied to the issuance of a Guarantee, if any
Guarantor, at the time it incurred such Guarantee, (a)(i) was or is insolvent or rendered insolvent by reason of such incurrence, (ii) was or is engaged in a business or transaction for
which the assets remaining with such Guarantor constituted unreasonably small capital or (iii) intended or intends to incur, or believed or believes that it would incur, debts beyond its
ability to pay such debts as they mature and (b) received or receives less than reasonably equivalent value or fair consideration, the obligations of such Guarantor under its Guarantee could be
avoided, or claims in respect of such Guarantee could be subordinated to all other debts of such Guarantor. Among other things, a legal challenge to a Guarantee on fraudulent conveyance grounds may
focus on benefits, if any, realized by such Guarantor as a result of our

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issuance
of the Notes. To the extent that any Guarantee were held to be a fraudulent conveyance or unenforceable for any other reason, the holders of the Notes would cease to have any claim in respect
of the Guarantor issuing such Guarantee and would have a claim solely with respect to any Guarantors whose Guarantees were not avoided or held unenforceable. There can be no assurance that, upon the
insolvency of a Guarantor and after providing for all prior claims, there would be sufficient assets to satisfy the claims of the holders of the Notes relating to any avoided portion of a Guarantee.
See Item 4. "Information on the CompanyOrganizational Structure."

There is no public market for the Notes.

There can be no assurance regarding the future development or continuation of a market for the Notes, the ability of holders of the Notes to sell their Notes or
the price for which such holders may be able to sell their Notes. In such a market, the Notes could trade at prices that may be higher or lower than the initial offering price, depending on many
factors, including some beyond our control. The liquidity of, and trading market for, the Notes may also be adversely affected by changes in interest rates and declines and volatility in the market
for similar securities as well as by any changes in our financial condition or results of operations.

We may not have sufficient resources to satisfy our obligation to repurchase the Notes upon a change of control.

The Indenture under which the Notes were issued provides that upon the occurrence of a Change of Control (as defined below), we will be required to offer to any
holder of the Notes to repurchase any and all of the Notes at a purchase price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. In general, a Change of Control will be deemed to have occurred when (i) Grupo México and its controlling shareholders beneficially own (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, in the aggregate less than 51% of our Voting Stock or (ii) any "person" or "group" (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act) other than Grupo México or its controlling shareholders shall have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of our Board of Directors. We do not have the ability under the Indenture to waive or otherwise unilaterally amend our obligation to repurchase the Notes
upon the occurrence of a Change of Control. There can be no assurance that we would have sufficient resources to repurchase the Notes upon a Change of Control if required to do so under the terms of
the Indenture. Our failure to repurchase the Notes in such event could result in an Event of Default under the Indenture.

Payment on the Notes in pesos under some circumstances may have unfavorable consequences.

We will be required to make payments of amounts owed on the Notes in U.S. dollars. Under the Ley Monetaria de los Estados Unidos Mexicanos (the Mexican Monetary
Law), however, obligations to make payments in Mexico in foreign currency, whether by a judgment or otherwise, may be discharged in pesos at the rate of exchange for pesos prevailing at the time and
place of payment. Accordingly, since the Notes are payable outside Mexico, we will be legally entitled to make payment of amounts due on the Notes in pesos if payment of the Notes is sought in Mexico
through the enforcement of a non-Mexican judgment or otherwise. If we elect to make payments due on the Notes in pesos under such circumstances in accordance with the Mexican Monetary Law,
there can be no assurance that the amounts so paid would be convertible by the payee into U.S. dollars or that, if convertible, such amounts would be sufficient to purchase U.S. dollars equal to the
amount of principal, interest or additional amounts due on the Notes. We have agreed under the Indenture to indemnify the holder of any Note for the difference between the U.S. dollar amount expressed
to be due to the recipient under such Note and the U.S. dollar amount that the recipient is able to purchase with the amount received or recovered in that other currency (in this case, pesos) on the
date of that receipt or recovery.

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ITEM 4.    INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

Organization

We are Minera México, S.A. de C.V. (formerly, Grupo Minero México, S.A. de C.V.), a Mexican corporation with variable capital
(sociedad anónima de capital variable), organized under the laws of Mexico and incorporated in Mexico in 1994 with a duration of
99 years. Our registered office is located at Avenida Baja California No. 200, Roma Sur, México, D.F., C.P. 06760, and our telephone number is
52-55-5080-0050.

Historical Background

Our origins can be traced to the early 1900s when the American Smelting and Refining Company, which later changed its name to Asarco Incorporated ("Asarco"),
expanded its mining operations into Mexico. In 1978, the Larrea family acquired a majority ownership of Asarco Mexicana, a predecessor corporation. In 1978, Grupo Industrial Minera
México, S.A. de C.V. ("GIMMSA") was formed in order to become our holding company.

In
December 2000, the former Grupo México underwent a restructuring designed to (i) create a structure that would allow for the globalization of its mining
division, which operates in Mexico, Peru and the United States, (ii) reduce the "country risk" cost associated with financing, (iii) improve access to the capital markets,
(iv) improve share liquidity, (v) maintain the tax consolidation previously experienced by
the former Grupo México, (vi) separate the railway business and new infrastructure projects from the internationalized mining division and (vii) allow for the acquisition
of mining companies through a non-Mexican vehicle while maintaining tax consolidation in Mexico. As part of the corporate restructuring, on September 2, 1999, Nueva G.
México, S.A. de C.V. ("Nueva G. México") was incorporated, and after exchanging shares with the shareholders of the former Grupo México, became the
ultimate parent company and, as of December 1, 2000, changed its name from Nueva G. México to Grupo México, S.A. de C.V. ("Grupo México"). In turn,
former Grupo México changed its name to Minera México, S.A. de C.V. ("Minera México") and the Company became the mining division of Grupo
México in Mexico.

Mexicana
de Cobre, S.A. de C.V. ("Mexcobre"), our subsidiary, was established in 1968 pursuant to a concession from the Mexican authorities to explore the La Caridad property. In
November 1988, we acquired 91% of the shares of Mexcobre through a public auction for a purchase price of approximately $680 million.

The
Cananea mine is the oldest continuously operating copper mine in North America, with operations tracing back to 1899. In 1990, Mexcobre acquired a controlling interest in the Cananea
mine and processing facilities through a public auction.

ORGANIZATIONAL STRUCTURE

We are a majority-owned indirect subsidiary of Grupo México, S.A. de C.V. We are also a holding company and all of our operations are conducted
through the following subsidiaries that are grouped into (a) Mexicana de Cobre, S.A. de C.V. ("Mexcobre," and together with its subsidiaries, the "Mexcobre Unit"), (b) Industrial Minera
México, S.A. de C.V. ("Immsa") and Minerales Metálicos del Norte, S.A. ("Mimenosa," and together with Immsa and its subsidiaries, the "Immsa Unit") and
(c) Mexicana de Cananea, S.A. de C.V. ("Mexcananea," and together with its subsidiaries, the "Cananea Unit").

On
May 28, 2003, Grupo Minero México and we held a general Extraordinary Stockholders' Meeting approving our merger with and into Minera México. The
merger between Grupo Minero

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México
and us was effective on October 1, 2003. The executed resolutions and accompanying merger agreement were registered on July 2, 2003, with the Mexican Public
Registry of Commerce.

The
table set forth below lists our subsidiaries, their jurisdiction of organization and the percentage of voting stock owned by us.

|Name of Subsidiary                              |  | Jurisdiction |  | Percentage of Voting Stock
Owned by us |  
|----------------------------------------------- |  | ------------ |  | -------------------------------------- | -
|Mexicana de Cobre, S.A. de C.V.                 |  | Mexico       |  | 95.74                                  | %
|Mexicana de Cananea, S.A. de C.V.               |  | Mexico       |  | 98.49                                  | %
|Industrial Minera México, S.A. de C.V.          |  | Mexico       |  | 100.0                                  | %
|Servicios de Apoyo Administrativo, S.A. de C.V. |  | Mexico       |  | 100.0                                  | %
|México Compañía Inmobiliaria S.A.               |  | Mexico       |  | 100.0                                  | %
|Minerales y Minas Mexicanas, S.A. de C.V.       |  | Mexico       |  | 100.0                                  | %
|Minerales Metálicos del Norte, S.A.             |  | Mexico       |  | 100.0                                  | %
|Mexicana del Arco, S.A. de C.V.                 |  | Mexico       |  | 100.0                                  | %
|Minera México Internacional, Inc.               |  | U.S.A.       |  | 100.0                                  | %

Our
Mexcobre Unit, which owns and operates the mine and processing facilities at La Caridad, includes Mexcobre and its subsidiaries. The Cananea Unit, which owns and operates the mine
and processing facilities at Cananea, includes Mexcananea and its subsidiaries. The Immsa Unit, which owns and operates four mining complexes, two processing facilities and a coal and coke complex,
includes two operating companies (Immsa and Mimenosa). Our subsidiaries also include two exploration companies, Mexicana del Arco, S.A. de C.V. and Minerales y Minas Mexicanas, S.A. de C.V.; a
services
company, Servicios de Apoyo Administrativos, S.A. de C.V.; a real estate company, México Compañía Inmobiliaria, S.A.; and a U.S. sales company, Minera
México, Internacional, Inc.

Minority
investors own 1.51% of the capital stock of Mexcananea and 4.26% of the capital stock of Mexcobre. Other minority interests in our subsidiaries are not material.

BUSINESS OVERVIEW

We are Mexico's largest mining company based on consolidated net sales of $781.6 million in 2003 and total assets of $2.57 billion at
December 31, 2003. We are engaged principally in the mining and processing of copper, zinc, silver, gold, lead and molybdenum. Of our consolidated net sales in 2003, 66.0% was from sales of
copper rod, copper cathodes and copper blister, 12.9% was from sales of zinc, 9.4% was from sales of silver and the balance was from sales of molybdenum, gold, lead and other metals and
by-products and from metals trading activities. In 2003, we sold 285,272 metric tons of copper, 122,217 metric tons of zinc and 476 metric tons of silver. Export sales represented 50.4% of
our net sales in 2003 and substantially all of our revenues are derived from the sale of our metals in U.S. dollar-denominated transactions. All of our mining and processing operations, as well as our
extensive exploration activities, are located in Mexico. We have substantial ore reserves and believe that we are among the lowest-cost producers of copper in the world.

We
are a holding company that has no business operations other than (a) holding the capital stock of our subsidiaries, (b) holding cash and short-term
investments and (c) advancing funds to, and receiving funds from, our subsidiaries engaged in operations or in providing services to other subsidiaries. Of our consolidated net sales in 2003,
the Mexcobre Unit accounted for 65.1%, the Immsa Unit accounted for 18.2% and the Cananea Unit accounted for 16.7%. See "Organizational Structure."

The
Mexcobre Unit, which was acquired from the Mexican government in 1988, and the Cananea Unit, which was acquired from the Mexican government in 1990, operate major
open-pit copper mines

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in
northwestern Mexico at La Caridad and Cananea, respectively. The Cananea copper mine is one of the largest actively mined copper ore deposits in the world.

As
of December 31, 2003, the Immsa Unit's mining operations consisted of four operating underground mines situated in central and northern Mexico, where zinc, copper, lead, silver
and gold are mined,
including the San Martín mine, which is the largest underground mine in Mexico, and the Charcas mine, which is the largest producer of zinc in Mexico. The Immsa Unit also operates coal
mines and a coking operation to supply a portion of the energy requirements of its processing plants.

We
have metals processing facilities at each of our operating units. In recent years, we have upgraded and expanded our processing facilities to incorporate
state-of-the-art technology, to integrate processing capacity in the Mexcobre and Cananea Units, and to increase vertical integration. In 1998, increasing capacity
at the Mexcobre smelter allowed to us to close the antiquated Cananea smelter earlier than anticipated, and we opened a copper refinery and a copper rod plant at La Caridad. We have a precious metals
refinery at La Caridad and we completed the first phase of expanding the Cananea Unit's SX-EW leaching facility in November 2001. The Immsa Unit has its own processing and refining
facilities, including a cost-efficient zinc refinery and copper smelter at San Luis Potosí.

In
2003, our annual consolidated sales increased by $57.8 million, or 8.0%, compared to annual consolidated net sales in 2002, and generated a consolidated net loss in 2003 of
$35.2 million. The increase in annual consolidated net sales from the year ended December 31, 2002, to the year ended December 31, 2003, was due mainly to the increase in the
metal prices of copper, zinc and silver by approximately 9.2%, 5.1% and 6.8%, respectively. The decrease in sales volumes was largely the result of a strategy adopted during the year that placed
greater emphasis on cost reduction and rationalization operations. In order to successfully implement this strategy, the following steps were taken: (a) adjusting our plans for mining
operations and (b) improving the efficiency of the production process in order to reduce the production cost per copper pound sold, resulting in significantly lower smelting and refining
charges and reduced mineral purchases from third parties for processing at our subsidiaries' plants. These activities allowed us to obtain significant operating cost savings compared to the previous
year.

In
the past, our financial results have been significantly and deleteriously affected by the decline in the market prices of the metals we produce. As a result of this situation, during
2002 and 2001, we were not in compliance with certain debt covenants and were in default under related payment obligations. We began to renegotiate the terms of our debt in the fourth quarter of 2002
and on December 4, 2002, we executed a term sheet with the holders of our secured export notes (such holders, the "SEN Holders") and the banks with which we had previously entered into credit
arrangements (the "Bank Lenders"), in which the new terms and conditions of the restructured debt were agreed. On April 29, 2003, we entered into a series of definitive agreements restructuring
the terms of our indebtedness. The most significant of these agreements (the "Common Agreement") was executed by and among us, Minera México, S.A. de C.V., certain of our subsidiaries,
as guarantors of our obligations thereunder, the SEN Holders, the Bank Lenders, HSBC Bank, as shared payment and collateral agent for the SEN Holders and the Bank Lenders, Bank of America, as
administrative agent of the Bank Lenders, and The Bank of New York, as trustee of our secured export notes.

Strategy

Minera México seeks to maximize its profitability and to strengthen its position as a major global mining company through improved productivity of
its operations, increased vertical integration of its mining and processing facilities, diversification and expansion of its markets, and strategic investments and acquisitions. Minera
México has managed to maintain its strategy in the face of declining metals

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prices
as it is considered one of the lowest-cost copper producers in the market. Key elements of our strategy include the following:

Improved productivity of mining and processing operations

We seek to further reduce our costs of production through:



Vertical integration among operating units and increased sales of refined metals

As part of our vertical integration strategy, we have expanded the capacity of Mexcobre's low-cost smelter from 180,000 metric tons to 300,000 metric
tons of copper per year in order to consolidate our copper processing capacity at La Caridad. In 1997, we completed the construction of a copper refinery at La Caridad, which has an operating capacity
of 300,000 metric tons per year. In 1998, we completed construction of a copper rod plant. We completed the construction of a precious metals refinery as part

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of
the same complex and commenced operations in July 1999. This facility has the capacity to produce approximately 467 metric tons of refined silver and 2,800 kilograms of refined gold per
annum. These facilities have allowed us to sell predominantly refined products and to realize additional margins associated with sales of high grade refined metals. We will continue to seek
opportunities for vertical integration in copper, zinc, gold, silver and coal. In November 2001, we completed the first phase of the expansion of the Cananea Unit's SX-EW facilities
from a production capacity from 34,200 metric tons to 54,750 metric tons.

Continued diversification of markets and expansion of customer base

We seek to remain as Mexico's leading supplier of copper and zinc, while continuing to strengthen our market share in the United States, Europe and Asia. In
addition, we seek to continue broadening our customer base by increasing our sales of high quality refined metals to end-users and providing specialized products and services to our
customers.

Recent Developments

Minera México is Mexico's largest mining company. We are engaged primarily in the mining and processing of copper, zinc, silver, gold, lead and
molybdenum and operate open-pit mines, concentrators, solution extraction/electron winning (SX/EW) plants, smelters and other conversion and processing operations. We have substantial ore
reserves and believe we are among the lowest-cost producers of copper in the world.

The
markets for our products are highly competitive and sensitive to wide fluctuations in price and cyclical changes in industry capacity and the economy, both domestically and
internationally. Changes in the level of competition, industry capacity and the global economy also have a significant impact on the Company's selling prices and overall profitability. During the
several year period prior to 2004, the Company's competitive and financial position had been negatively influenced by historically low market prices of the metals we produce. As a result of our
restructuring efforts, higher metal prices and increases in the volume of copper produced, our financial prospects have improved significantly since mid-2003.

As
more fully described in this report, the Company's financial results had been negatively impacted by weak prices, which required the Company to restructure in mid-2003 the
terms of its indebtedness. The most significant of these agreements, the Common Agreement, was entered into by and among us, certain of our subsidiaries, as guarantors of our obligations, and our
principal lenders. Our repayment obligations under the Common Agreement consist of payments of principal occurring periodically beginning on June 25, 2004, until maturity on March 30,
2007, for a total amount of $880.9 million. See Item 5. "Operating and Financial Review and ProspectsOperating ResultsLiquidity and Capital Resources" and
Exhibit 4(b) hereto.

In
light of the circumstances described above, the Company changed its business plan, including the cessation of all but critically necessary capital expenditures relating to
preservation of its existing facilities and took several steps to downsize its operations in order to preserve cash resources, including selective curtailment in production and reduction of working
capital. In addition, over the past two-and-a-half years, the Company expended considerable effort in exploring potential financial or restructuring solutions to
its financial difficulties.

The
global market for copper improved markedly during 2003. Increasing demand growth in China coupled with falling inventories helped pushed copper prices to $1.04 per pound at
2003 year-end. During the first three months of 2004, copper has averaged $1.23 per pound. The higher prices are

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expected
to result in increased mining capacity and Minera México has begun to restore its copper production to pre-curtailment levels.

The
improved outlook has enabled us to increase our level of capital expenditures to levels consistent with our anticipated increased earnings growth. Minera México has
begun rehabilitation programs for its operations, improving availability of its installed capacity from less than 70% in 2002 to 90.1% during the first five months of 2004. As a result of these
improvements, copper production output has increased from 267,532 metric tons during 2002 to almost 142,000 metric tons during the first five months of 2004.

Increased
production has helped the Company achieve higher efficiency in its operations, reducing production costs by 6.4% during the first five months of 2004 compared to the same
period in 2003. Additionally, the combined effects of improved efficiency and by-products credit to production costs has enabled the Company to achieve significant cost reductions.

The
improvement in copper prices has also helped the Company to increase net sales for the first five months of 2004 to $549.1 million as compared to $263.9 million for the
same period in 2003.

The
Company's cash flow generation has also improved substantially during the first five months of 2004 and it has been directed mainly to reduce debt. As part of its financial
restructuring, Minera México was able to retain funds from export sales that were previously under the control of some of its creditors and thereby benefit from this addition to cash
flow. The refinancing completed in April 2003 also resulted in a healthier debt profile, reducing principal amortizations through 2007. As of April 2004, the Company prepaid
$115 million of debt under the metals price prepayment provision of the Common Agreement. Moreover, if metal prices remain at current levels, the Company expects to prepay more than
$80 million of additional debt by the end of the 2nd quarter of 2004 and would be in a position to effect substantial additional prepayments by the end of 2004.

Minera
México seeks to continue its position as Mexico's premier mining company through the use of advanced production technology and the continued discovery and strategic
development of mineral deposits. Recent geological and mining studies conducted at the La Caridad and Cananea mines and plants by independent mining consultants Winters, Dorsey & Co and
Mintec, Inc. have confirmed an improvement on the life-of-mine plans in terms of expected life, quality of ore deposits and potential for viable production expansions.
The life-of-mine study at Cananea shows continuous operations at current
production rates until the year 2063, while the La Caridad study shows prospects for continued operations until 2032. Moreover, Minera México has other important exploration projects in
Mexico, such as El Arco in Baja California, Buenavista in Sonora and Angangueo in Michoacán.

With
all its reserve deposits and production facilities located in Mexico, Minera México is uniquely positioned among the world's leading copper producers by having
low-cost, high-quality operations and, at the same time, an investment grade sovereign risk that contributes to efficient financial costs.

Minera
México seeks to continue improving labor productivity through incentive systems, worker training and introduction of new technology. Minera México
has worked jointly with labor union representatives to implement productivity incentives and to streamline work rules in order to implement more efficient labor standards without burdening the Company
with oversized labor structures, thus enabling the Company to adapt efficiently to volatile copper prices.

In
addition to improvements in its mining operations, Minera México is implementing important strategic plans related to diversification of markets and expansion of its
customer base by selling high quality refined metals directly to end-users.

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Production Processes

Open-Pit Mining

In an open-pit mine, the production process begins at the mine pit, where waste rock, leaching ore and copper ore are drilled and blasted and then
loaded onto diesel-electric trucks by electric shovels. Waste is hauled to dump areas and leaching ore is hauled to leaching dumps. The ore to be milled is transported to the primary crusher. Crushed
ore is then sent to the concentrator.

Underground Mining

In an underground mine, the production process begins at the stopes, where copper, zinc and lead veins are drilled and blasted and then the ore is hauled to the
underground crusher station. The crushed ore is then hoisted to the surface for processing.

Concentrating

The copper ore from the open-pit primary crusher or the copper, zinc and lead-bearing ore from the underground mines is transported to a
concentrator plant where a crushing circuit with gyratory crushers breaks the ore into sizes no larger than 3/4 inch. The ore is then sent to a mill section where it is ground to the consistency of
sand. The finely ground ore is agitated in a chemical and water solution and pumped as a slurry to the flotation separator. The separator causes a froth that carries minerals to the surface but not
waste rock. The froth is skimmed off and filtered to produce concentrates with a metal content of approximately 25% to 30% for copper, or 55% for lead or zinc, with silver and gold associated with the
copper, zinc or lead.

Copper Smelting

Copper concentrates are transported to a smelter, where they are smelted using a furnace, converter and anode furnace to produce either copper blister (which is
in the form of cakes with air pockets) or copper anodes (which are cleaned of air pockets). We produce copper anodes of 99.6% purity at the La Caridad smelter and copper blister of 97.4% purity at the
San Luis Potosí smelter.

Copper Refining

Copper anodes are then sent to an electrolytic refinery where they are treated by electrolysis to produce 99.99% pure copper and to separate silver and gold,
which are recovered as slimes for further treatment to produce refined silver and gold. In July 1997, we completed the construction of an electrolytic copper refinery at La Caridad, which
reached its operating capacity of 300,000 metric tons per year in June 1999.

Copper Rod Production

To produce copper rods, copper cathodes are first liquefied in a furnace and then dosified in a casting machine. The dosified copper is then passed through a
cooling system that begins solidification of the copper into a 60 × 50 mm copper bar. The resulting copper bar is gradually reduced in a rolling mill to achieve the desired
diameter. The rolled bar is then cooled and sprayed with wax as a preservation agent and collected into a rod coil, which is compacted and sent to market. We completed construction of a copper rod
plant at La Caridad in April 1998, which reached its operating capacity of 150,000 metric tons per year in May 1999.

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Solvent extraction-electrowinning or SX-EW

An alternative to the conventional concentrator/smelter/refinery process is the leaching and SX-EW process in which ore is treated with a sulfuric
acid solution for a period of several years, producing a copper-pregnant solution from which copper is recovered by solvent extraction and then by electrowinning to produce copper cathodes. We have
SX-EW facilities at the Cananea and La Caridad mining complexes. Refined copper can be produced more economically (though over a longer period), and with lower grade ore, using the
SX-EW process instead of the traditional concentrating, smelting and refining process.

Zinc Refining

Metallic zinc is produced through electrolysis using zinc concentrates and zinc oxides. Sulfur is eliminated from the concentrates by roasting, and then the zinc
oxide is dissolved in sulfuric acid solution to eliminate solid impurities. The purified zinc sulfide solution is treated by electrolysis to produce refined zinc and to separate silver and gold, which
are recovered as concentrates.

Sulfuric Acid Production

Sulfur dioxide gases are produced in the copper smelting and zinc refining processes. As a part of our environmental preservation program, we treat the sulfur
dioxide emissions at two of our plants,
producing sulfuric acid, some of which is, in turn, used for the leaching process with the rest sold to fertilizer companies located in Mexico, the United States, Chile, Australia and other countries.

Molybdenum Production

Molybdenum is recovered from copper-molybdenum concentrates produced at the concentrator. The copper-molybdenum concentrate is first treated through a thickener
until it becomes slurry with 60% solids. The slurry is then agitated in a chemical and water solution and pumped to the flotation separator. The separator causes a froth that carries molybdenum to the
surface but not the copper mineral (which is later filtered to produce copper concentrates of approximately 30%). The molybdenum froth is skimmed off, filtered and dried to produce molybdenum
concentrates of approximately 58%.

Silver and Gold Refining

Silver and gold are recovered from copper, zinc and lead concentrates in the smelters and refineries, and from slimes through electrolytic refining. Construction
of a silver and gold refinery was completed and operations at this facility commenced in July 1999 at the Mexcobre Unit.

Metals Prices

Our products are internationally traded commodities. Prices are established on the Commodies Exchange, Inc. ("Comex") in New York and the London Metal
Exchange ("LME"), two of the most important metal exchanges. These exchanges broadly reflect the worldwide balance of supply and demand of metals. The profitability of our operations is dependent on,
and our financial performance is significantly affected by, the international market prices for the metals we produce, especially for copper, zinc and silver. Metals prices have historically 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

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certain
metals have on occasion been subject to rapid short-term changes due to speculative activities. Copper prices had been in a general downward trend since mid-1997;
however, the global market for copper improved markedly during 2003. Increasing demand growth in China coupled with falling inventories helped push copper prices to $1.04 per pound in
2003 year-end. During the first three months of 2004, copper has averaged $1.23 per pound. The higher prices are expected to result in new mining capacity.

The
following tables set forth high, low and average spot prices in U.S. dollars for copper, zinc and silver for the periods and on the metals exchanges indicated.

|      |                   | Copper PricesComex |      | Zinc PricesLME |   | Silver PricesComex
|----- | ----------------- | ------------------- | ---- | --------------- | - | -------------------
|
|
|1999: |                   | $                   | 0.85 |                 | $ | 0.61               
|2000: |                   |                     | 0.93 |                 |   | 0.74               
|2001: |                   |                     | 0.87 |                 |   | 0.60               
|2002  |                   |                     |      |                 |   |                    
|      | First quarter     |                     |      | 0.77            |   |                    
|      | Second quarter    |                     |      | 0.78            |   |                    
|      | Third quarter     |                     |      | 0.77            |   |                    
|      | Fourth quarter    |                     |      | 0.76            |   |                    
|      | Year              |                     |      | 0.78            |   |                    
|2003  |                   |                     |      |                 |   |                    
|      | First quarter     |                     |      | 0.80            |   |                    
|      | Second quarter    |                     |      | 0.79            |   |                    
|      | Third quarter     |                     |      | 0.83            |   |                    
|      | Fourth quarter    |                     |      | 1.04            |   |                    
|      | Year              |                     |      | 1.04            |   |                    
|2004  |                   |                     |      |                 |   |                    
|      | First quarter     |                     |      | 1.39            |   |                    
|      | Second quarter(1) |                     |      | 1.37            |   |                    

---

The high level of copper prices resulted in higher net sales and higher operating income in 2003. This trend of high copper prices has continued
during the first quarter of 2004. See Item 5. "Operating and Financial Review and ProspectsOperating ResultsResults of Operations for 2003, 2002 and 2001." In the event of a
substantial and sustained decline in prices, we might, in very adverse market conditions, consider curtailing or modifying certain of our mining and processing operations. See Item 3. "Key
InformationRisk FactorsCertain Factors Relating to Our Business."

From
time to time, we have entered into hedging transactions to provide partial protection against future decreases in the market price of metals and we may do so under certain market
conditions. In 2002 and 2003, however, we have not entered into any material hedging transactions. See Item 11. "Quantitative and Qualitative Disclosures About Market RiskCommodity Price
Risk."

Cash Cost of Production in Terms of Copper

Presented below is a table summarizing our average consolidated cash cost of production of copper during each period indicated. Our cash cost of production
includes all operating costs, costs of purchasing concentrates, treatment and refining charges (which represent allowances or costs incurred on the sale of unrefined products) and freight and other
sales costs. By-product credits include the net realized value of zinc, silver, gold, lead and other by-product sales. Administrative expenses include

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corporate
headquarters expenses. The calculation excludes the effects of depreciation and amortization, net financing (cost) income, employee profit sharing and extraordinary items. See Note 3
to the Financial Statementsl. Foreign currency balances and transactions. Each component of our cash cost of production is recorded in pesos and translated into U.S. dollars at the
average exchange rate for the month in which such costs are paid or incurred or, in the case of by-product credits, at the exchange rate on the date the corresponding sales are invoiced.

|                                 |                               | Year ended December 31, |     
|-------------------------------- | ----------------------------- | ----------------------- | ----
|
|
|Operating costs                  |                               | .632                    |     
|Costs of purchasing concentrates |                               | .113                    |     
|Treatment and refining charges   |                               | .076                    |     
|Freight and other sales costs    |                               | .091                    |     
|By-product credits               |                               | (.502                   | )   
|Administrative expenses          |                               | .050                    |     
|                                 | Total cash cost of production |                         | .460

The
increase in operating costs in 2003 compared to 2002 was primarily due to the increased cost of energy and to maintenance materials and the increase in the total cash cost of
production in 2003 compared to 2002 was primarily due to the depreciation of the Mexican peso against the dollar in 2002 (which, in U.S. dollar terms, makes operating costs lower) and the decrease in
the by-product credits.

Markets and Distribution

Our marketing strategy is to remain Mexico's leading supplier of copper and one of Mexico's largest zinc suppliers, while complementing our domestic strength with
a strong international presence. As one of Mexico's leading exporters, we devote significant marketing efforts to expanding our diverse international customer base. We coordinate our global marketing
to international consumers and commodity traders through our Mexico City and Phoenix, Arizona sales offices. Our principal customers for metal products are industrial refiners and
end-users, commodity traders and buyers of last resort. In general, for refined products, we and our end-user customers enter into one-year supply contracts at
specified prices and volumes, subject to adjustments. In addition, we sell refined copper, silver and gold on a spot sale basis. For concentrates, we may enter into supply agreements of one to three
years. See Note 3 to the Financial Statementsm. Revenue recognition.

Our
three largest customers accounted for 14%, 12% and 8% of total sales in 2003, 23%, 7% and 7% of total sales in 2002 and 10%, 10% and 5% of total sales in 2001, respectively. See
Note 3 to the Financial Statementsp. Swap agreements and concentration of credit risk.

In
2001, 2002 and 2003, our export sales represented 60%, 43% and 50%, respectively, of our net sales. See Item 8. "Financial InformationOther Financial
InformationExport Sales" and Note 11 to the Financial StatementsSegment Information.

The
primary uses of copper are in the building and construction industries, electrical and electronic products and, to a lesser extent, industrial machinery and equipment, consumer and
general products and transportation. We sell copper anodes and copper blister to copper refiners, and we sell copper cathodes and copper rod to industrial users. The majority of our copper sales are
pursuant to annual contracts, and the six largest customers, which included two Mexican refineries and four U.S. industrial rod manufacturers, accounted for 63%, 63% and 65% of net sales in 2001, 2002
and 2003, respectively.

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In
2003, approximately 44.4% of our copper sales were in Mexico, 47.3% in the United States, 1.2% in Europe and 7.1% in Asia. We are the leading supplier of copper in Mexico. In
addition, we believe that we will be able to qualify and register our copper cathode products with the LME, which will permit us to sell copper cathodes directly to the LME as a buyer of last resort.

Zinc
is primarily used to make galvanized metal products, alloys, brass products, zinc oxide and rolled zinc and for other industrial uses. We sell three grades of refined zinc, two of
which are registered on the LME, to industrial users, principally steel mills, and we sell zinc concentrates to other zinc refiners. Refined zinc is sold under annual contracts with U.S. customers,
under monthly contracts with Mexican customers and on a spot basis.

In
2003, approximately 49.3% of our refined zinc and zinc concentrate sales were in Mexico, 33.3% in the United States, 9.5% in Europe, 7.0% in Central and South America and 0.9% in
Asia. In 2003, we supplied approximately 41% of the refined zinc sold in Mexico. Our principal Mexican competitor is Peñoles. We are seeking to diversify the types of customers and uses
for our zinc to include die-casting, bronze mills and galvanizing mills.

The
principal uses for silver are for photographic uses, electrical and electronic products, silverware and jewelry and, to a lesser extent, brazing alloys and solders and miscellaneous
uses. We sell silver to metals traders on a spot basis, as well as to industrial users pursuant to long-term contracts. In 2003, 46.0% of our silver sales were in Mexico, 37.5% in the
United States, 15.8% in Asia and 0.7% in Europe and Latin America. We have registered our silver refined production on the LME and Comex and with the London Bullion Market Association.

Since
the construction of the copper refinery at La Caridad in 1998, we have sold approximately 99% of our volume in the form of refined metals. Whereas past sales have been made
predominantly to a group of approximately 10 to 20 regular wholesale customers, we are seeking to market our refined products to a customer base of end-users and wholesalers numbering in
the hundreds.

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The table below sets forth our revenues by product category in the geographic markets and for the periods indicated:

Minera México, S.A. de C.V.  Sales Distribution 2001, 2002 and 2003  (Revenues in Thousands of U.S. Dollars)

|2001   |       | Mexico |         | USA     |   | Europe  |         | Asia |        | Latin
America |   | Total 
|------ | ----- | ------ | ------- | ------- | - | ------- | ------- | ---- | ------ | ------------- | - | ------
|Copper |       | $      | 176,135 |         | $ | 402,677 |         |      |       |               | $ | 579   
|Zinc   |       |        | 49,521  |         |   | 41,268  |         | $    | 15,934 |               |   | 1,834 
|Silver |       |        | 30,279  |         |   | 56,829  |         |      | 178    |               |   | 1,510 
|Gold   |       |        | 9,489   |         |   | 8,430   |         |      |       |               |   | 237   
|Lead   |       |        | 13,570  |         |   |        |         |      |       |               |   | 853   
|Others |       |        | 78,706  |         |   | (907    | )       |      | 2,528  |               |   | 1,209 
|       |       |        |         |         |   |         |         |      |        |               |   |       
|       | Total |        | $       | 357,700 |   | $       | 508,297 |      | $      | 8,640         |   | $     
|       |       |        |         |         |   |         |         |      |        |               |   |       
|
|Copper |       | $      | 245,234 |         | $ | 220,990 |         |      |       |               |   |      
|Zinc   |       |        | 46,275  |         |   | 32,720  |         | $    | 9,909  |               | $ | 1,122 
|Silver |       |        | 44,665  |         |   | 28,577  |         |      | 220    |               |   | (735  
|Gold   |       |        | 7,455   |         |   | 2,522   |         |      |       |               |   | (240  
|Lead   |       |        | 11,236  |         |   |        |         |      |       |               |   | (872  
|Others |       |        | 59,896  |         |   | (246    | )       |      | 5,099  |               |   | 773   
|       |       |        |         |         |   |         |         |      |        |               |   |       
|       | Total |        | $       | 414,761 |   | $       | 284,562 |      | $      | 15,229        |   | $     
|       |       |        |         |         |   |         |         |      |        |               |   |       
|
|Copper |       | $      | 229,185 |         | $ | 244,154 |         | $    | 6,194  |               | $ | 36,649
|Zinc   |       |        | 49,595  |         |   | 33,499  |         |      | 9,557  |               |   | 905   
|Silver |       |        | 33,914  |         |   | 27,647  |         |      | 295    |               |   | 11,649
|Gold   |       |        | 6,025   |         |   | 4,402   |         |      |       |               |   | 1,539 
|Lead   |       |        | 10,227  |         |   |        |         |      |       |               |   |      
|Others |       |        | 58,465  |         |   | 1,443   |         |      | 2,198  |               |   | 3,566 
|       |       |        |         |         |   |         |         |      |        |               |   |       
|       | Total |        | $       | 387,411 |   | $       | 311,145 |      | $      | 18,244        |   | $     
|       |       |        |         |         |   |         |         |      |        |               |   |       

See Item 5. "Operating and Financial Review and ProspectsOperating ResultsSummary of Prices, Volumes Sold and Net Sales"
for further information relating to revenues by product category for 2001, 2002 and 2003.

Competition

The metallurgical market prices for our products are characterized by cyclical prices, little product differentiation and strong competition. In general, the
market price for our products are influenced by production costs of domestic and foreign competitors, worldwide economic conditions, world supply/demand balances, inventory levels, the U.S. dollar
exchange rate and other factors.

We
compete directly or indirectly with many foreign producers throughout the world primarily in respect of our main products, copper and zinc.

The
largest copper ore reserves are found in Chile, which is also the world's largest producer. Countries such as Indonesia and Australia have also increased their mined production
substantially. Chile is also a major producer of refined copper, as are China, Poland, Japan, the USA and Germany.

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Five
major players dominate the copper mining market: Codelco (Chile), Phelps Dodge (USA), BHP Billiton (Australia, UK), Rio Tinto (UK) and Anglo American (UK), which have a combined
market share of approximately 35.1 percent. Minera México's share of global copper mining production is 2.4 percent.

The
copper metal market is characterized by a few large, integrated mining and smelting companies, such as Codelco, Phelps Dodge and Rio Tinto, along with the Company, Norilsk Nickel in
Russia and KGHM in Poland.

Zinc
prices also are affected by the demand for end-use products in, for example, anti-corrosion coating on steel (galvanizing), precision components (die
casting), construction material, brass and pharmaceutical and cosmetic uses.

Environmental and Other Regulations

Our operations are subject to Mexican federal, state and municipal environmental laws, to Mexican Official Standards, and to regulations for the protection of the
environment, including regulations relating to water supply, water pollution, air pollution, noise pollution, hazardous and solid wastes and soil pollution. The principal legislation is the federal
Ley General del Equilibrio Ecológico y la Protección al Ambiente (the General Law of Ecological Balance and Environmental Protection or the "Environmental Law"), which is
enforced by the Procuraduría Federal de Protección al Ambiente (Federal Bureau of Environmental Protection or "PROFEPA"). PROFEPA monitors compliance with environmental
legislation and enforces Mexican environmental laws, regulations and official standards. PROFEPA can bring administrative and criminal proceedings against companies that violate environmental laws,
and it also has the power to close noncomplying facilities, to revoke operating licenses required to operate such facilities and to impose sanctions and fines.

Our
operations near the U.S.-Mexican border are also subject to the Agreement on the Cooperation for the Protection and Improvement of the Environment (the "La Paz Agreement"), which was
concluded in 1983 between the United States and Mexico for the purpose of improving air quality in
the border area. The La Paz Agreement establishes sulfur dioxide emissions standards and requires the installation and maintenance of emission monitoring and record-keeping systems at the smelters.

Mexican
environmental regulations have become increasingly stringent over the last decade, and this trend is likely to continue and may be influenced by the environmental agreement
entered into by Mexico, the United States and Canada in connection with NAFTA in February 1999. In order to maintain compliance with sulfur dioxide emissions standards promulgated under the
Environmental Law and the La Paz Agreement, we shut down the Cananea smelter and operations at Monterrey in December 1999. Management does not believe that continued compliance with the
Environmental Law or Mexican state environmental laws will have a material adverse effect on our business, properties, results of operations, financial condition or prospects or will result in
material capital expenditures. Nevertheless, although we believe that all of our facilities are in material compliance with applicable environmental, mining and other laws and regulations, there can
be no assurance that stricter enforcement of existing laws and regulations or the adoption of additional laws and regulations would not have a material adverse effect on our business, properties,
results of operations, financial condition or prospects.

In
December 2001, the Mexican Congress passed a new law regarding general access to formerly restricted information, including official records concerning environmental matters.
In addition, in February 2002, the Mexican Congress amended the Federal Criminal Code in order to include, as environmental crimes, several actions related to various industrial operations.
Notwithstanding the fact that this law and the legal provisions related thereto are in their early stages and have not been fully implemented, several actions have already been taken against
environmental offenders. We believe,

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however,
that even when fully implemented, the amendment to the Federal Criminal Code will have not any material adverse effect on our business, properties, results of operations, financial condition
or prospects.

We
have instituted extensive environmental conservation programs at our mining facilities. Our environmental programs include water recovery systems to conserve water and minimize
contamination of nearby streams, revegetation programs to stabilize the surfaces of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions.

Suppliers

We have undertaken a program to reduce spare parts inventories and to coordinate purchasing functions. Inventory reduction strategies include a consignment system
for suppliers and a coding system for spare parts to permit inventory transfers among operating units. Reduced import duties
under NAFTA have broadened the number of suppliers from whom we may purchase equipment and supplies.

In
addition, subsequent to the former Grupo México's acquisition of Asarco in November 1999, we and Asarco had implemented a joint purchasing program aimed at
reducing costs through higher volume purchases of mining supplies, chemicals, heavy equipment, tires and other operating supplies under customary synergy policies between affiliated companies.

The
principal raw materials for our operations are ores from our own mines. We have in the past purchased raw materials from time to time for each of our facilities, although we have
substantially reduced our purchases of ores in recent years due to the current low level of the metals we produce. We do, however, continue to regularly purchase copper concentrates for the San Luis
Potosí copper smelter and the La Caridad copper smelter, and zinc oxide for the San Luis Potosí zinc refinery. Our expenditures for purchased ores in 2003 totaled
$13.9 million. As the prices of the metals we produce and market conditions improve, we increase our purchases of ore from third parties to match available processing capacity. We also process
metals on a toll basis for other mining operators at our San Luis Potosí facilities. We and Asarco are also employing economies of scale in the joint purchases and sales of concentrates
and semi-refined products, but always safeguarding our separate corporate identities.

Aside
from ore, the principal raw materials for our operations are fuel (including fuel oil to power generators and diesel fuel for mining equipment), electricity and water. Fuel is
purchased directly or indirectly from Petroleos Mexicanos ("Pemex"), the state oil monopoly. Electricity, which is used as the sole energy source at each mining complex we operate, is purchased from
the Comisión Federal de Electricidad (Federal Electricity Commission, or "CFE"), the state electrical power producer, or steam-generated at Mexcobre's smelter by using purchased fuel
or, in the case of the San Luis Potosí copper smelter, coke from coal we mine. Accordingly, a significant portion of our operating costs are dependent upon the pricing policies of Pemex
and CFE, which reflect government policy as well as international market prices for crude oil and conditions in the crude oil and refinery markets. Our natural gas pipeline (between Douglas, Arizona
and Nacozari, Sonora) that began operating in May 1999 permits us to import natural gas from the United States into Mexico at market prices and thereby reduce operational costs. However, during
2003 we relied on heavy oil due to the substantial increase in the price of natural gas. In addition, we are studying the possibility of extending our alternative sources of electrical power by
investing in additional power generating facilities subject to the terms of our restructured indebtedness.

We
obtain water pursuant to permits granted by the Comisión Nacional del Agua (National Water Commission, or "CNA"), for which we pay fees to the CNA. In recent years, the
CNA has been increasing the price of water. At the Cananea facility, we maintain our own well but must pay the CNA for water measured by usage.

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We
believe that supplies of fuel, electricity and water are readily available. Although the prices of these raw materials may fluctuate, we have generally been able to offset all or a
portion of our increased costs through cost-saving measures. However, during 2002 and 2003 we have experienced increases in energy prices that have surpassed levels we can effectively
control through cost savings.

DESCRIPTION OF PROPERTY, PLANT AND EQUIPMENT

The following map sets forth the locations of our principal mines and smelting, refining and SX-EW facilities as well as our corporate and sales
office as of December 31, 2003:

GRAPHIC



The Mexcobre Unit is currently engaged in the production of copper rod, copper cathodes and copper anodes, with quantities of gold and silver, molybdenum and
sulfuric acid. It operates the La Caridad mining complex, located in the State of Sonora, 14 miles southeast of the town of Nacozari de Garcia and 75 miles south of the U.S.-Mexico border. It includes
an open-pit mine, concentrator, smelter, refinery, rod plant, SX-EW plant, lime plant and two sulfuric acid plants. The smelter and the sulfuric acid plants, as well as the new
refineries and rod plant, are located approximately 15 miles from the mine, and the lime plant is situated 11 miles from the U.S. border. Access is by paved highway and by railroad. The concentrator
began operations in June 1979, the molybdenum plant in June 1982, the smelter in June 1986, the first sulfuric acid plant in July 1988 and the SX-EW plant in
July 1995, the second sulfuric acid plant in January 1997, the copper refinery in July 1997, the rod plant in April 1998 and the precious metals refinery in
July 1999. The total book value of Mexcobre's property and equipment was $1.12 billion as of December 31, 2003.

The
Mexcobre Unit accounted for 65.1% and 39.4% of our 2003 consolidated net sales and operating income, respectively, and 61.4% of our total assets as of December 31, 2003.

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Geology

The La Caridad deposit is a porphyry copper deposit typical of those in the southern basin and range province in the southwestern United States. The main rock
types that predate the mineralizing processes are, in chronological order, diorite, granodiorite, quartz monzonite and pegmatite. Breccia bodies are also present. Alteration and mine realization
patterns at La Caridad are comparable to those of other porphyry copper deposits in the southwestern United States. Minable copper mineralization is mainly chalcocite, covellite (in a secondary
enrichment blanket) and chalcopyrite.

Mining Operations

The Mexcobre Unit uses a conventional open-pit mining method. The ore body is situated within a mountain top, which gives La Caridad the advantage of
a relatively low waste-stripping ratio, natural pit drainage and relatively short haul distances for both ore and waste. The mining method involves drilling, blasting, loading and haulage of waste,
leach and ore to waste and leaching dumps and to the primary crushers. Drills, trucks and shovels are used in the mining process. The mine, which was originally designed to produce 72,000 metric tons
of ore per day, has been expanded to produce 90,000 metric tons of ore per day in order to keep pace with the expansion of the concentrator. An average of 89,759, 67,547 and 74,868 metric tons per day
of ore were mined in 2001, 2002 and 2003, respectively. The average copper content of the ore mined was 0.525% for 2001, 0.535% for 2002 and 0.508% for 2003, respectively. The stripping ratio at the
mine (i.e., the ratio of waste materials plus leaching ore to ore mined) for 2003 was 1.70 to 1. The mine plan calls for a pit ultimately covering an
area of nearly four square miles. The final pit has been designed with 45° maximum slopes, 40 15-meter benches, and a minimum of six months of exposed ore. Mining equipment
includes eighteen 170-ton, seven TITAN 200-ton and 13 240-ton diesel-electric trucks, four electric shovels with dipper sizes ranging from 16 to 17 cubic yards, one
electric shovel with a 38-cubic yard dipper, three electric shovels with a 40-cubic yard dipper, six electric and one diesel rotary blasthole drills and a fleet of bulldozers,
road graders, water trucks and other equipment.

Concentrating Operations

The concentrator, which began operations in 1979, was designed to process 72,000 metric tons of ore per day. It has undergone several stages of modification and
has a current capacity of 90,000 metric tons of ore per day. Mexcobre uses state-of-the-art "expert" computer monitoring systems at the concentrator, the crushing
plant and the flotation circuit in order to coordinate inflows and optimize operations.

Ore
extracted from the mine is processed at the concentrator, which produces a copper-molybdenum concentrate. Concentration consists of crushing and grinding the ore and separating
copper-molybdenum ores from waste material by flotation. The copper-molybdenum concentrate is further processed at the molybdenum plant into copper concentrates and molybdenum concentrates. The copper
concentrates are sent to the smelter and the molybdenum concentrate is exported. The molybdenum recovery plant has a capacity of 2,000 metric tons per day of copper-molybdenum concentrates. A lime
plant was built in 1980 to produce lime from limestone for use in the concentrating process. The lime plant has a capacity of 340 metric tons of finished product per day.

In
2001, 2002 and 2003, the copper ore processed averaged 90,025, 67,789 and 74,814 metric tons per day, respectively, with an average grade of 0.525%, 0.535% and 0.508% copper,
respectively, and of 0.0399%, 0.0403% and 0.0345% molybdenum, respectively. During the same periods, 503,834, 333,885 and 410,476 metric tons of copper concentrates were produced, with average grades
of 27.94%, 27.53% and 26.12%, respectively. The copper recovery was 81.57% for 2001, 78.73% for 2002 and 77.36% for 2003, respectively.

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Smelting Operations

Copper concentrates are carried by trucks from the concentrator to the smelter, where they are processed and cast into copper anodes of 99.7% purity to be sold to
refineries. Mexcobre's flash smelter of Outokumpu design became operational in 1986. The smelter's initial capacity was 180,000 metric tons per year, with the addition of an El Teniente converter, and
was increased to 300,000 metric tons per year with the addition of a new shaft furnace in June 1999. Sulfur dioxide off-gases collected from the flash furnaces and converters are
processed into sulfuric acid at two sulfuric acid plants and sold to third parties. The first sulfuric acid plant, which started operations in July 1988, has a capacity of 2,650 metric tons of
sulfuric acid per day, and the second plant, which started operations in January 1997, has a capacity of 2,160 metric tons of sulfuric acid per day.

Refining Operations

In July 1997, the Mexcobre Unit completed the construction of an electrolytic copper refinery at La Caridad. The refinery, which uses the permanent cathode
technology developed by the Canadian company Kidd Creek, reached its maximum capacity of 300,000 metric tons per year in June 1999. The refinery consists of an anode plant with an AISCO
preparation machine, an electrolytic plant, a slimes treatment plant and a number of ancillary installations. The refinery is producing Grade "A" copper cathode of 99.99% purity. Anodic slimes are
recovered from the refining process and sent to the slimes treatment plant where additional copper is extracted. The slimes are then filtered, packed and shipped to the La Caridad precious metals
refinery to produce silver and gold. Construction of this refinery was completed in July 1999, when operations commenced.

Copper Rod Plant

A rod plant at the Mexcobre Unit was completed in April 1998 and reached its maximum annual operating capacity of 150,000 metric tons by May 1999.
The plant is producing 8 mm copper rods with a purity of 99.99%.

SX-EW Facilities

Approximately 188 million metric tons of leaching ore have been extracted from the La Caridad open-pit mine with grades between 0.10% to 0.32%
sulfide copper since May 1995. With an average grade of approximately 0.25% copper, this ore cannot be processed economically using the conventional smelting process and has been deposited in
leaching dumps. In 1995, Mexcobre completed the construction of a new SX-EW facility at La Caridad, which has allowed processing of this ore and certain leach ore reserves that are unmined
and has resulted in a reduction in Mexcobre's production costs of copper. The facility has an annual production capacity of 21,900 metric tons and has received ISO 9002 certification from the
International Standards Organization.

Immsa Unit Mining Operations

The Immsa Unit operates four underground mining complexes situated in central and northern Mexico. All of Immsa's mining facilities employ exploitation systems
and conventional equipment. We believe that all plants and equipment are in good operating condition. The total book value of the Immsa Unit's mining and metallurgical facilities was
$269.1 million as of December 31, 2003. Each of Immsa's
principal mining complexes is described below. The Nueva Rosita Coal Complex is described under "Immsa Unit Processing Operations."

The
Immsa Unit accounted for 18.2% and 13.9% of our 2003 consolidated net sales and operating loss, respectively, and 16.3% of our total assets as of December 31, 2003.

31

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Charcas

The Charcas mining complex is located 69 miles north of the city of San Luis Potosí in the State of San Luis Potosí. Access is by
paved road. The complex includes three underground mines and one flotation plant and produces zinc, lead and copper concentrates, with significant amounts of silver. The Charcas mining district was
discovered in 1573, and operations in the 20th century began in 1911. The Charcas mine is characterized by low operating costs and good quality ores, and is situated near the zinc refinery. We have
expanded production capacity of the mine by 32% since 1993, and the Charcas mine is now Mexico's largest producer of zinc.

The
Charcas mining district occupies the east-central part of the Central Mesa and is part of the Sierra Madre Metallogenic Province. The dominant mineral structures in the
region are folds associated with faults in Mesozoic carbonate rocks. The Charcas mine encompasses the Zacatecas, Taraises and Cupido geological formations, which contain most of the silver, lead,
copper and zinc ores. Ore occurs as filling fractures and as replacements at vein walls where limestone strata host rocks are favorable to substitution processes. The economically significant minerals
located in the Charcas mines include pirargyrite, argentite, sphalerite, galena, pyrite and chalcopyrite.

The
Charcas mine uses the hydraulic cut-and-fill method and the room-and-pillar mining method with descending benches. The broken ore is
hauled to the underground crusher station. The crushed ore is then hoisted to the surface for processing in the flotation plant to produce lead, zinc and copper concentrates. The capacity of the
flotation plant is 4,000 metric tons of ore per day; 1,445,849, 1,342,703 and 1,212,938 metric tons of ore were mined at Charcas during 2001, 2002 and 2003, respectively. The lead concentrate produced
at Charcas is sold to third parties in Mexico. The zinc and copper concentrates are treated at the San Luis Potosí zinc refinery and copper smelter.

Santa Bárbara

The Santa Bárbara mining complex is located approximately 16 miles southwest of the city of Hidalgo del Parral in southern Chihuahua. Access is by
paved road. It includes three main underground mines and a flotation plant and produces lead, copper and zinc concentrates, with significant amounts of silver. Gold-bearing veins were
discovered in the Santa Bárbara district as early as 1536. Mining activities in the 20th century began in 1913.

The
regional geology of the Santa Bárbara mines consists of Cretaceous shales and interbedded limestones of the Parral Formation. The majority of the zinc, copper and lead
ores produced at Santa Bárbara come from quartz veins occupying fractures previously existing in the lucite and andesite rocks with dips of 50o to 90o. The
zinc and lead content of the ore tends to decrease with depth while copper content in general increases with depth. Minerals formed at the Santa Bárbara mine include sphalerite,
marmatite, galena, chalcopyrite and tetrahedrite. Gangue minerals include quartz, pyrite, magnetite, pyrrhotite, arsenopyrite and fluourite.

The
mining operations at Santa Bárbara are more diverse and complex than at any of our other mines, with veins that aggregate approximately 13 miles in length. Each of the
three underground mines has several shafts and crushers. Due to the variable characteristics of the ore bodies, four types of mining methods are used: shrinkage stopes, long-hole drilled
open stopes, cut-and-fill stopes and horizontal benching stopes. The ore, once crushed, is processed in the flotation plant to produce concentrates. The flotation plant has a
capacity of 4,800 metric tons of ore per day; 1,847,975, 1,590,650 and 1,450,124 metric tons of ore were mined at the Santa Bárbara mine during 2001, 2002 and 2003, respectively. The
lead concentrate produced is sold to third parties in Mexico. The copper concentrates are treated at the San Luis Potosí copper smelter, and the zinc concentrates are either treated at
the San Luis Potosí zinc refinery or exported.

32

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San Martín

The San Martín mining complex is located in the municipality of Sombrerete in the western part of the state of Zacatecas, approximately 63 miles
southeast of the City of Durango. Access is by paved road. The complex includes an underground mine and one flotation plant and produces lead, copper and zinc concentrates, with significant amounts of
silver. The mining district in which the San Martín mine is located was discovered in 1555. Mining operations in the 20th century began in 1949.

San
Martín lies in the Mesa Central between the Sierra Madre Occidental and the Sierra Madre Oriental. The Mesa Central consists of Cretaceous carbonate sequences with
interbedded chert and shale deposits overlain by Tertiary volcanic rocks of the Sierra Madre Occidental. The principal sedimentary rock formation in the San Martín district is the Upper
Cretaceous Age Cuesta del Cura limestone, which consists of an interlayered sequence of shallow marine limestone and black chert, overlain by shales and fine-grained clayed limestones. San
Martín's mineral deposits are of three types: (i) veins; (ii) replacement ore bodies of metasomatic origin associated with veins; and (iii) sedimentary strata. The
most important mineral deposits of San Martín are replacement veins and bodies found in the Cerro de La Gloria granodiorite intrusion. An extensive zone of tactites west of the Cerro de
La Gloria intrusion hosts the San Marcial, Ibarra, Ramal Ibarra and Gallo-Gallina veins. The replacement bodies and veins are comprised of chalcopyrite, sphalerite, bornite, tetrahedrite, native
silver, arsenopyrite, pyrrhotite, stibnite, and galena. Tactite deposits are dispersed throughout layers that alternate with barren chert beds.

The
horizontal cut-and-fill mining method is used at the San Martín mine. The broken ore is hauled to the underground crusher station. The ore is
then brought to the surface and fed to the flotation plant to produce concentrates. The flotation plant has a total capacity of 4,600 metric tons of ore per day; 1,863,002, 1,237,051 and 1,287,239
metric tons of ore were mined at San Martín in 2001, 2002 and 2003, respectively. The lead concentrate is sold to third parties in Mexico. The copper concentrate is treated at the San
Luis Potosí copper smelter and zinc concentrate is either treated at the San Luis Potosí zinc refinery or exported.

Taxco

The Taxco mining complex is located on the outskirts of the city of Taxco in the northern part of Guerrero State, approximately 44 miles from Cuernavaca. Access
is by paved road. The complex includes several underground mines and a flotation plant and produces lead and zinc concentrates, with some amounts of gold and silver. The mining district in which the
Taxco mines are located was discovered in 1519. Mining activities in the 20th century commenced in 1918.

The
Taxco district lies in the northern part of the Balsas-Mexcala basin adjacent to the Paleozoic Taxco-Zitacuaro Massif. The geology of the Taxco district consists of basement schists
overlain by Lower Cretaceous limestone and Upper Cretaceous shales. The ore bodies of Taxco are of three types: (i) ore filling fractures (veins formed from hydrothermal fluids);
(ii) replacement ore bodies in calcerous rock; and (iii) breccia pipes. Fissure veins in the layer of schists, such as the el Cobre vein, contain the most important copper ore deposits.
Silver and lead ores are also present in the fissure veins. There are over 40 veins in the Taxco district, ten of which are currently being mined.

Immsa
employs the shrinkage, cut-and-fill and the room-and-pillar mining methods at the Taxco mines. The flotation plant has a capacity of
3,300 metric tons of ore per day; 559,839, 433,800 and 328,243 metric tons of ore were mined at Taxco in 2001, 2002 and 2003, respectively. The lead concentrate is sold in Mexico. The
zinc concentrate is either treated at the San Luis Potosí zinc refinery or exported. See Item 6. "Directors, Senior Management and EmployeesEmployees."

33

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Immsa Unit Processing Operations

San Luis Potosí Zinc Refinery

The San Luis Potosí electrolytic zinc refinery is located in the city of San Luis Potosí, state of San Luis Potosí.
Built in 1982, it is one of the most cost-efficient zinc refineries in the world. The refinery's cost of production, at less than $400 per metric ton of zinc after credits for
by-products including sulfuric acid and silver, is among the lowest in the world. The total book value of the refinery was $58.2 million as of December 31, 2003.

The
plant was designed to produce 105,000 metric tons of refined zinc per year, by treating up to 200,000 metric tons of zinc concentrate from our own mines, principally Charcas, located
only 70 miles from the refinery. Refined zinc production in 2001, 2002 and 2003 amounted to 107,005, 92,012 and 101,069 metric tons, respectively. The refinery produces special high grade zinc
(99.995% zinc), high grade zinc (over 99.9% zinc) and zinc-based alloys with aluminum, lead, copper or magnesium in varying quantities and sizes depending on market demand. In 2003, the
plant produced as by-products 171,626 metric tons of sulfuric acid, 683 metric tons of refined cadmium, 3,000 metric tons of copper residues and 10,000 metric tons of
lead-silver residues.

San Luis Potosí Copper Smelter

The San Luis Potosí copper smelter is adjacent to the San Luis Potosí zinc refinery. The plant, which has been in operation since
1925, has gone through several phases of expansion and modernization, principally over the last ten years. The total book value of the smelter was $44.6 million as of December 31, 2003.

The
plant operates one blast furnace (with a second on stand-by), which smelt incoming materials, mainly copper concentrates and copper by-products from lead
plants, to produce a copper matte. The copper matte is then treated in one of the two Pierce Smith converters, producing an impure copper blister (97.4% copper), which in 2002 contained approximately
one ounce of gold and 380 ounces of silver per metric ton of copper blister produced. Of a total concentrate copper intake of 62,031 metric tons for 2003, approximately 95% was supplied by the Immsa
Unit's mines and the remaining amount was smelted under toll arrangements with third parties. Copper blister production in 2001, 2002 and 2003 amounted to 30,664, 24,381 and 23,548 metric tons,
respectively.

As
the materials treated at the smelter contain various impurities (especially lead and arsenic), the facility has been equipped with an arsenic recovery plant for treatment of the flue
dust produced in the blast furnace section. This material contains approximately 35% lead and 15% arsenic which, when treated, produces approximately 2,500 metric tons per year of high purity arsenic
trioxide, which is, in turn, sold in the United States principally to the wood preserving industry. Approximately 15,000 metric tons per year of lead bearing calcines (approximately 32% lead) are sold
annually to Industrias Peñoles, S.A. de C.V. ("Peñoles"). We do not expect to incur significant remediation costs for the closure of this plant, but freight costs
associated with transport of copper concentrates to the La Caridad Smelter have increased.

Nueva Rosita Coal and Coke Complex

The Nueva Rosita coal and coke complex commenced operations in 1924. The complex is located in the state of Coahuila, on the outskirts of the city of Nueva Rosita
near the Texan border. It comprises an underground coal mine, with a present yearly capacity of approximately 280,000 metric tons of coal, and a 21-coke oven facility capable of producing
90,000 metric tons of metallurgical coke per year. The room-and-pillar mining method is employed at the underground coal mine with continuous miners. The coke oven installation
supplies the San Luis Potosí copper smelter with low-cost coke, resulting in a significant cost savings to the smelter. The surplus production (approximately 70,000 metric
tons per year) is sold to Peñoles and other Mexican consumers in northern Mexico. The total book value of the complex was $17.3 million as of December 31, 2003. The
complex includes a coal washing plant completed in 1998, which has a capacity of 900,000 metric tons per year and produces cleaner coal of a higher quality.

Cananea Unit Operations

The Cananea Unit is engaged in the production of copper concentrates and copper cathodes. It operates the Cananea mining complex, located 44 miles from La Caridad
and 38 miles south of the Arizona border on the outskirts of the town of Cananea. The mining complex includes an open-pit mine, a concentrator and two SX-EW plants. Access is
by paved highway and railroad. The Cananea deposit is one of the world's largest porphyry copper deposits. The total book value of the Cananea Unit's property and equipment was $484.8 million
as of December 31, 2003.

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For the year ended December 31, 2003, the Cananea Unit accounted for 16.7% and 46.9% of our consolidated net sales and operating loss, respectively, and accounted for 22.3% of our
total assets as of December 31, 2003.

Geology

The Cananea mine is unusual in that the ore explored and sampled at the mine has been of consistent quality, unlike most copper deposits, which evidence a decline
in quality at deeper strata. The Cananea region is within the southern Cordilleran region, extending from southern Mexico to the northwestern United States. Geological and structural features in the
district setting are representative of large copper deposits of the disseminated porphyry type. The district lies within the Basin and Range Metallogenic province. A series of Paleozoic sediments from
Cambrian to Carboniferous, lithologically equivalent to a section in southeastern Arizona, unconformably overlie a Pre-Cambrian granitic basement.

Mineralization
occurred in several stages. An early pegmatitic stage, associated with bornite-chalcopyrite-pyrite-molybdenite assemblage in breccia pipes, is followed by a widespread
flooding of hydrothermal solutions accompanying extensive quartz-pyritic-chalcopyrite mineralization. A distinct pyrite-quartz stage envelopes and closes the primary sequence. An extensive and
pervasive feldspar destructive sericitic and argillic alteration event is evident throughout the district's igneous rock complex.

Mining Operations

Cananea uses a conventional open-pit mining method. In recent years the Cananea Unit has invested in equipment to improve stripping capacity and has
undertaken accelerated removal of the substantial excess overburden from the mine. An average of 259,755, 242,288 and 217,506 metric tons of material per day were mined in 2001, 2002 and 2003,
respectively. The stripping ratio was approximately 2.73 to 1.0 during 2003 and the average copper content for 2003 was approximately 0.576%. Mining equipment includes nine rotary drills, five
360-ton trucks, seven 260-ton trucks, 20 240-ton trucks and 25 170-ton trucks, one 70-cubic yard shovel, one 54-cubic yard
shovel, two 40-cubic yard shovels, one 36-cubic yard shovel and five 30-cubic yard shovels.

Concentrating Operations

Cananea's concentrator was constructed in 1986. It originally had a capacity of 62,500 metric tons of ore per day, which was increased to 80,000 metric tons per
day in May 1998. During 2001, 2002 and 2003, daily averages of 56,250, 53,314 and 58,379 metric tons of ore were processed with an average grade of 0.501%, 0.565% and 0.576% copper,
respectively. During the same periods, 314,354, 323,351 and 337,922 metric tons of copper concentrates were produced, with average grades of 26.15%, 26.79% and 27.85% copper, respectively. The copper
recovery was 80.03% for 2001, 80.48% for 2002 and 80.63% for 2003. Copper concentrates are currently sold to the Mexcobre Unit for further processing.

SX-EW Facilities

The Cananea Unit operates a leaching facility and two SX-EW plants. All copper ore with a grade lower than the mill cut-off grade (0.4%),
but higher than 0.15% copper, is delivered to the leaching dumps. A cycle of leaching and resting occurs for approximately five years to achieve a 56% recovery. In November 2001, we completed
the first phase of the expansion of one of the SX-EW facilities. The Cananea Unit currently maintains 4.4 million cubic meters of pregnant leach solution in the old Cananea pit with
a concentration of approximately 0.91 grams of copper per liter. The SX-EW facilities have a total capacity of 54,750 metric tons of copper cathodes per year. In 2001, 2002 and 2003,
copper

35

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cathode
production was 39,952, 50,041, and 49,518 metric tons, respectively. In July 1998, the SX-EW facilities at Cananea received ISO 9002 certification from the International
Standards Organization.

Capitalization of leaching material

From 1999 to 2001, Mexcananea conducted major drilling studies and metallurgic testing to better locate copper deposits and also to obtain greater yields.
According to these studies, we determined that the Cananea mine has large quantities of material known as chalcocite, which has proven beneficial when processed through the hydrometallurgical process
known as leaching. In order to begin exploiting these leaching materials, during 2001 we accumulated large quantities of leaching materials in sites known as leaching dumps, from which copper is
extracted through a process of irrigation, filtering and electrolysis. According to Mexcananea's studies, copper can be recovered through the leaching process over a period of approximately five to
eight years. Amortization of the costs incurred in processing the leaching material, which are capitalized once such materials are removed from the mine, is based on the actual depletion of each of
the leaching dumps. As of December 31, 2003 and 2002, the gross amount capitalized for this activity was $154.9 million and $131.3 million, respectively. Prior to 2001, such
leaching materials were considered to be waste and therefore figured into the determination of stripping ratios, which are used to determine capitalized stripping costs. The implementation of
processing leaching materials resulted in a net reduction of our cost of sales of $37.1 million in 2003 and $38.2 million in 2002.

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The
table below sets forth production capacity and capacity utilization for our mining, concentrating, smelting and refining facilities during 2003:

Minera México, S.A. de C.V.  Mines and Plants Capacity Utilization in 2003

|Facility                   |  | Unit                  |  | Product                    |  | Capacity(1) |  | Production(1) |  | Capacity
Utilization |  
|-------------------------- |  | --------------------- |  | -------------------------- |  | ----------- |  | ------------- |  | -------------------- | -
|Mine/Concentrator          |  | Mexcobre              |  | Extraction and milling ore |  | 32,400,000  |  | 27,307,000    |  | 84                   | %
|Molybdenum Plant           |  | Mexcobre              |  | Molybdenum ore             |  | 720,000     |  | 416,583       |  | 58                   | %
|Smelting                   |  | Mexcobre              |  | Anodes                     |  | 300,000     |  | 199,033       |  | 66                   | %
|Sulfuric Acid Plant        |  | Mexcobre              |  | Sulfuric acid              |  | 1,565,520   |  | 603,300       |  | 39                   | %
|SX/EW Plant                |  | Mexcobre              |  | Cathodes                   |  | 21,900      |  | 21,470        |  | 98                   | %
|Copper Refinery            |  | Mexcobre              |  | Cathodes                   |  | 300,000     |  | 163,967       |  | 55                   | %
|Copper Rod Plant           |  | Mexcobre              |  | Wire rod                   |  | 150,000     |  | 53,822        |  | 36                   | %
|Precious Metals Plant      |  | Mexcobre              |  | Anode slimes               |  | 2,800       |  | 821           |  | 29                   | %
|Lime Plant                 |  | Mexcobre              |  | Lime                       |  | 122,400     |  | 117,803       |  | 96                   | %
|Smelting                   |  | Immsa San Luis Potosí |  | Concentrates smelted       |  | 230,000     |  | 103,898       |  | 45                   | %
|Electrolytic Zinc Refinery |  | Immsa San Luis Potosí |  | Zinc                       |  | 105,000     |  | 101,069       |  | 96                   | %
|Electrolytic Zinc Refinery |  | Immsa San Luis Potosí |  | Cadmium                    |  | 936         |  | 683           |  | 73                   | %
|Electrolytic Zinc Refinery |  | Immsa San Luis Potosí |  | Sulfuric acid              |  | 175,000     |  | 171,626       |  | 98                   | %
|Coke Plant                 |  | Immsa Nueva Rosita    |  | Coke                       |  | 120,000     |  | 76,645        |  | 64                   | %
|Coal Mine                  |  | Immsa Nueva Rosita    |  | Coal                       |  | 280,000     |  | 260,966       |  | 93                   | %
|Concentrate Mine           |  | Immsa Charcas         |  | Extraction and milling ore |  | 1,292,000   |  | 1,212,938     |  | 94                   | %
|Concentrate Mine           |  | Immsa Taxco           |  | Extraction and milling ore |  | 1,065,900   |  | 328,243       |  | 31                   | %
|Concentrate Mine           |  | Immsa San Martin      |  | Extraction and milling ore |  | 1,485,800   |  | 1,287,239     |  | 87                   | %
|Concentrate Mine           |  | Immsa Santa Barbara   |  | Extraction and milling ore |  | 1,938,000   |  | 1,450,124     |  | 75                   | %
|Mine/Concentrator          |  | Mexcananea            |  | Extraction and milling ore |  | 29,200,000  |  | 20,316,000    |  | 70                   | %
|SX/EW Plant                |  | Mexcananea            |  | Cathodes                   |  | 54,750      |  | 49,518        |  | 90                   | %

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Reserves

We have estimates of ore reserves prepared with respect to each of our units as of January 1 of each year. The ore reserve estimates set forth below have
been prepared by our engineering staff in conjunction with the engineering staffs of our units using evaluation methods generally used in the international mining industry, including standard methods
of mapping, drilling, sampling, assaying and modeling. The reserves may not conform to geological, metallurgical or other expectations, and the volume and grade of ore recovered may be below the
expected levels. Lower market prices, increased production costs, reduced recovery rates and other factors may render proven and probable reserves unprofitable to exploit and result in revision of
reserve data from time to time. Reserve data are not indicative of future results of operations. See Item 3. "Key InformationRisk Factors."

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The
terms "reserves," "proven reserves," "probable reserves," "dilution," "total leaching recovery," "total metal recoverable" and "total mill recovery," which are used in the following
tables, are defined in Annex A"Glossary of Certain Mining Terms."

The
following tables set forth estimated reserve data of the Mexcobre Unit, Immsa Unit and Cananea Unit as of January 1, 2004, which are prepared by the Department of Mining,
Planning and Control at each operating unit under the supervision of our Director of Mining, Planning and Control. See Item 6. "Directors, Senior Management and EmployeesDirectors and
Senior Management."

Ore ReservesOpen-Pit Mines    Mexcobre Unit  (estimated as of January 1, 2004)

|           |          | Ore
(Thousands of
metric tons)                     |         | Copper
(Average grade
percentage, unless
otherwise indicated) |      | Molybdenum
(Average grade
percentage, unless
otherwise indicated) |      
|---------- | -------- | -------------------------------------------------- | ------- | ------------------------------------------------------------- | ---- | ----------------------------------------------------------------- | -----
|Mill ore:  |          |                                                    |         |                                                               |      |                                                                   |      
|           | Proven   |                                                    | 638,222 |                                                               | 0.42 |                                                                   | 0.024
|           | Probable |                                                    | 36,910  |                                                               | 0.38 |                                                                   | 0.020
|           |          | Total                                              |         | 675,132                                                       |      | 0.42                                                              |      
|           |          | Total mill recovery                                |         |                                                              |      | 82.59                                                             | %    
|           |          | Total metal recoverable (thousands of metric tons) |         |                                                              |      | 2,330                                                             |      
|Leach ore: |          |                                                    |         |                                                               |      |                                                                   |      
|           | Proven   |                                                    | 554,697 |                                                               | 0.24 |                                                                   |     
|           | Probable |                                                    | 45,089  |                                                               | 0.24 |                                                                   |     
|           |          | Total                                              |         | 599,786                                                       |      | 0.24                                                              |      
|           |          | Total leaching recovery                            |         |                                                              |      | 29.88                                                             | %    
|           |          | Total metal recoverable (thousands of metric tons) |         |                                                              |      | 430                                                               |      

Cananea Unit  (estimated as of January 1, 2004)

|           |          | Ore
(Thousands of
metric tons)                     |           | Copper
(Average grade
percentage, unless
otherwise indicated) |     
|---------- | -------- | -------------------------------------------------- | --------- | ------------------------------------------------------------- | ----
|Mill ore:  |          |                                                    |           |                                                               |     
|           | Proven   |                                                    | 1,763,350 |                                                               | 0.59
|           | Probable |                                                    | 523,715   |                                                               | 0.54
|           |          | Total                                              |           | 2,287,065                                                     |     
|           |          | Total mill recovery                                |           |                                                              |     
|           |          | Total metal recoverable (thousands of metric tons) |           |                                                              |     
|Leach ore: |          |                                                    |           |                                                               |     
|           | Proven   |                                                    | 2,518,868 |                                                               | 0.25
|           | Probable |                                                    | 468,933   |                                                               | 0.22
|           |          | Total                                              |           | 2,987,801                                                     |     
|           |          | Total leaching recovery                            |           |                                                              |     
|           |          | Total metal recoverable (thousands of metric tons) |           |                                                              |     

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Ore ReservesUnderground Mines    Immsa Unit  (estimated as of January 1, 2004)

|Mine Unit     |          | Ore                                   |        | Zinc   |      | Copper  |      | Lead   |      | Silver  |     | Gold     |     
|------------- | -------- | ------------------------------------- | ------ | ------ | ---- | ------- | ---- | ------ | ---- | ------- | --- | -------- | ----
|
|Charcas       |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 3,995  |        | 5.79 |         | 0.28 |        | 0.24 |         | 70  |          |    
|              | Probable |                                       | 5,064  |        | 5.93 |         | 0.26 |        | 0.28 |         | 64  |          |    
|              |          | Total                                 |        | 9,059  |      | 5.86    |      | 0.27   |      | 0.26    |     | 67       |     
|              |          | Total mill recovery                   |        |       |      | 93.25   | %    | 49.36  | %    | 72.39   | %   | 76.10    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 495,004 |      | 12,072 |      | 17,049  |     | 461.87   |     
|Santa Bárbara |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 9,660  |        | 3.30 |         | 0.51 |        | 1.94 |         | 109 |          | 0.45
|              | Probable |                                       | 10,370 |        | 3.22 |         | 0.57 |        | 1.56 |         | 119 |          | 0.30
|              |          | Total                                 |        | 20,030 |      | 3.26    |      | 0.54   |      | 1.74    |     | 114      |     
|              |          | Total mill recovery                   |        |       |      | 85.00   | %    | 74.02  | %    | 87.88   | %   | 83.97    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 555,035 |      | 80,062 |      | 306,283 |     | 1,917.40 |     
|San Martín    |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 4,309  |        | 3.34 |         | 1.05 |        | 0.33 |         | 102 |          |    
|              | Probable |                                       | 6,765  |        | 2.99 |         | 1.04 |        | 0.46 |         | 135 |          |    
|              |          | Total                                 |        | 11,074 |      | 3.13    |      | 1.04   |      | 0.41    |     | 122      |     
|              |          | Total mill recovery                   |        |       |      | 68.00   | %    | 84.01  | %    | 81.99   | %   | 79.05    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 235,696 |      | 96,752 |      | 37,226  |     | 1,067.97 |     
|Velardeña     |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 35     |        | 7.31 |         | 0.03 |        | 1.41 |         | 61  |          |    
|              | Probable |                                       | 492    |        | 8.17 |         | 0.10 |        | 1.31 |         | 72  |          |    
|              |          | Total                                 |        | 527    |      | 8.11    |      | 0.10   |      | 1.32    |     | 71       |     
|              |          | Total mill recovery                   |        |       |      | 69.48   | %    | 62.53  | %    | 74.31   | %   | 62.48    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 29,657  |      | 329    |      | 5,163   |     | 23.35    |     
|Santa Eulalia |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 526    |        | 8.39 |         | 0.09 |        | 2.12 |         | 107 |          |    
|              | Probable |                                       | 1,288  |        | 7.20 |         | 0.19 |        | 1.78 |         | 103 |          |    
|              |          | Total                                 |        | 1,814  |      | 7.55    |      | 0.16   |      | 1.88    |     | 104      |     
|              |          | Total mill recovery                   |        |       |      | 86.00   | %    | 30.13  | %    | 83.00   | %   | 78.00    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 117,795 |      | 874    |      | 28,308  |     | 147.17   |     
|Rosario       |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 14     |        | 5.75 |         | 0.68 |        | 2.64 |         | 60  |          | 1.65
|              | Probable |                                       | 307    |        | 3.23 |         | 0.21 |        | 2.19 |         | 121 |          | 0.91
|              |          | Total                                 |        | 321    |      | 3.34    |      | 0.23   |      | 2.21    |     | 118      |     
|              |          | Total mill recovery                   |        |       |      | 69.68   | %    | 65.63  | %    | 77.77   | %   | 67.24    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 7,464   |      | 484    |      | 5,512   |     | 25.45    |     
|Taxco         |          |                                       |        |        |      |         |      |        |      |         |     |          |     
|              | Proven   |                                       | 338    |        | 4.54 |         |     |        | 2.44 |         | 188 |          |    
|              | Probable |                                       | 1,435  |        | 5.12 |         |     |        | 2.00 |         | 131 |          |    
|              |          | Total                                 |        | 1,773  |      | 5.01    |      |       |      | 2.08    |     | 142      |     
|              |          | Total mill recovery                   |        |       |      | 82.00   | %    |       | %    | 82.00   | %   | 78.31    | %   
|              |          | Total metal recoverable (metric tons) |        |       |      | 72,854  |      |       |      | 30,246  |     | 197.20   |     
|              |          |                                       |        |        |      |         |      |        |      |         |     |          |     

39

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|Immsa Unit total |          |                                       |        |        |      |           |      |         |      |         |     |          |     
|---------------- | -------- | ------------------------------------- | ------ | ------ | ---- | --------- | ---- | ------- | ---- | ------- | --- | -------- | ----
|                 | Proven   |                                       | 18,877 |        | 4.01 |           | 0.56 |         | 1.22 |         | 100 |          | 0.23
|                 | Probable |                                       | 25,721 |        | 4.09 |           | 0.57 |         | 1.06 |         | 111 |          | 0.13
|                 |          | Total                                 |        | 44,598 |      | 4.06      |      | 0.57    |      | 1.13    |     | 106      |     
|                 |          | Total mill recovery                   |        |       |      | 83.58     | %    | 74.96   | %    | 85.28   | %   | 81.24    | %   
|                 |          | Total metal recoverable (metric tons) |        |       |      | 1,513,505 |      | 190,573 |      | 429,787 |     | 3,840.41 |     

The
above reserve estimates take into account estimated dilution (extracting loss) by applying to mine ore grades a factor derived from historical
mine-to-concentrator grade differences.

Exploration

We conduct mineral exploration programs at each of our existing mines with a view to locating new ore reserves to replace ore extracted in mining operations. The
size of the ore deposits at the Cananea and La Caridad sites has permitted us to achieve this objective at such sites without material expenditure, and, based on current test drilling and sampling
results, we expect this situation to continue for the life of each mine. We believe that the exploration budget of the Immsa Unit is also sufficient to meet this goal under currently foreseeable
circumstances.

In
addition to exploratory drilling programs at existing mines, we are currently conducting exploration to locate mineral reserves at 42 other sites in Mexico. In particular, we have
identified significant copper and gold deposits at the El Arco site in the state of Baja California. Preliminary investigations of the El Arco site indicate that the deposit contains approximately
846 million metric tons of sulfide ore with average grades of 0.51% copper and 0.14 grams of gold per metric ton, and 170 million metric tons of leaching ore with average grades of
0.56%. A reserve of 13 million metric tons of ore at Angangueo site in the state of Michoacán has been identified with diamond drilling. This reserve contains 0.16 grams of gold
and 262 grams of silver per metric ton, and is comprised of 0.79% of lead, .97% of copper and 3.5% of zinc. This ore reserve is sufficient to proceed to the pre-feasibility stage, which
includes additional metallurgical tests to ascertain the feasibility of developing the project. Metallurgical studies at the Buenavista Project site (in the state of Sonora) have shown that a
commercial operation can be carried out at such site, where there is a reserve of 36 million tons of ore containing 29 grams of silver, 0.69% of copper and 3.3% of zinc per metric ton.

We
spent $13.1 million on exploration programs in 2001, $6.7 million in 2002 and $7.2 million in 2003 and have budgeted $11.6 million for 2004.

40

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Mining Concessions and Properties

Under Mexican law, mineral resources belong to the Mexican nation and a concession from the Mexican federal government is required to explore for or exploit
mineral reserves. Our mineral rights derive from concessions granted by the Secretary of Economy pursuant to the Mining Law and regulations thereunder. The current Mining Law, enacted in 1992,
simplified procedures for obtaining concessions, extended the life of exploitation concessions from 25 years to 50 years and eliminated the maximum level of non-Mexican
ownership of mining concessionaires, which was previously 49%. Certain excise taxes previously applicable to mining revenues have also been eliminated.

Mining
concessions are granted either for exploration or for exploitation. An exploration concession permits exploration of mineral resources on a specified claim for a
non-renewable period of six years and confers priority in seeking an exploitation concession for the same claim. An exploitation concession permits extraction of specified minerals from a
specified claim for a renewable period of up to 50 years, subject to payment of a nominal fee and compliance with a program of exploitation submitted to the Secretary of Economy.

Mining
concessions grant several specified rights to the concessionaire, including (i) the right to freely dispose of mineral products obtained as a result of the exploitation of
the concession, (ii) the right to obtain the expropriation of, or an easement with respect to, the land where the exploration or exploitation will be carried out and (iii) the right to
use water in the mine to facilitate extraction, subject to securing and maintaining the required permits from the CNA under applicable laws and regulations. In addition, a concessionaire of a mining
concession is obligated, among other things, (i) to explore or exploit the relevant concession, (ii) to pay any relevant fees, (iii) to comply with all environmental and safety
standards and (iv) to provide information to, and permit inspections by, the Secretary of Economy. Mining concessions may be terminated if, among other things, minerals being mined are not
included in the concession or the obligations of the concessionaire are not satisfied. An assignment of mining concessions is only effective if the assignment is registered with the Public Registry of
Mining.

We
generally own the land to which our concessions relate, although ownership is not required in order to operate a concession. We also own all of our processing facilities. Our
headquarters are in Mexico City and we have a sales office in Phoenix, Arizona and a purchasing and logistics office in Tucson, Arizona.

41

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CAPITAL EXPENDITURES

We made capital expenditures of $127.7 million, $43.2 million and $54.6 million in 2001, 2002 and 2003, respectively, and expect to make
capital expenditures of approximately $127.0 million in 2004. All capital expenditures in 2004 are anticipated to be funded by internally generated funds, as has been principally the case in
the past. In general, the capital expenditures and projects described below are intended to contribute to further vertical integration of our operations by increasing the capacity for production of
refined metals products.

Our
capital expenditures are made primarily in U.S. dollars, and accordingly, budgeted amounts in the table below are presented in U.S. dollars.

The
following table sets forth our capital expenditures on the items specified at December 31, 2001, 2002 and 2003 and principal capital expenditures projected through 2004:

|                                                                                                |                                           | For the year ended December 31,        
|----------------------------------------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------
|
|
|New Projects                                                                                    |                                           |                                        
|La Caridad copper refinery, precious metals refinery, copper dust treatment plant and rod plant |                                           | $                                      
|La Caridad natural gas pipeline                                                                 |                                           |                                        
|                                                                                                |                                           |                                        
|                                                                                                | Total new projects                        |                                        
|                                                                                                |                                           |                                        
|Capacity Expansions                                                                             |                                           |                                        
|San Martin Unit, Santa Barbara Unit, Charcas Unit and Nueva Rosita Unit                         |                                           |                                        
|La Caridad copper smelter                                                                       |                                           |                                        
|La Caridad sulphuric acid plant                                                                 |                                           |                                        
|Cananea SX-EW plants                                                                            |                                           |                                        
|Cananea concentrator plant                                                                      |                                           |                                        
|                                                                                                |                                           |                                        
|                                                                                                | Total capacity expansions                 |                                        
|                                                                                                |                                           |                                        
|Other Expenditures                                                                              |                                           |                                        
|Investments in tailing dams, water recovery and plant                                           |                                           |                                        
|Stripping capitalized                                                                           |                                           |                                        
|Other investments                                                                               |                                           |                                        
|                                                                                                | Total equipment and machinery replacement |                                        
|                                                                                                |                                           |                                        
|                                                                                                |                                           | Total Capital Expenditures             
|Less net book value of retirements                                                              |                                           |                                        
|                                                                                                |                                           |                                        
|                                                                                                |                                           | Capital Expenditures net of retirements
|                                                                                                |                                           |                                        

---

Note:During 2002 and for 2003, the Company's capital expenditures were curtailed due to liquidity constraints and conditions imposed by the Company's
lenders. In late 2003 and during 2004, the Company's rate of capital expenditures increased significantly.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the Financial Statements included elsewhere in this Annual Report. We present our financial statements
in U.S. dollars and in accordance with U.S. GAAP. Minera México, S.A. de C.V. ("Minera México") is a majority-owned indirect

42

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subsidiary
of Grupo México, S.A de C.V. ("Grupo México"), an entity registered pursuant to Mexican law. Minera México comprises substantially all the
assets and liabilities of Grupo México associated with its mining operations in Mexico. For foreign exchange effect, basis of presentation and measurement into U.S. dollars, the
Company's functional currency is the U.S. dollar. Minera México maintains its books in Mexican Pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current
exchange rates except for inventory, property, plant and equipment and other non-monetary assets, which are remeasured at historical exchange rates. Revenues and expenses are generally
translated at average exchange rates in effect during the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates.

In
addition to our Financial Statements, there are also included herein audited consolidated financial statements as of December 31, 2002 and 2003 and for the years ended
December 31, 2001, 2002 and 2003, together with notes thereto, for each of Mexicana de Cobre, S.A. de C.V., our 95.74%-owned subsidiary ("Mexcobre"), Mexicana de Cananea, S.A. de C.V., our
98.49%- owned subsidiary ("Mexcananea") and Industrial Minera México, S.A. de C.V., our 100%-owned subsidiary ("Immsa"). Mexcobre, Mexcananea, Immsa and two other of our subsidiaries
have guaranteed, jointly and severally, the Notes, the securities in respect of which this Annual Report on Form 20-F has been filed. The financial statements of Mexcobre,
Mexcananea and Immsa are set forth herein at Annex F-1, Annex F-2 and Annex F-3, respectively.

Restatement of Previously Reported U.S. GAAP Financial Information

Under U.S. GAAP, a definition of the functional currency is required, which may differ from the reporting currency. The Company's management has determined the
U.S. dollar as its functional currency in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52.

Subsequent
to the issuance of the December 31, 2002 consolidated financial statements by our predecessor, Grupo Minero México, S.A. de C.V., prepared in accordance
with Mexican GAAP and accordingly expressed in thousands of Mexican pesos of purchasing power as of December 31, 2002, our management determined that the reconciliation of net income (loss) and
shareholders' equity from Mexican GAAP to U.S. GAAP presented therein was not prepared assuming that the U.S. dollar was the functional currency, but rather reflected the Mexican peso as the
functional currency. Therefore,
the reconciliation of net income (loss) and stockholders' equity to U.S. GAAP as of and for the years ended December 31, 2002 and 2001, have been restated to give effect to the identification
of the U.S. dollar as the functional currency.

Under
U.S. GAAP, with the U.S. dollar as the functional currency, the effects of inflation recognized under Mexican GAAP must be eliminated in the reconciliation to U.S. GAAP.

Accordingly,
the restated amounts shown below have been remeasured into U.S. dollars and translated back into the reporting currency, the Mexican peso, by applying the procedures
specified in SFAS No. 52.

The
objective of the remeasurement process is to produce the same results that would have been reported if the accounting records had been kept in U.S. dollars. Accordingly, the
comprehensive effects of inflation are removed from the Mexican peso-denominated financial statements. Monetary assets and liabilities are remeasured at the balance sheet date (current)
exchange rate. Non-monetary assets are recorded at their historical exchange rate at the time of purchase. Past transactions in currencies other than the U.S. dollar are remeasured at the
exchange rates in effect when the transactions occurred. Revenues and expenses are remeasured on a monthly basis at the average rates of exchange in effect during the period, except for consumption of
non-monetary assets, which are remeasured at the rates of exchange in effect when the respective assets were acquired. Translation gains and losses on monetary assets and liabilities
arising from the remeasurement are included in the determination of net loss in the period such gains and losses arise.

43

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The
amounts obtained from the remeasurement process referred to above are translated back into Mexican pesos following the provisions of SFAS No. 52. Assets and liabilities are
translated at the current selling exchange rate of Mexican pesos of 10.31 and 9.14 to one U.S. dollar as of December 31, 2002 and 2001, respectively. Revenues, expenses, gains and losses
reported in the income statement are translated at the exchange rate existing at the time of each transaction or, if appropriate, at the weighted average exchange rate during the period. Translation
effects of exchange rate changes are included in other comprehensive income as a cumulative translation adjustment in stockholders' equity.

The
effect of the restatement is further discussed in Note 18 to our audited consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ materially from
these estimates under different assumptions or conditions.

We
believe that the following accounting policies are the most critical to our consolidated financial statements since these policies require significant judgment or involve complex
estimates that are important to the portrayal of our financial condition and results of operations.

Ore reserves

We periodically reevaluate estimates of our ore reserves, which represent our estimate as to the amount of unmined copper, zinc, lead, silver and gold remaining
in existing mine locations that can be produced and sold at a profit. Such estimates are based on engineering evaluations derived from samples of drill holes and other openings, combined with
assumptions about market prices and production costs relating to the metals. We believe that the metals price assumptions used are consistent with average historical prices over recent full economic
and pricing cycles.

The
reserve estimates have been adjusted for actual production since the most recent reserve declarations. Many companies declare their ore reserves on an annual basis. We believe that
our estimates as to ore reserves closely approximate the ore reserve quantities that would have been determined as of December 31, 2003. The reserve estimates have been calculated as of
January 1 on an annual basis.

We
use ore reserve estimates in determining, among other things, the recoverability of long-lived assets, the amount of capitalized stripping and units of production
amortization of capitalized mine stripping. We believe this price reflects a valid price assumption over the remaining lives of our mines, which range from 15 to 102 years. We understand that
the SEC has recently indicated that in calculating ore reserves, companies should use no more than a three-year historical average price. Price

44

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assumptions
utilized by us in determining ore reserves and three-year average market price data are as follows:

|           |  | Price Assumption Utilized in
Determining Ore Reserves |        | Three-Year Average
Market Prices
|---------- |  | ----------------------------------------------------- | ------ | --------------------------------
|
|Copper     |  | $                                                     | 0.90   |                                 
|Molybdenum |  |                                                       | 4.60   |                                 
|Zinc       |  |                                                       | 0.50   |                                 
|Gold       |  |                                                       | 350.00 |                                 
|Silver     |  |                                                       | 5.00   |                                 
|Lead       |  | $                                                     | 0.24   |                                 

We
believe the price assumptions used to determine ore reserves are reasonable and appropriate for the purpose of managing operations.



Stripping costs:    In carrying out operations in open-pit mines, we are required to remove
waste materials to access mineral deposits. Because the concentration of mineral deposits is not evenly distributed throughout the mines, there are periods during the life of the mine where we mine
more (or better quality) reserves as compared to waste removed, and periods during which we mine less (or lower quality) reserves as compared to waste removed.

For
each of our existing production stage open-pit mines, mine engineers have calculated a life-of-mine stripping ratio, which represents our estimate
of the total amount of waste to be incurred divided by the estimated total proven and probable reserve at each such mine. The mine stripping ratios are used to determine the amount of mine production
costs to be charged against earnings. In periods when the actual ratio of waste to mineral ore extracted exceeds the life-of-mine stripping ratios, we capitalize production
costs associated with mining operations in proportion to the excess waste mined. Such capitalized costs are included in net capitalized mine stripping, and are amortized using the units of production
method. Copper resources contained in piles of leaching materials that have been extracted from the mines are not included in the determination of units of production amortization. Conversely, in
periods when the actual ratio of waste to mineral ore mined is less than the life-of-mine stripping ratios, we reduce the net capitalized mine stripping asset proportionally
with a charge of amortization expense.

We
understand that the SEC is currently evaluating methods for accounting for mine stripping costs. In addition, we are aware that in recent public comments, the SEC has expressed
unfavorable views towards our method of accounting for mine stripping costs, which is also shared by others within the industry. However, we believe that our method of accounting for mine stripping
costs, which effectively results in the smoothing of production costs over the lives of our mines, accurately reflects the results and operations of our mining operations and also facilitates improved
matching of revenues and related expenses.

During
2003, 2002 and 2001, actual stripping ratios were higher than the life-of-mine stripping ratios for our mines, which resulted in the capitalization of mine
costs associated with the additional waste mined. If we were to have expensed all production costs associated with our mining operations as incurred, net operating costs expenses would have increased
by $39.5 million, $39.9 million and $60.4 million, for the years ended December 31, 2003, 2002 and 2001, respectively.

45

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Estimated
life-of-mine stripping ratios for each of the Company's mines for the years ended December 31, 2003, 2002 and 2001, were as follows:

|     |  | Life-of-Mine Stripping Ratio
With Respect to
|---- |  | --------------------------------------------
|
|2003 |  | 0.56                                        
|2002 |  | 0.56                                        
|2001 |  | 0.56                                        

Leaching material:In the Cananea mine, we capitalize the cost of materials with low copper content
extracted during the mining process ("leaching the material"), which are accumulated in areas known as leaching dumps. The amortization of the capitalized costs is determined based on the individual
depletion of the leaching dumps, which occurs in approximately five to eight years.

Mine development costs:Exploration costs incurred before site operation are expensed as incurred,
except for expenditures related to specific properties where proven and probable mineral resources have been confirmed, in which case the expenditures are capitalized as mine development costs.
Capitalized mine
development costs are amortized on a straight-line basis over the estimated useful lives of the corresponding proven metal reserves.

Employee benefit obligations

In accordance with Mexican Labor Law and our collective bargaining agreements, a liability results from the voluntary departure of employees who have worked for a
company for a minimum number of years. In addition, in accordance with the Federal Labor Law, companies have obligations resulting from indemnities and seniority premiums payable to employees
terminated under certain circumstances. We record the liabilities from voluntary employee departures, indemnities and seniority premiums as they accrue, in accordance with actuarial computations.

Mexcananea
provides medical and hospital services to all active and retired unionized employees and members of their families through one of its subsidiaries, Hospital del Ronquillo, S.
de R.L. de C.V. Mexcananea records the liability for post-retirement medical benefits in accordance with actuarial calculations. When there is a significant reduction in personnel due to a
restructuring of the labor force or the closing of a plant, the corresponding costs, net of the corresponding reduction in projected benefit obligations and other related items, are charged to
results.

We
are accruing a liability that at present value will cover the projected benefit obligations owed to our employees at their respective estimated retirement dates. Payments are charged
to results in the period in which they are made. Our plan assets related to voluntary employee departures and seniority premiums consist of investments in Mexican government treasury certificates
(30%) and various equity securities of large Mexican companies (70%).

Revenue recognition

Most of our copper is sold as refined metal under annual contracts or on a spot sale basis. The balance of our copper production is sold in the form of
concentrate under contracts of one to three years in duration. Silver and gold are sold under monthly contracts or in spot sales. Revenues are recognized upon the shipment of products to customers in
satisfaction of orders.

Sales
of copper concentrate are recorded in the month the product is shipped to customers. For those sales of copper products wherein customers are given the option to select a monthly
average LME or Comex price ranging between one and three months subsequent to shipment, revenue is recorded at a provisional price at the time of shipment, based on LME or Comex spot prices for

46

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copper
sales. The Company, from time to time, makes adjustments to provisionally priced sales to reflect changes in spot prices at the end of each month until a final adjustment is made to the price
of the shipments upon settlement with customers pursuant to the terms of the contract. The Company has determined that, when made, such monthly adjustments to provisionally priced sales are not
material and are reversed in subsequent months.

OPERATING RESULTS

Our business is primarily affected by the following factors described below that should be considered in evaluating our financial position, results of operations
and cash flows for the periods described in this Annual Report.

Commodity Prices

Our selling prices depend principally upon the market prices of metals we produce, especially copper. Such prices can fluctuate widely and are beyond our control.
Since the maximum volume of metals we produce can generally be sold at prevailing market prices, our results of operations are highly sensitive to such prices. Our results were adversely affected in
2001, 2002 and 2003 by decreases in copper prices, although the diversity of our metals production partly mitigated the effects of these market price fluctuations. Copper prices averaged $0.81 per
pound during 2003, as compared to an average of $0.72 per pound during 2002. The price of copper was $1.04 per pound at December 31, 2003 and the lowest price of copper during 2003 was $0.71
per pound on April 3, 2003. High copper prices resulted in higher net sales, lower operating income and higher net income in 2003. Low prices for copper continued during the first three
quarters of 2003 and began to increase in the last quarter of 2003. The price of copper was $1.21 per pound at June 25, 2004.

In
2003, each change of $0.01 per pound in the average price of each of the following metals (except for silver, which reflects a change of $0.10 per ounce) would have changed net income
by approximately the amount indicated: copper$3.5 million; zinc$1.5 million; lead$0.3 million; and silver$0.9 million.
See "Summary of Prices, Volumes Sold and Net Sales" and Item 4. "Information on the CompanyBusiness OverviewMetals Prices" for information concerning market
prices for metals.

From
time to time we have entered into options and futures contracts or fixed-price forward sales contracts with respect to a portion of our expected future production of metals. See
Item 11. "Quantitative and Qualitative Disclosure About Market RiskCommodity Price Risk." Gains and losses on such transactions, together with amortization of any initial fees or other
costs of such transactions, are reported net under cost of sales.

Summary of Prices, Volumes Sold and Net Sales

We invoice our customers for all of our products on the basis of market prices for refined metals and the amounts of metal contained in our products and this
gross value is recorded under net sales. Where products are sold in impure form, like copper anodes, copper blister or copper concentrates, the invoice also includes a debit for treatment and refining
charges, which is recorded under cost of sales. Other by-products are invoiced based on market prices and the invoiced value is recorded under net sales. The prices of unrefined products
are estimated at the time of the initial invoice, because certain physical properties (such as metal and moisture content) cannot be finally determined until they have been processed further and
because invoices are often based on references to market prices that have not been determined at the time of the initial invoice. When the price is finally determined, a further invoice is sent and an
adjustment to net sales is recognized.

47

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The
following table sets forth, for each of the periods indicated and for each of our principal categories of metal products, average realized prices, volumes sold and net sales:

|                                     |                                                              | Year ended December 31, |                                    
|------------------------------------ | ------------------------------------------------------------ | ----------------------- | -----------------------------------
|
|Average Realized Price ($)           |                                                              |                         |                                    
|                                     | Metallic copper (per pound)                                  |                         | $                                  
|                                     | Refined zinc (per pound)                                     |                         |                                    
|                                     | Zinc concentrate (per pound of zinc contained)               |                         |                                    
|                                     | Silver (per ounce)                                           |                         |                                    
|                                     | Molybdenum concentrate (per pound of molybdenum contained)   |                         |                                    
|                                     | Gold (per ounce)                                             |                         |                                    
|                                     | Lead (per pound)                                             |                         |                                    
|Volume Sold                          |                                                              |                         |                                    
|                                     | Metallic copper (metric tons)                                |                         |                                    
|                                     | Copper concentrate (metric tons of copper contained)         |                         |                                    
|                                     |                                                              | Total copper            |                                    
|                                     | Refined zinc (metric tons)                                   |                         |                                    
|                                     | Zinc concentrate (metric tons of zinc contained)             |                         |                                    
|                                     |                                                              | Total zinc              |                                    
|                                     | Silver (kilograms)                                           |                         |                                    
|                                     | Molybdenum concentrate (metric tons of molybdenum contained) |                         |                                    
|                                     | Gold (kilograms)                                             |                         |                                    
|                                     | Lead (metric tons)                                           |                         |                                    
|Net Sales (millions of U.S. dollars) |                                                              |                         |                                    
|                                     | Copper:                                                      |                         |                                    
|                                     |                                                              | Metallic                |                                    
|                                     |                                                              | Concentrate             |                                    
|                                     |                                                              |                         | Total                              
|                                     | Zinc:                                                        |                         |                                    
|                                     |                                                              | Refined                 |                                    
|                                     |                                                              | Concentrate             |                                    
|                                     |                                                              |                         | Total                              
|                                     | Silver                                                       |                         |                                    
|                                     | Molybdenum                                                   |                         |                                    
|                                     | Gold                                                         |                         |                                    
|                                     | Lead                                                         |                         |                                    
|                                     | Other                                                        |                         |                                    
|                                     |                                                              |                         |                                    
|                                     |                                                              |                         | Total                              
|                                     |                                                              |                         |                                    
|                                     |                                                              |                         | Percentage change from prior period

Results of Operations for 2003, 2002 and 2001

We reported an operating income of $90.0 million in 2003, 471.4% higher than the $15.7 million operating income reported in 2002. This increase was
primarily due to an increase in average metal prices for metallic copper of 9.2%, refined zinc of 2.6%, silver of 6.8%, molybdenum of 45.2%, gold of 17.2% and lead of 4.8% and a decline in the cost of
sales, causing lower purchased concentrates from third parties during 2003 compared to 2002.

48

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We reported an operating income of $15.7 million in 2002, 128.4% higher than the $6.9 million operating income reported in 2001. This increase was primarily due to a
decline in the cost of sales, causing lower purchased concentrates from third parties during 2002 compared to 2001 and partially offset decrease in volume sales for copper (73,391 fewer metric tons
sold), zinc (15,414 fewer metric tons sold), silver (153 fewer metric tons sold) and gold (1,114 fewer kilograms sold).

We
reported net loss of $35.2 million in 2003, compared to net income of $84.4 million in 2002 and net loss of $154.3 million in 2001.

Net sales

Net sales in 2003 were $781.6 million, 8.0% higher than the $723.8 million of net sales in 2002. This increase was due to higher average realized
price of copper, zinc, silver, molybdenum, gold and lead.

Net
sales in 2002 were $723.8 million, 19.7% lower than the $901.5 million of net sales in 2001. This decrease was due to lower sales volumes of copper, zinc, silver, and
gold and by decreased average prices of copper, zinc, silver and gold.

Copper sales.Net copper sales in 2003 were $516.2 million, 10.7% higher than the
$466.3 million of copper sales in 2002. This increase was due to a higher average realized price of copper. Net copper sales in 2002 were $466.3 million, 19.5% lower than the
$579.4 million of copper sales in 2001. This decrease was due to a lower sales volume of copper.

Zinc sales.Net zinc sales in 2003 were $100.6 million, 7.6% higher than the
$93.5 million of zinc sales in 2002. This increase was due to a 5.1% increase in the price of refined zinc and a 5.0% increase in the sales volume of refined zinc. Net zinc sales in 2002 were
$93.5 million, 18.5% lower than the $114.7 million of zinc sales in 2001. This decrease was due to a 13.3% decrease in the price of zinc and a 10.9% decrease in the sales volume of zinc.

Silver sales.Net silver sales in 2003 were $73.7 million, 0.3% higher than the
$73.5 million of silver sales in 2002. This increase was due to a 6.8% increase in the price of silver partially offset by a 4.7% lower
sales volume of silver. Net silver sales in 2002 were $73.5 million, 17.2% lower than the $88.8 million of silver sales in 2001. This decrease was due to a 23.4% lower sales volume of
silver partially offset by a 4.8% increase in the price of silver.

Molybdenum sales.Net molybdenum sales in 2003 were $38.2 million, 47.5% higher than the
$25.9 million of molybdenum sales in 2002. This increase was due to a 45.2% higher price of molybdenum. Net molybdenum sales in 2002 were $25.9 million, 5.3% higher than the
$24.6 million of molybdenum sales in 2001. This increase was due to a 51.1% higher price of molybdenum partially offset by a 37.2% decrease in the sales volume of molybdenum.

Gold sales.Net gold sales in 2003 were $12.0 million, 20.0% higher than the
$10.0 million of gold sales in 2002. This increase was due to a 3.5% increase in the sales volume of gold and a 17.2% increase in the price of gold. Net gold sales in 2002 were
$10.0 million, 45.1% lower than the $18.2 million of gold sales in 2001. This decrease was due to a 52.6% decrease in the sales volume of gold partially offset by a 14.4% increase in the
price of gold.

Lead sales.Net lead sales in 2003 were $10.7 million, 7.0% lower than the
$11.5 million of lead sales in 2002. This decrease was due to a 17.1% decline in the sales volume of lead partially offset by a 4.8% increase in the price of lead. Net lead sales in 2002 were
$11.5 million, 22.3% lower than the $14.8 million of lead sales in 2001. This decrease was due to 21.7% decline in the sales volume of lead.

49

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Cost of sales

Cost of sales in 2003 was $551.8 million, 70.6% of net sales, and was 4.3% lower than the $576.5 million of cost of sales in 2002. The decrease in
cost of sales was primarily due to fewer purchases of concentrates from third parties, reduction in freight and other sales costs and the application of maintenance reserves that had been expensed in
2002. Cost of sales in 2002 was $576.5 million, 79.6% of net sales, and was 24.7% lower than the $765.7 million of cost of sales in 2001. The decrease in cost of sales was primarily due
to fewer purchases of concentrates from third parties. See Item 4. "Information on the CompanyBusiness OverviewCash Cost of Production in Terms of Copper." See Note 3
to the Financial Statementsl. Foreign currency balances and transactions.

Administrative expenses

Administrative expenses in 2003 were $36.4 million, 4.7% of net sales, and were 13.0% lower, by $5.4 million, than in 2002 due primarily to the
positive impact of the devaluation of the Mexican peso on salaries and benefits expressed in U.S. dollars and a reduction in professional fees paid. Administrative expenses in 2002 were
$41.8 million, 5.8% of net sales, and were 6.4% higher than in 2001 due primarily to expenses related to our financial restructuring, including legal expenses, which were $6.6 million
more than in the prior year, incurred as a result of the restructuring process. See Note 8 to the Financial Statements.

Depreciation and amortization

Depreciation and amortization expense in 2003 was $103.5 million, 15.3% higher than in 2002. The increase was due to a corresponding increase in the
amortization of shipping costs of approximately $11.5 million. Depreciation expense in 2002 was $89.8 million, 0.2% higher than in 2001. See Note 3 to the Financial
Statementsd. Property, Plant and Equipment.

Financing cost

Financing cost was an expense of $86.6 million in 2003, an expense of $48.0 million in 2002 and an expense of $139.0 million in 2001. The
change in 2003 was due primarily to a decrease of $32.4 million (62.2% from the prior year) in remeasurement gain due to the depreciation of the Mexican peso against the U.S. dollar. See
Note 2 to the Financial Statementsb. Foreign exchange effect and basis of presentation and measurement into U.S. dollars.

Income taxes

In the event Minera México reduces its consolidated tax liability through the use of tax loss carryforwards or other tax benefits to which it or
its subsidiaries are entitled, Minera México is obligated to reimburse such subsidiary for such tax benefit at the time such benefit would otherwise have reduced the tax payable by such
subsidiary. Beginning in 1999, Mexican law changed to reduce the extent to which a company can benefit from tax consolidation, from 100% to 60% of the possible benefits. See Note 13 to the
Financial Statements. At December 31, 2003, we had tax loss carryforwards amounting to $134.0 million, all of which were attributable to Mexcananea and Mexcobre and all of which has been
applied to reduce the income taxes of Minera México.

We
are subject to income tax and to an alternative minimum corporate tax known as asset tax, which is currently assessed at 1.8% of the net average balance of certain assets and
liabilities. Our subsidiaries and we are also required under Mexican law to pay employees, in addition to their normal compensation and benefits, profit-sharing in amounts based on the taxable income
of the employing entity.

50

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The
tax at effective tax rate was $35.5 million in 2003, $(124.6) million in 2002, and $25.8 in 2001. These differences arose as a consequence of the deteriorating financial
condition of the Company, its default on certain of its credit agreements and ability to continue as a going concern that required the elimination of accumulated tax losses in the calculation of
deferred taxes for 2001 and a charge to earnings in the subsequent period followed by an adjustment to accumulated tax losses when the Company restructured its outstanding indebtedness in 2003 and
restored its financial condition.

Minority interest

Minority interest in net income was $3.1 million in 2003. Minority interest in net income was $8.0 million in 2002 and net loss of
$3.5 million in 2001.

Liquidity and Capital Resources

Operating Activities

Net cash used for operating activities totaled $90.2 million in 2003, compared with cash provided by operating activities of $86.4 million in 2002
and $160.3 million in 2001. The use of cash of $90.2 million in 2003 was principally attributed to the reduction in accounts payable to suppliers and the increase in trade and other
receivables. The generation of cash by operating activities in 2002 of $86.4 million was due basically to improved earnings of $84.4 million, an increase in accounts payable of
$61.8 million was offset by a credit of $146.8 million due to deferred taxes as a result of the improvement of the financial situation of the Company.

Cash
provided by operations is generally lower in years when low metals prices adversely affect our earnings. Cash (used in) provided by operations were $(90.2) million in 2003,
$86.4 million in 2002 and $160.3 million in 2001.

Investing Activities

Net cash used for investing activities totaled $49.4 million in 2003 compared to $43.2 million in 2002 and $124.1 million in 2001. Our
principal capital requirements are capital expenditures. Capital expenditures in 2003 and 2002 were curtailed due to liquidity constraints and other limitations imposed by the Company's lenders. In
late 2003 and during 2004, the Company's rate of capital expenditures increased significantly. Capital expenditures and investments in 2001 totaled $127.7 million, and included primarily the
investment in Cananea's SX-EW plant and concentrator plant and also $21 million in planned plant expansions. Capitalized stripping costs were $39.5 million in 2003 compared
to $39.9 million in 2002 and $60.4 million in 2001. We have budgeted total capital expenditures for 2004 of approximately $127.0 million. See Item 4. "Information on the
CompanyCapital Expenditures." The actual amount we spend in each year will depend to some degree on the pace at which current investment projects are implemented and change in market
prices for metals.

We
have generally met our capital expenditure requirements out of cash flow from operations, supplemented to the extent required by borrowings for specific investment projects and by
general borrowings. At December 31, 2003, we had $56.1 million in cash and cash equivalents.

Financing Activities

As of December 31, 2003 and as of December 31, 2002, our total indebtedness was $1.32 billion. See Note 8 to the Financial Statements
for information relating to the maturity profile of our indebtedness. At December 31, 2003, 100% of our total indebtedness was denominated in U.S. dollars and 46.5% thereof bore interest at
floating rates. In September 1998 and February 1999, we repurchased a portion of our Notes as an investment, in the amounts of $40 million and $5 million,

51

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respectively,
which represented the fair market value at the date of purchase. We recognized these promissory notes as redeemed in June 2000 and recorded financial income of
$13.7 million.

Cash
provided by financial activities totaled $181.8 million in 2003, ($25.6) million in 2002 and ($62.0) million in 2001. In 2003, shareholders of the Company agreed to increase
the fixed capital stock of the
Company by $111.5 million. In addition, the Company made stock repurchases in the amount of $17.8 million during 2003.

As
previously discussed, our financial results were significantly affected in recent years by the decline in the market prices of the metals we produce. As a result of this situation,
during 2002 and 2001, we were not in compliance with certain debt covenants and were in default under certain payment obligations. We began to renegotiate the terms of our debt in the fourth quarter
of 2002 and on December 4, 2002, we executed a term sheet with the SEN Holders and the Bank Lenders, in which the terms of the restructured debt were described.

On
April 29, 2003, we entered into a series of definitive agreements restructuring the terms of our indebtedness. The most significant of these agreements, the Common Agreement,
was entered into by and among Minera México, its principal subsidiaries (as guarantors), the SEN Holders, the Bank Holders, HSBC Bank USA, as shared payment and collateral agent, HSBC
Bank USA, as collateral agent for the SEN Holders, Bank of America, as administrative agent for the Bank Holders, and The Bank of New York, as the SEN Trustee. See "Terms of the
Restructuring."

As
a result of the restructuring, Minera México has incurred additional administrative expenses of $2.4 million in fees to SEN Holders, $2.0 million in fees
to Bank Holders and $2.2 million in legal fees.

The
definitive agreements related to our restructuring also provide that Minera México, and certain of our subsidiaries will guarantee our obligations thereunder. Our
subsidiary guarantors of the restructured debt include the following: Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre,
S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V.,
Compañía de Terrenos e Inversiones de San Luis Potosí, S.C. por A., S.A., México Compañía Inmobiliaria, S.A.
and Proyecciones Urbanísticas S. de R.L. de C.V.

Pursuant
to the restructuring agreements, the SEN Holders' and the Bank Lenders' indebtedness is divided into two series ("Tranche A" and "Tranche B"), with amortization periods from
June 25, 2004, to March 30, 2007, with a third tranche ("Tranche, C") which is applicable only in the event a make-whole amount becomes payable under the terms of the Common
Agreement. The original and restructured indebtedness and the respective amounts and interest rates are detailed below (as of December 31, 2003 and 2002, the London interbank offered rate
("LIBOR") was 1.14% and 1.38%, respectively):

|                                        |  |                                |  | Scheduled Principal
Payment Dates |  |                  |  |                                        |  |                                 |  |   |           |  |   |        
|--------------------------------------- |  | ------------------------------ |  | --------------------------------- |  | ---------------- |  | -------------------------------------- |  | ------------------------------- |  | - | --------- |  | - | -------
|
|
|
|
|The Bank of New York (Agent)            |  | Secured export notes           |  | 1998 to 2011                      |  | 2004 to 2007     |  | 9.80%, 10.26%, 11.18% and LIBOR  2.39% |  | 11.01%, 11.18% and LIBOR+ 3.75% |  | $ | 473,231   |  | $ | 145,205
|Bank of America (Agent)                 |  | Syndicated term loan           |  | 2001 to 2003                      |  | 2004 to 2007     |  | LIBOR  0.90%                           |  | LIBOR  3.75%                    |  |   | 104,000   |  |   | 31,911 
|Bank of America (Agent)                 |  | Down payment agreement         |  | 2003 to 2006                      |  | 2004 to 2007     |  | LIBOR  1.86%                           |  | LIBOR  3.75%                    |  |   | 7,694     |  |   | 2,361  
|Bank of America and Export-Import Bank  |  | Export related loan agreements |  | 2001 to 2007                      |  | 2004 to 2007     |  | LIBOR  0.1%                            |  | LIBOR  3.75%                    |  |   | 36,747    |  |   | 11,275 
|Bank of Nova Scotia                     |  | Term credit facility           |  | 2004                              |  | 2004 to2007      |  | LIBOR  2.25%                           |  | LIBOR  3.75%                    |  |   | 102,237   |  |   | 31,370 
|Banco Nacional de Comercio Exterior     |  | Revolving credit facility      |  | 2007                              |  | 2004 to 2007     |  | LIBOR  1.59%                           |  | LIBOR  3.75%                    |  |   | 50,000    |  |   | 15,342 
|Bank of America (Agent)                 |  | Letter of credit facility      |  | 2003                              |  | 2004 to 2007     |  | Prime  2.0%                            |  | LIBOR  3.75%                    |  |   | 39,826    |  |   | 12,220 
|Export Development Corporation          |  | Loan agreement                 |  | 1997 to 2005                      |  | 2004 to 2007     |  | LIBOR  0.75%                           |  | LIBOR  0.625% and LIBOR  3.75%  |  |   | 39,580    |  |   | 12,145 
|Société Générale and Export-Import Bank |  | Export loan                    |  | 1998 to 2004                      |  | 2004 to 2007     |  | LIBOR  0.25%                           |  | LIBOR  3.75%                    |  |   | 7,628     |  |   | 2,341  
|Enron, Siemens Financial and West LB AG |  | Non-payment liability          |  | 2002                              |  | 2004 to 2007     |  | LIBOR  2.625%                          |  | LIBOR  3.75%                    |  | $ | 20,000    |  |   | 6,137  
|                                        |  |                                |  |                                   |  |                  |  |                                        |  |                                 |  |   | 880,943   |  | $ | 270,307
|The Notes                               |  | Guaranteed senior notes        |  | 2008 and 2028                     |  | Not restructured |  | 8.25 and 9.25%                         |  | Not restructured                |  |   | 441,245   |  |   |        
|                                        |  |                                |  |                                   |  |                  |  |                                        |  |                                 |  | $ | 1,322,188 |  |   |        

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Interest paid by the Company during 2003, 2002 and 2001 was $100.4 million, $94.4 million and $104.9 million, respectively.

The
restructured loans, their respective amounts and interest rates are detailed below:

December 31,Maturity

2003
Thousands
of US$

2002
Thousands
of US$2004

$
55,307

$
55,3072005


94,000


94,0002006


94,000


94,0002007


637,636


637,6362008


316,245


316,2452028


125,000


125,0001,322,188


1,322,188Less  Current portion of long-term debt


55,307Long-term debt

$
1,266,881

$
1,322,188


At
December 31, 2003 and 2002, interest payable amounted to $13.5 million and $18.0 million, respectively.

Terms of our indebtedness prior to the restructuring

We issued the Notes in March 1998. There are two series of Notes: Series A Notes in the amount of $375.0 million maturing in 2008 and
Series B Notes in the amount of $125.0 million maturing in 2028. The Series A Guaranteed Senior Notes bear interest at a fixed rate of 8.25% per annum and the Series B
Guaranteed Senior Notes bear interest at a fixed rate of 9.25% per annum. The Notes are guaranteed by Mexcobre, Immsa, Mexcananea, Mimenosa and Minera México Internacional. Under the
terms of the Notes, we must comply with certain financial covenants that prohibit us from incurring indebtedness unless the pro forma ratio of earnings before interest, taxes, depreciation and
amortization to consolidated interest expense would be equal or greater than 2.5:1. During 2000, we purchased and cancelled $58.8 million in principal amount of these Notes before maturity. On
December 31, 2003 and 2002, the remaining balance due under these Notes was $441.2 million. We did not default on the terms of the Notes and therefore were not required to restructure
the terms thereof.

We
issued our secured export notes (the "Secured Export Notes") in November 1995, October 1996 and August 1997. At December 31, 2002, our Secured Export Notes
were divided into three series. Of the denominated Series C, D and E, approximately $189.6 million, $76.5 million and $207.2 million, respectively, was outstanding at
December 31, 2003, under each such Series. At December 31, 2003, the total outstanding amount of Secured Export Notes was $473.2 million. After the restructuring, principal is now
scheduled to be paid with respect to the Secured Export Notes periodically beginning June 25, 2004, until maturity on March 30, 2007, and interest is borne at rates of 11.01%, 11.18% and
LIBOR + 3.75%.

On
August 21, 1996, we entered into a long-term export finance credit agreement with Société Générale and
the Export-Import Bank of the United States in the amount of $21.3 million. Mexcobre and Immsa previously were guarantors of this loan. At December 31, 2002, $7.6 million was
outstanding under this credit agreement. This debt obligation was restructured in accordance with the terms of our restructuring on April 29, 2003.

On
June 15, 1998, we entered into a long-term credit agreement with Export Development Corporation for up to $75 million to finance the purchase of
Canadian-made assets for the construction

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of
a copper and precious metals refining plant owned by Mexcobre and other assets for the subsidiaries. $60.7 million has been drawn under this credit agreement. Mexcobre, Immsa, Mexcananea,
Mimenosa and Minera México Internacional previously guaranteed this loan. At December 31, 2002, $40.0 million was outstanding under this agreement. This debt obligation
was restructured in accordance with the terms of our restructuring on April 29, 2003.

On
October 6, 1998, we entered into a long-term syndicated loan from Bank of America in the amount of $130 million. Mexcobre, Immsa, Mexcananea, Mimenosa and
Minera México Internacional previously guaranteed this loan. At December 31, 2002, $104.5 million (including $0.5 million of interest payable) was outstanding under
this loan. This debt obligation was restructured in accordance with the terms of our restructuring on April 29, 2003.

On
June 9, 2000, we entered into a syndicated loan arrangement with Bank of America, as agent, in the amount of $100 million. The loan previously was guaranteed by
Mexcobre, Immsa, Mexcananea, Mimenosa and Minera México Internacional. On September 10, 2001, the revolver credit balance was prepaid and only the letters of credit remained
outstanding. At December 31, 2002, $39.8 million remains outstanding under the letters of credit. These letters of credit are divided into three amounts of $21.0 million,
$11.3 million and $7.5 million, bear interest at the rate of Prime plus 2.0% per annum and mature in 2003. This debt obligation was restructured in accordance with the terms of our
restructuring on April 29, 2003.

On
February 6, 2001, we entered into an unsecured loan agreement with Bank of America in the amount of $11 million in order to acquire foreign goods. The guarantors of this
loan were Mexcobre, Immsa, Mexcananea, Mimenosa and Minerales y Minas Mexicanas, S.A. de C.V. At December 31, 2002, $7.7 million was outstanding under this agreement. This debt
obligation was restructured in accordance with the terms of our restructuring on April 29, 2003.

On
February 6, 2001, we entered into two export-related loan agreements with Bank of America and Export-Import Bank of the United States in the amounts of $49.9 million and
$21.4 million, respectively, to finance the acquisition of foreign capital goods, equipment and spare parts. To date, the Company has drawn $22.3 million of the first loan and the entire
available balance of the second one. The guarantors of these loans were Mexcobre, Immsa, Mexcananea, Mimenosa and Minerales y Minas Mexicanas, S.A. de C.V. At December 31, 2002,
$36.7 million was outstanding under these agreements. These debt obligations were restructured in accordance with the terms of our restructuring on April 29, 2003.

On
August 10, 2001, we entered into a revolving credit agreement with Banco Nacional de Comercio Exterior, S.N.C., in the amount of $50 million. The guarantors of this loan
previously were Mexcobre, Immsa, Mexcananea and Mimenosa. At December 31, 2002, $50 million was outstanding under this credit agreement. This debt obligation was restructured in
accordance with the terms of our restructuring on April 29, 2003.

On
August 30, 2001, we entered into a long-term loan agreement with The Bank of Nova Scotia in the amount of $100 million. The guarantors of this loan
previously were Mexcobre, Immsa, Mexcananea, Mimenosa and Minera México Internacional in addition to the corporate guarantee of Grupo México. At December 31, 2002,
$102.2 million was outstanding under this agreement. This debt obligation was restructured in accordance with the terms of our restructuring on April 29, 2003.

In
2002, Siemens Financial Services GMBH, and West LB AG commenced legal action against Mexcobre for failure to pay under an agreement related to the purchase of an electrolyte cathode
in the amount of $20 million. This debt obligation was restructured in accordance with the terms of our restructuring on April 29, 2003.

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Terms of the Restructuring

The following are general descriptions of certain covenants that we are required to satisfy according to the terms of the restructuring: (i) our net
consolidated working capital, defined as current assets less current liabilities, may not be less than $170 million in 2003, $180 million in 2004, and $190 million in 2005 and
thereafter; (ii) as of the quarter ended March 31, 2004, our interest coverage ratio, defined as income from operations before depreciation and amortization and other
non-cash items included in the calculation of income from operations, less scheduled capital expenses and scheduled capitalized stripping, divided by the projected interest expense for the
next succeeding twelve months, may not be less than 0.6 in 2004, 1.5 in 2005, and 1.8 in 2006; (iii) as of the quarter ended March 31, 2004, our debt coverage ratio, defined as income
from operations before depreciation and amortization and other non-cash items included in the calculation of income from operations, less scheduled capital expenses and scheduled
capitalized stripping, divided by scheduled principal payments and projected interest expense for the next succeeding twelve months, may not be less than 0.4 in 2004, 0.7 in 2005, and 0.8 in 2006;
(iv) as of the quarter ended March 31, 2004, the total debt to net capitalization ratio, defined as total debt divided by net capitalization, may not be less than 2.3 in 2004, 2.6 in
2005 and 2.6 in 2006; and (v) we and our subsidiaries may not incur any liabilities other than permitted debt, which may not exceed $30 million.

In
addition, the restructured debt contains the following mandatory prepayment provisions: (i) when excess cash flow (i.e., income
from operations before depreciation and amortization and other
non-cash items included in the calculation of income from operations (plus net proceeds from asset dispositions otherwise not included and interest earned), after permitted capex,
permitted capitalized stripping, certain proceeds from asset sales, interest paid, amortization, taxes, severance payments, employee statutory profit-sharing (PTU), and certain amounts resulting from
sales of metals in excess of certain prices) exceeds established amounts, 50% of such surplus amount allocated to the Company will be distributed to the holders of each of Tranche A and Tranche B of
our restructured debt; (ii) when the prices of copper, zinc and silver exceed $0.88 per pound, $0.485 per pound, and $5.00 per ounce, respectively, we will pay an amount equal to 75% of the
excess cash flow generated by the sales of such metals at the higher metal price, which will be applied first, to the amortization of Tranche B, then to the amortization of Tranche A;
(iii) when our net surplus working capital exceeds $240 million, 100% of the surplus will be used first, to amortize Tranche B, then to the amortization of Tranche A; or (iv) when
the value of sales of specified assets exceeds $81 million, 100% of the proceeds will be used first, to amortize Tranche B, then to the amortization of Tranche A.

Security Agreements

To secure our obligations under the Common Agreement, a security agreement (the "Mexican Security Trust Agreement") was executed by and among us, Immsa, Mexcobre,
Mimenosa, Mexcananea, Mexarco, Minerales y Minas Mexicanas, Americas Mining Corporation, Compañía de Terrenos e Inversiones de San Luis Potosí, S.C. por
A., S.A. and México Compañía Inmobiliaria, S.A., each as a grantor, and GE Capital Bank, S.A., Institución de Banca Múltiple
and GE Capital Grupo Financiero, as trustees. In addition, a separate security agreement (the "U.S. Security Agreement" and together with the Mexican Security Trust Agreement, the "Security
Agreements") was executed by and among us, Immsa, Minera México Internacional, Inc., Mexcobre, Mimenosa, Mexcananea, Mexarco, Minerales y Minas Mexicanas,
Compañía de Terrenos e Inversiones de San Luis Potosí, S.C. por A., S.A., Mexico Compañía Inmobiliaria, S.A., Proyecciones
Urbanisticas S. de R.L. de C.V., each as a grantor, and HSBC Bank USA, as the shared payment and collateral agent.

Pursuant
to the terms of the Mexican Security Trust Agreement, the grantors pledged certain property to the trustees of the trust created thereunder, including the following:
(i) the amount of Ps. 25,000, which will be deposited in a trust account; (ii) real property, tangible movable assets and intangible assets; (iii) the shares representing our
common stock, held by Americas Mining

55

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Corporation,
and exploitation concessions (pursuant to the Mining Law and the restrictions imposed by the Economy Department); (iv) any of such assets previously described and additional shares
acquired after the execution of the Mexican Security Trust Agreement transferred to the trust pursuant to the terms of the Mexican Security Trust Agreement; (v) any securities or other
instruments acquired with proceeds resulting from a foreclosure procedure of the trust assets; (vi) any amounts kept in the trust account at any time; and (vii) any other assets that may
be transferred to the trust.

Pursuant
to the terms of the U.S. Security Agreement, the grantors pledged the following to the shared payment and collateral agent thereunder: (i) all inventory that is located
in the United States consisting of copper cathodes, copper rod, copper anode, and other copper or metal products, and any records, bills of lading or other documents relating thereto; and
(ii) all deposit accounts and securities accounts, together with all monies, credit balances and investments held therein or credited thereto, and any and all agreements establishing such
accounts (collectively, the "Collateral"). The Collateral shall not include any properties, assets and rights to the extent such properties are subject to the Mexican Security Trust Agreement.

As
a result of the Security Agreements, we have effectively pledged substantially all of our assets as collateral in connection with our restructured indebtedness. The Notes have been
secured on apari passubasis pursuant to the provisions of the Notes.

Impact of New U.S. GAAP Accounting Standards

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with "Exit or Disposal Activities'," which will be required to be
effective for exit or disposal activities that are initiated after December 31, 2002. This statement addresses financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." We adopted the provisions of SFAS No. 146 on January 1, 2003, which did not have a material effect on our financial statements.

In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that the guarantor recognize, at the inception of certain guarantees, a liability for the fair value of the
obligation undertaken in issuing such guarantee. FIN 45 also requires additional disclosure requirements about the guarantor's obligations under certain guarantees that it has issued. The initial
recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements are
effective for financial statement periods ending after December 15, 2002. We do not expect that the adoption of FIN 45 will have a material impact on, our financial position, results of
operations or cash flows.

In
January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN
46 clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statement",to certain entities in which equity investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all companies
that hold a variable interest in a variable interest entity created after January 31, 2003. For a variable interest held by us in a variable interest entity created before February 1,
2003, we will apply the provisions of FIN 46 no later than the end of the first annual
reporting period beginning after June 15, 2003. We are evaluating the effect of FIN 46 on our financial position, results of operations or cash flow.

In
April 2003, the FASB issued SFAS No. 149, "Amendments of Statement 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting
and reporting for

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derivative
instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The changes in SFAS No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. SFAS No. 149 will be
effective for contracts entered into or modified after June 30, 2003, except as stated below, and for hedging relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this statement should be applied prospectively. The provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues that have been effective for
fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. We adopted SFAS No. 149 in 2003, which did not have
a material effect on our financial position, results of operations or cash flow.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 aims to
eliminate diversity in practice by requiring that the following three types of financial instruments be reported as liabilities by their issuers:



Until
now, these types of instruments have been variously reported by their issuers as liabilities, as part of equity, or between the liabilities and equity sections (sometimes referred as "mezzanine"
reporting) of the balance sheet. The provisions of SFAS 150 are effective for financial instruments for the first fiscal period beginning after December 15, 2003. We adopted SFAS
No. 150 in July 2003, which did not have a material impact on our financial position, results of operations or cash flow.

Off-Balance Sheet Arrangements

We have not entered into any material off-balance sheet arrangements as defined by SEC rules.

TREND INFORMATION

As described under Item 4. "Information on the CompanyBusiness Overview" and Item 5. "Operating and Financial Review and
ProspectsOperating Results," the most significant trend affecting our results of operations currently and during the past few fiscal years is the depressed market prices for metals and
metal products we sell. See Item 3. "Key InformationRisk FactorsCertain Factors Relating to Our Business." This trend was reversed during the last two quarters of 2003 and
the first two quarters of 2004 as a result of the financial restructuring of the Company that resulted in the availability of the cash previously retained in collateral accounts. We are unable to
predict the possible impact on cash costs of production, and therefore on gross profit, of changes in rates of inflation relative to the exchange rate of the peso compared to the U.S. dollar. See Item
4. "Information on the CompanyBusiness OverviewCash Cost of Production in Terms of Copper."

On
May 28, 2003, Grupo Minero México and we held extraordinary shareholders' meetings approving our merger with and into Minera México. The merger
between Grupo Minero México and

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us
was effective as of October 1, 2003. The executed resolutions and accompanying merger agreement were registered on July 2, 2003, with the Mexican Public Registry of Commerce.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table summarizes our significant contractual obligations (as defined by Section 13(j) of the Securities Exchange Act of 1934, as amended) as
of December 31, 2003 (expressed in millions of dollars):

|                                                               |  | Payment due by Period
|-------------------------------------------------------------- |  | ---------------------
|
|Long-term debt                                                 |  | 1,322.2              
|Pension-related liabilities                                    |  | 28.3                 
|Deferred income taxes and employee statutory profit-sharing(1) |  | 194.4                
|Take-or-pay contracts(2)                                       |  | 11.5                 

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ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

DIRECTORS AND SENIOR MANAGEMENT

Our Board of Directors currently consists of twenty directors. Each director's term of office lasts for one year and each is elected at the annual meeting of
shareholders. Our directors do not have any

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compensation
or service agreements. We currently do not have alternate directors (although C.P. Eduardo Gonzalez Gomez is our alternate examiner). The current directors are as follows:

Name

Position

Years as
DirectorGermán Larrea Mota-Velasco

Chairman

23Genaro Larrea Mota-Velasco

Vice-President

19Juan I. Gallardo Thurlow

Independent Director

15Rómulo O'Farrill Jr.

Independent Director

38Claudio X. González

Independent Director

14José Mendoza Fernández

Independent Director

31Prudencio López Martínez

Independent Director

25Antonio Madero Bracho

Independent Director

3Luis Téllez Kuenzler

Independent Director

3Agustín Santamarina V.

Independent Director

15Emilio Carrillo Gamboa

Independent Director

1Oscar González Rocha

Non-independent Director

23Xavier García de Quevedo Topete

Non-independent Director

21Alfredo Casar Pérez

Non-independent Director

8Valentín Diez Morodo

Independent Director

Fernando Ruiz Sahagun

Independent Director

Rolando Vega Iñiguez

Independent Comisario

25Eduardo González Gómez

Alternate Comisario Non-independent

2Agustín Santamarina V.

Secretary Independent Director

15Armando F. Ortega Gómez

Alternate Secretary Non-independent

3


Germán
Larrea Mota-Velasco, Genaro Larrea Mota-Velasco, Oscar González Rocha, Xavier García de Quevedo Topete,
Alfredo Casar Pérez and Armando F. Ortega Gómez are officers or employees of Grupo México, Southern Peru Copper Corporation, Minera México
and Grupo Ferroviario Mexicano. The remaining directors are not affiliated with Minera México, Grupo México or Southern Peru Copper Corporation. Germán
Larrea Mota-Velasco and Genaro Larrea Mota-Velasco are brothers. Juan I. Gallardo Thurlow is their brother-in-law.

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Each
of our executive officers is appointed for an indefinite term. Our executive officers are as follows:

|Name                            |  | Current Position                                   |  | Years in this
Position |  | Years as an
Employee
|------------------------------- |  | -------------------------------------------------- |  | ---------------------- |  | --------------------
|Germán Larrea Mota-Velasco      |  | Executive President                                |  | 13                     |  | 14                  
|Xavier García de Quevedo Topete |  | President and General Director (Minera México)     |  | 3                      |  | 8                   
|Daniel Chávez Carreón           |  | General Director Operations (Minera México)        |  | 3                      |  | 23                  
|Julian Chavira Quintana         |  | DirectorMining Units Operations (IMMSA)           |  | 3                      |  | 5                   
|Arturo Bermea Castro            |  | DirectorMetallurgical Operations, Coal and Coke   |  | 13                     |  | 40                  
|Héctor Nieto Castilla           |  | DirectorFinance                                   |  |                       |  | 2                   
|Alfonso González Schiavon       |  | DirectorHuman Resources                           |  | 4                      |  | 4                   
|Manuel Calderón Cárdenas        |  | DirectorPlanning and Control of Mining Operations |  | 14                     |  | 36                  
|Ruben Tello Flores              |  | DirectorMining Operations (Mexcobre)              |  | 11                     |  | 44                  
|Isaac López Arzola              |  | DirectorMining Operations (Mexcananea)            |  | 8                      |  | 29                  
|Mario Vinageras Barroso         |  | Corporate DirectorCommercial                      |  | 3                      |  | 28                  
|Agustín Avila Martínez          |  | DirectorController                                |  | 3                      |  | 16                  
|Ligia Sandoval Parra            |  | General Counsel                                    |  | 1                      |  | 8                   

There
are no arrangements by or between any persons whereby such person was elected or designated as one of our officers or directors.

Set
forth below is a summary of the principal business activities of our directors and executive officers in addition to those performed on our behalf.

Germán Larrea Mota-Velasco.Executive President.
Mr. Germán Larrea has been the Chairman and Chief Executive Officer of Grupo México since 1994 and Minera México since its incorporation. Prior to
1994, Mr. Larrea was the Executive Vice President of Grupo México S.A. de C.V., a position that he assumed in December 1989. Mr. Larrea also serves as a Director of
the Board of Grupo México, a position that he has held since 1981, and as a director of Minera México, Asarco and of Southern Peru Copper Corporation, a majority-owned
public subsidiary of Asarco ("SPCC"). Mr. Larrea is also Chairman of the Board and Chief Executive Officer of Compañía Perforadora México and
México Compañía Constructora. Mr. Larrea founded Grupo Impresa in 1978 and was a Chief Executive Officer until 1989 when that company was sold.
Mr. Larrea is also a member of the Board of Directors, Grupo Televisa, ING Seguros Comercial América, and Perforadora México.

Juan Sánchez-Navarro Peón.Vice President of Grupo Modelo, S.A. de C.V.
since 1993. Chairman of Banco Internacional, S.A. from July 22, 1992 to April 23, 1997. Chairman of Grupo Financiero Bital, S.A. de C.V. from July 22, 1992, to April 23,
1997. Director since 1994.

Carlos Girón Peltier.Retired in 1995. Director since 1994.
Mr. Girón passed away on March 8, 2003.

Prudencio López Martínez.President of Sanvica, S.A. de C.V. since
1982. Director since 1994.

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Juan I. Gallardo Thurlow.Chairman of the Board of Grupo Azucarero de México, S.A. de
C.V. since 1995. Chairman of the Board of Grupo Embotelladoras Unidas, S.A. de C.V. since 1986. Director since 1994.

Agustín Santamarina Vázquez.Partner of Santamarina y Steta, S.C. and
outside counsel to Grupo México since July 1, 1992 and Minera México since its incorporation. Director since 1994.

Xavier García de Quevedo Topete.Mr. García de Quevedo has been
President and General Director of Minera México since September 2001. Mr. García de Quevedo was President and Chief Operating Officer of Asarco from
January 2000 to August 2001 and Director of Asarco since November 1999. Mr. Garcia de Quevedo was Managing Director of Grupo Ferroviario Mexicano, S.A. de C.V. and
Ferrocarril Mexicano, S.A. de C.V. from December 1997 to December 1999 and Managing Director for Exploration and Development at Grupo México from 1994 to 1997. He has been
a member of the Board of Directors of Grupo México since 1998 and Director of SPCC since November 1999.

Daniel Chávez Carreón.Daniel Chávez
Carreón joined Immsa in 1989 as Purchasing Manager. In 1989, Mr. Chávez left Immsa to serve as General Manager of W.M. Mexicana. In 1991, he rejoined Grupo
México as Director of Corporate Purchasing of the group. Mr. Chávez was the Managing Director of Immsa from 1997 to June 2001.
Mr. Chávez has been General Director Operations of Minera México since July 2001.

Manuel Calderón Cárdenas.DirectorPlanning and Control of
Mining Operations. Mr. Calderón joined Immsa as Chief Engineer in 1956 and assumed his current position in January 1989. His responsibilities include the financial and
economic valuation of new mining ventures, planning and scheduling of mine operations and analysis of capital and operations costs. Previously, he served as Mine Superintendent in 1965, Planning
Department Manager in 1975 and Sub-director of the commercial department in 1982.

José Julián Chavira Quintana.Mr. Chavira has been a director of
the North Zone Underground Mining Operation since September 1998 to February 2002. He has been the Mining Operations Director of Industrial Minera México, S.A. de C.V.
from March 2002 to the present.

Arturo Bermea Castro.Mr. Bermea has worked for us since 1964. From 1972 to 1975 he was
General Manager of the Chihuahua Plant. From 1976 to 1982, he was the Regional Manager for copper and lead plants. Since 1991, he has been Director of Metallurgical Operations, Coal and Coke.

Héctor Nieto Castilla.Mr. Nieto, has been Finance Director since
March 2004. Previously, he was Corporate Finance Director of Grupo México (August 2002 to February 2004). Previously, Mr. Nieto held executive positions at
BBVA-Bancomer, Chase Manhattan Bank and Citibank.

Alfonso González Schiavón.Mr. González has been
the Human Resources Director since February 2000. Previously, he was Corporate Director of Grupo Transportación Marítima Mexicana, S.A., de C.V. from
July 1995 to February 2000.

Rubén Tello Flores.Mr. Tello is DirectorMining Operations,
Mexcobre. He has served in his current position since 1993. He was Manager of Operations at Mexcobre from 1990 to 1993 and Superintendent of Concentrators at Mexcobre from 1980 to 1990.
Mr. Tello joined Immsa in 1960 and has served in several positions in the operating areas.

Isaac López Arzola.Mr. López has been Managing Director of
Mexcananea since March 1, 2000. Previously, he was Director of Operations at Mexicana de Cananea from November 1, 1996, to February 29, 2000. He has worked for different companies
of the group since August 1, 1975.

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Mario Vinageras Barroso.Mr. Vinageras is the Corporate DirectorCommercial of
Grupo México since June 1, 2000. He has also been Commercial Managing Director for Minera México since September 1994 and Commercial Vice President for
Southern Peru Copper Corporation since April 2002.

Agustín Avila Martínez.Mr. Avila has been the
DirectorController since March 2000. From November 1993 until March 2000 he was Deputy Controller and from September 1988 until November 1993 he was
General Controller of Mexcobre and Mexcananea.

Ligia Sandoval Parra.Ms. Sandoval was recently appointed General Counsel of Minera
México. From June 2000 to June 2003, she was Deputy Legal Director at Grupo México. She has held other positions at Grupo México since 1996.

COMPENSATION

For the year ended December 31, 2003, the aggregate compensation paid and benefits in kind granted to our directors and officers for services in such
capacities by us and our subsidiaries was approximately $3.6 million. Such compensation includes such persons' benefits realized under our Employee Stock Purchase Plan (as defined below).

The
total amount set aside and accrued by our subsidiaries and us in 2003 to such persons to provide retirement, pension or similar benefits was $1.9 million.

BOARD PRACTICES

The management of our business is vested in the Board of Directors. Our by-laws provide that our shareholders elect our directors and may elect up to
an equal number of alternate
directors. Alternate directors, if appointed, are authorized to serve on the Board of Directors in place of directors who are unable to attend meetings. Directors and alternate directors are elected
at the General Ordinary Stockholders' Meeting for a one-year term. We have not appointed alternate directors. We have not entered into any service or employment contracts with any of our
directors and executive officers.

The
examiner reports to the shareholders at the annual ordinary general meeting regarding the accuracy of the financial information presented to such holders by the Board of Directors
and generally reviews our affairs. Generally, examiners are also authorized (i) to call ordinary or extraordinary shareholders' meetings, (ii) to place items on the agenda for meetings
of shareholders or the Board of Directors and (iii) to attend meetings of shareholders or the Board of Directors (without the right to vote). Examiners also receive monthly reports from the
Board of Directors regarding material aspects of our affairs, including our financial condition. Rolando Vega Íniguez has been our examiner for 25 years, and C.P. Eduardo
González Gómez has been the alternate examiner for two years.

Committees of the Board of Directors



Minera México's by-laws establish the Executive Committee of the Company's Board of Directors. The chairman and secretary of the
Executive Committee are the same persons holding such positions on the Board of Directors. The resolutions of the Executive Committee must be approved by the affirmative vote of the majority of the
members attending the relevant session. In case of a tie, the member heading the session will have the determining vote. The Executive Committee meets on the dates and with the frequency as it
determines in the first meeting to be held during each year, or, when called by its chairman, any of two members or the statutory auditor. The Executive Committee is not allowed to delegate its powers
to any person, but may grant general and special powers if necessary and appoint the persons or delegates that must execute its resolutions.

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The
powers and duties of the Executive Committee are:



The
Executive Committee also reports to the Board of Directors on the activities it has undertaken in a yearly manner, or, at any other time at its discretion.

Members of the Executive Committee appointed at the General Ordinary
Stockholders' Meeting of April 30, 2004Name

Current PositionGermán Larrea Mota-Velasco

Non-Independent MemberClaido X. González

Independent MemberAntonio Madero Bracho

Independent MemberLuis Téllez Kuezler

Independent MemberAgustín Santamarina V.

Independent Member


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Armando
F. Ortega Gómez also attends the executive committee meetings as its secretary.



The Audit Committee is composed of the three independent members appointed at the General Ordinary Stockholders' Meeting. Each member of the Audit Committee is
appointed for a term of one year or until its successor is appointed.

The
Audit Committee is responsible primarily for overseeing the accounting and financial reporting processes of the Company and audits of the financial statements of the Company. The
Audit Committee assists the Board in the selection of independent auditors whose appointment is subject to an affirmative vote of the shareholders at the annual general meeting of shareholders and
reviewing the scope of external audit services. The Audit Committee also provides support to the Board of Directors of the Company in supervising the correct application of Generally Accepted
Accounting Principles, reviewing compliance with internal control, risk management and risk audit systems, reviewing the annual and quarterly financial statements of the Company and monitoring the
qualifications, independence and performance of the external auditors as well as the integrity of the preparation of individual and consolidated audits.

The
responsibilities of the Audit Committee include in addition to the foregoing the following:



The
Audit Committee reports annually to the Board of Directors about activities or any other act material to the Company.

Members
of the Board of Directors and the Statutory Advisor attending meetings of the Audit Committee, and in any case, members of the Audit Committee, must report to other Directors,
Committee members and to the Board of Directors any transaction in which they have an interest in conflict with the Company and recuse themselves from any deliberation and decision concerning any such
transaction.

Members of the Auditing Committee appointed at the General Ordinary
Stockholders' Meeting of April 30, 2004Name

Current PositionAgustín Santamarina V.

Independent MemberEmilio Carrillo Gamboa

Independent MemberFernando Ruíz Sahagún

Independent Member


Armando
F. Ortega Gómez also attends the meetings of the Audit Committee as its secretary and C.P. Rolando Vega Iñiguez as the Examiner of the
Company.

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In accordance with Mexican law, the Board of Directors has established a Compensation Committee responsible for recommending, evaluating and approving
compensation for the Company's principal key officers and employees evaluating their performance and making recommendations to the Board of Directors relating to management compensation generally.

The
Compensation Committee meets at least once a year and at any other time at the request of any two members of the Board of Directors or Compensation Committee, and of the Human
Resources Director. Any other member of the Board of Directors is allowed to participate in its meetings.

The
Compensation Committee is also authorized to investigate any activity within the scope of its functions and has the authority to obtain any information from any officer and/or
employee and access to external legal advisors of the Company and/or its subsidiaries, if necessary.

The
responsibilities of the Compensation Committee include, in addition to the foregoing, the following:



Members of the Compensation Committee appointed at the General Ordinary
Stockholders' Meeting of April 30, 2004Name

Current PositionGermán Larrea Mota-Velasco

Non-Independent MemberAgustín Santamarina V

Independent MemberPrudencio López Martínez

Independent Member


Armando
F. Ortega Gómez also attends the meetings of the Compensation Committee as its secretary.

EMPLOYEES

At December 31, 2003, we had 9,147 employees, of whom 6,019 were in mining operations, 2,708 were in processing operations and 420 were at headquarters.
The size of our workforce has generally been stable, although steadily declining since 1994. We have generally negotiated workforce reductions with representatives of the labor union in exchange for
severance compensation. As a result of the

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strike
at the Cananea mine, however, the Cananea Unit laid off approximately 1,000 union and non-union employees during the months of February, March and April 1999.

We
have undertaken a number of measures to improve labor productivity at our facilities, including simplification of job categories, increased flexibility and establishment of worker
productivity incentives.

Approximately
75% of our labor force at December 31, 2003, were members of the Sindicato Nacional de Trabajadores Minero Metalúrgicos y Similares de la
República Mexicana, A.C. (the "National Mine Workers Union" or the "Union"). Under Mexican law, the terms of employment for unionized workers is set forth in collective bargaining
agreements. Mexican companies negotiate the salary provisions of collective bargaining agreements with the labor unions annually and negotiate other benefits every two years. We conduct negotiations
separately at each mining complex and each processing plant.

Between
April 9, 2003, and June 10, 2003, we conducted salary and contract negotiations at the San Luis Potosí Copper smelter, the Charcas mine, the Santa
Bárbara mine, the Taxco mine and the Nueva Rosita Plant. However, we have not as yet been able to finalize these negotiations due to delays by the National Mine Workers Union in
connection with an interunion conflict at the Immsa Electrolytic Zinc Plant. We do not anticipate a strike by the Union in connection with these negotiations.

We
have recently experienced labor unrest that has affected our operations. Notwithstanding this occasional labor unrest, we regard our present relations with our employees as
satisfactory.

On
January 20, 2003, approximately 1,117 members of the Union went on strike at the Mexcananea's Cananea mine in the state of Sonora, alleging a violation of their collective
bargaining agreement. This strike was resolved on February 5, 2003.

On
October 30, 2002, approximately 453 members of the Union went on strike at Immsa's Electrolytic Zinc Plant, in the state of San Luis Potosí, alleging a violation
of their collective bargaining agreement. This strike was resolved before the Mexican Ministry of Labor declared the strike illegal on November 14, 2002.

On
June 3, 2002, approximately 1,256 members of the Union went on strike at Mexcananea's Cananea mine in the state of Sonora alleging a violation of their collective bargain
agreement. This strike was resolved on June 9, 2002, and Mexcananea and the Union agreed to a 5.25%, salary increase and a reclassification of the categories of employees that implied an
increase in the maximum salary per category of 4.75%.

On
June 3, 2002, approximately 280 members of the Union went on strike at Immsa's Nueva Rosita Plant, in the state of Coahuila, as a result of a disagreement in the manner in
which raises were to be determined during 2002. This strike was resolved on June 8, 2002, and Immsa and the Union agreed to a 5.25% salary increase and a reclassification of the categories of
employees that implied an increase in the maximum salary per category of 4.75%.

On
March 5, 2002, approximately 212 members of the Union went on strike at Immsa's Pasta de Conchos Unit, in the state of Coahuila, as a result of a disagreement in the manner in
which raises were to be determined during 2002. This strike was resolved on March 19, 2002, and Immsa and the Union agreed to a 5.25% salary increase.

On
March 5, 2002, approximately 531 members of the Union went on strike at Immsa's San Martín mine, in the state of Zacatecas, as a result of a disagreement in the
manner in which raises were to be determined in the year 2002. This strike was resolved on April 4, 2002, and Immsa and the Union agreed to a 5.75% salary increase.

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On
March 5, 2002, approximately 1,239 members of the Union went on strike at Mexcobre's concentrator mine, in the state of Sonora, as a result of a disagreement in the manner in
which raises were to be determined in the year 2002. This strike was resolved on April 16, 2002, and Mexcobre and the Union agreed to a 5.75% salary increase.

On
March 7, 2002, approximately 468 members of the Union went on strike at the Immsa's Electrolytic Zinc Plant, in the state of San Luis Potosí, as a result of a
disagreement in the manner in which raises were to be determined in the year 2002. This strike was resolved on March 19, 2002, and Immsa and the Union agreed to a 5.25% salary increase.

Employees
of the Mexcobre and Cananea Units reside in town sites at La Caridad and Cananea, respectively, where we have built approximately 2,000 houses and apartments and 275 houses and
apartments, respectively. Employees of the Immsa Unit principally reside on the grounds of the mining or processing complexes in which they work and we have built approximately 900 houses and
apartments for such employees. Housing, together with maintenance and utility services, is provided at minimal cost to most of our employees. Our town sites and housing complexes include educational
and, in some units, medical facilities, churches, social clubs, shopping, banking and other services. At the Cananea Unit, health care is provided free of charge to employees and their families.

SHARE OWNERSHIP

We offer eligible employees a stock purchase plan (the "Employee Stock Purchase Plan") through a trust that acquires shares of Grupo México for
future sale to our employees, subsidiaries and certain affiliated companies. Our officers and directors are eligible to participate in the Employee Stock Purchase Plan. Sales are at the approximate
fair market value of the shares at the date of sale, and the employees pay for such shares over periods extending to a maximum of eight years on an interest-free basis. The number of
shares allotted to each eligible employee is determined by the employee's position.

At
June 25, 2004, our directors and executive officers as a group, owned 3,714,337 shares of our common stock pursuant to the Employee Stock Purchase Plan, representing a
beneficial ownership of 0.429 percent.

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ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

As of December 31, 2003, Americas Mining Corporation owned 761,215,659 capital shares, or 98.91% of our capital stock, and certain minority investors owned
the remaining 8,388,687 capital shares, or 1.09%, of our capital stock.

The
shares of Grupo México, the indirect owner of 98.91% of Minera México, are listed on the Bolsa Mexicana de Valores, S.A. de C.V. (the Mexican Stock
Exchange). A holding company controlled by the Larrea family, which includes Germán Larrea Mota-Velasco, Chairman of the Board, and Genaro Larrea Mota-Velasco,
together with the holdings of various family members and of other stockholders who have supported the Larrea family, directly or indirectly may be deemed to control a majority of the capital stock of
Grupo México.

RELATED PARTY TRANSACTIONS

The principal transactions with affiliated companies and related parties in 2003, 2002 and 2001 were as follows:

|                                    |  | Description                                                                              |  | 2003 |  | 2002 |  | 2001
|----------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ---- |  | ---- |  | ----
|
|Revenues:                           |  |                                                                                          |  |      |  |      |  |     
|Holding Companies:                  |  |                                                                                          |  |      |  |      |  |     
|Grupo México                        |  | Interest and miscellaneous services                                                      |  | 0.8  |  | 0.4  |  | 0.2 
|Affiliated Companies:               |  |                                                                                          |  |      |  |      |  |     
|Asarco and Southern Peru
Copper Co. |  | Mineral concentrates and refined products sales, interest and miscellaneous services     |  | 6.3  |  | 2.3  |  | 19.0
|Intermodal México, S.A. de C.V.     |  |                                                                                          |  |      |  | 1.8  |  |     
|Expenses:                           |  |                                                                                          |  |      |  |      |  |     
|Holding Companies:                  |  |                                                                                          |  |      |  |      |  |     
|Grupo México                        |  | Interest                                                                                 |  | 3.4  |  | 3.4  |  | 3.8 
|Americas Mining Corporation         |  | Interest                                                                                 |  |      |  | 0.1  |  |     
|Affiliated Companies:               |  |                                                                                          |  |      |  |      |  |     
|Asarco and Southern Peru
Copper Co. |  | Mineral concentrates and refined products purchases, interest and miscellaneous services |  | 12.8 |  | 6.0  |  | 23.3
|Ferrocarril Mexicano, S.A.          |  | Freight services                                                                         |  | 13.8 |  | 17.7 |  | 17.6
|Asarco                              |  | Purchase of fixed assets                                                                 |  | 1.4  |  |      |  |     

The
Larrea family controls a majority of the capital stock of Grupo México, as described above, and has extensive interests in other businesses, including oil drilling
services, construction and real estate. We engage in certain transactions in the ordinary course of business with other entities controlled by the Larrea family concerning mining and refining
services, the lease of office space, and air transportation and construction services. These transactions amounted to approximately $4.1 million in 2003 and $6.6 million in 2002. All of
these transactions were conducted at arm's length under standard terms.

We
lend to and borrow from our affiliates from time to time to fund acquisitions and for other corporate purposes. See Item 5. "Operating and Financial Review and
ProspectsOperating ResultsLiquidity and Capital Resources" and Notes 8 and 12 to the Financial Statements. These financing transactions bear interest at market rates.

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ITEM 8.    FINANCIAL INFORMATION

FINANCIAL STATEMENTS

See our Financial Statements at Annex F, the financial statements of Mexcobre at Annex F-1, the financial statements of Mexcananea at Annex
F-2 and the financial statements of Immsa at F-3.

OTHER FINANCIAL INFORMATION

Export Sales

The volumes of total sales and export sales and export sales as a percentage of total sales for the periods indicated were as follows:

MINERA MÉXICO, S.A. DE C.V.
VOLUME SALES DISTRIBUTION 2001, 2002 AND 2003(1)

|          |  | 2001    |  | 2002    |  | 2003 |  
|--------- |  | ------- |  | ------- |  | ---- | -
|
|Copper    |  | 353,064 |  | 245,733 |  | 69.6 | %
|Zinc      |  | 141,913 |  | 80,607  |  | 56.8 | %
|Silver(2) |  | 652,336 |  | 429,889 |  | 65.9 | %
|Lead      |  | 34,214  |  | 2,634   |  | 7.7  | %
|Gold(2)   |  | 2,116   |  | 1,016   |  | 48.0 | %

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Legal Proceedings

Ejido

In July 1991, the agricultural community of Pilares de Nacozari Ejido (the "Ejido") commenced an action (the "Amparo") in the first federal district court
in Sonora, Mexico against the Ministry of Agrarian Reform (the "Ministry"), alleging that the expropriation of approximately 1,500 hectares of land on which certain of Mexcobre's facilities are
currently located, which land is adjacent to the land where the mine is located, was improper. Mexcobre was not named as a defendant in the Amparo, although it was included as an interested third
party due to its ownership of the land. Mexcobre bought the land in question in 1976 from the Banco Nacional de Obras y Servicios Publicos, which had previously acquired it as a beneficiary of the
expropriation by the Ministry in 1973.

The
claim alleged by the Ejido states that the Ministry failed to notify one of three legal representatives of the Ejido of the expropriation. In 1994, the Mexican District Court Judge
of Hermosillo granted the Amparo, ruling the expropriation by the Ministry legally void and in 1997 made a second ruling ordering the Ministry to return the land. As a result of the second ruling,
Mexcobre filed an ancillary action alleging the impossibility of returning the land.

There
has been no final resolution of this matter, but the Mexican District Court Judge of Hermosillo, before whom this matter is presently docketed, has twice before issued a ruling
stating that it is impossible to return the land as a means of restitution. A third and final ruling from the Mexican District Court Judge of Hermosillo is expected soon. We believe, along with
Mexcobre, that if the Ejido requests indemnity instead of a return of the land, Mexcobre's financial responsibility with respect to such compensation would not be material.

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Coremi Royalties

When Mexcobre originally received mining concessions related to its "La Caridad" unit in 1970, it was forced to pay royalties to the Council of Mineral Resources
("Coremi"). When the Mining Law came into effect in 1992, however, this obligation was abrogated. Coremi, the Mexican Superintendent of Mining and the Mexican Secretary of Economy, however, has
interpreted the inception of the Mining Law differently from us and Mexcobre and, in 1995, Coremi and Mexcobre initiated a series of legal actions that are still pending. In August 2002, Coremi
filed with the Third Federal District Judge in Civil Matters, certain civilian actions, demanding from Mexcobre the payment of royalties due since 1997. Mexcobre answered and denied Coremi's claims in
October 2002. We and Mexcobre believe that any such payment related to this matter would not be material to us or to Mexcobre.

La CaridadMining Concessions

Since 1995, the Mexican Superintendent of Mining has requested proof from Mexcobre that it has satisfied its obligation to pay certain "discovery bonuses"
allegedly due in connection with the grant of 13 mining concessions at La Caridad. If said proof is not provided, the Mexican Superintendent of Mining has threatened to cancel Mexcobre's concessions.
Mexcobre has challenged these demands by filing a writ before a higher administrative body, in which Mexcobre states its "defenses" against the alleged claims and by filing an Amparo on May 2,
2003, with the Tenth District Federal Judge in Administrative Matters. Mexcobre believes that its obligation to make the demanded payments was abrogated when the Mining Law came into effect in
November 1992, that the Mexican Superintendent of Mining confuses "bonuses" with "royalties" and that any claims related thereto are without merit.

We
are involved in various other legal proceedings incidental to our operations, but we do not believe that decisions in any such proceedings individually or in the aggregate would have
a material adverse effect on our financial position and results of operations.

Dividend Policy

We pay dividends to our stockholders out of funds legally available therefor as voted by Minera México at the annual meeting of stockholders. At
our Stockholders' Ordinary General Meeting held on December 30, 2002, an in-kind dividend was declared, consisting of 662,467,000 shares of common stock of Mexcobre. The value of
this in-kind dividend was equal to $1,304.3 million as of December 31, 2002, based on the accounting value of Mexcobre's common stock on that date. The first installment of
this dividend was distributed on May 15, 2003, in the amount of 90,622,066 Mexcobre shares (0.13938 multiplied by 650,161,917, the number of shares of our common stock). The second installment
of this dividend was cancelled as a result of our merger with and into Minera México. At our Stockholders' Ordinary General Meeting held on April 17, 1999, the stockholders
approved the payment of $30.5 million. See Item 3. "Key InformationSelected Financial Data." We had not previously paid dividends since April 1996. Currently, the terms of
our indebtedness limit our ability to pay dividends.

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ITEM 9.    THE OFFER AND LISTING

Our only classes of registered securities under the Exchange Act are our Notes. The Notes are not traded on any organized market.

ITEM 10.    ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

Set forth below is certain information concerning our capital structure and a description of certain provisions of our estatutos sociales
(by-laws) and Mexican law to the extent applicable for inclusion in this Annual Report. The description does not purport to be complete and is qualified entirely by reference to our
estatutos sociales and Mexican law.

General

We were incorporated on March 24, 1994, as a sociedad anónima de capital variable (corporation with variable capital) under the laws of
Mexico. We are registered in the Registro Público de Comercio del Distrito Federal (Public Commercial Registry of the Federal District of Mexico) under file number 188,622. Our
corporate domicile is Mexico City, Federal District and our principal administrative office is located at Avenida Baja California, No. 200, Col. Roma Sur, 06760 Mexico City, Federal District,
México. Our corporate purpose, as set forth in our estatutos sociales, is to invest in companies generally engaged in the mining/metallurgical industry, including any activities related
to that industry.

Administration (Board of Directors)

We are administered by a Board of Directors. The number of directors is determined by the shareholders at the annual ordinary general shareholders' meeting.
Members of our Board of Directors serve terms of one year and may be reelected. There is no requirement under our estatutos sociales or Mexican law that a director owns any of our shares. The majority
of the members of our Board of Directors (including the president, delegated advisors and executive members, or those with equivalent
functions) must be Mexican nationals. Our director or general manager must also be a Mexican national. Our estatutos sociales and Mexican law set no age limit for the retirement of directors. Our
Board of Directors may act by a majority of the votes cast by members present. Minority shareholders with at least 25% of the outstanding shares have the right to elect one director and one alternate
director. Mexican law requires that a director of a company must abstain from voting on any proposal, arrangement or contract in which that director has an interest contrary to that of the company.

Capital Stock

At the Stockholders' Meetings held on March 17 and May 28, 2003, the stockholders agreed to issue 103,584,081 and 6,558,428 shares, respectively, of
Series B, Class II stock to AMC for $111.5 million and a nominal value of $25.4 million.

Issuance
would be offered to the stockholders' in proportion to their shareholding percentage to subscribe and pay, in accordance with their preferential right, in the amount of Ps.
12.78 per each of the shares to which they are entitled, based on the number of shares held by each. The subscription price is practically equal to the book value of the shares, which represent the
capital stock at the date of said Stockholders' Meeting.

At
December 31, 2003, the Company's capital stock amounted to $431.5 million, represented by 769,604,346 shares, of which 630,000,000 Class I shares correspond to
the fixed portion and 139,604,346 Class II shares to the variable portion.

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Dividend Rights

Mexican law requires that we contribute 5% of after-tax profits, calculated at the end of each fiscal year, to a legal reserve fund until this fund
reaches 20% of our social capital. After directing the amounts that by law must be distributed to our workers, the remaining amount is applied as our shareholders determine. All Series B Shares
would share equally in any dividend. Dividends declared but not claimed for five years revert to us.

Changes in Capital Stock, Preemptive Rights and Redemption

The fixed portion of our capital stock may only be increased or decreased by resolution at an extraordinary general shareholders' meeting and the subsequent
amendment of the estatutos sociales. The variable portion of our capital stock may be increased or decreased by resolution of the shareholders at an ordinary general shareholders' meeting without
amending the estatutos sociales. Increases or decreases in the fixed or variable portion of the capital must be recorded in our registry of capital variations.

Increases
in our paid capital may be made by the capitalization of retained earnings or surplus or by the issuance of additional shares in consideration for cash or in-kind
payment. In the event of increases by the capitalization of retained earnings or surplus, each of the shareholders holding ordinary shares at the moment the increase is determined has the right to
participate in the increase in proportion to their holdings. In the event of an increase in the capital stock by issuance of additional shares in consideration of cash or in-kind payment,
shareholders will have preemptive rights to subscribe for new shares in proportion to their holdings. The subscription period for the exercise of preemptive rights is 15 days following the
publication of a notice of the issuance of new shares in the Gaceta Oficial del Distrito Federal (Official Gazette of the Federal District). If after the 15-day period there remain shares
not subscribed to in the exercise of preemptive rights, the Board of Directors may offer those unsubscribed shares to third parties.

Decreases
in capital may be made to absorb losses, to repay shareholders, to release shareholders from outstanding payments in connection with an increase of capital not fully paid or if
shareholders exercise the right of withdrawal in Article 220 of the Mexican General Corporation Law. In no event may the social capital be reduced to less than the legal minimum. Decreases of
capital to absorb losses are made proportionally (pro rata) to the fixed capital and to the variable capital, without the need to cancel shares. Article 135 of the Mexican General Corporation
Law provides that in a decrease of capital to repay shareholders, the decision of which shares are to be cancelled must be made by a drawing held in the presence of a notary or licensed broker.

In
accordance with the terms of Article 136 of Mexican General Corporation Law, shares representing our capital stock are subject to redemption in connection with retained
earnings. The redemption of shares must be approved by resolution of an extraordinary shareholders' meeting. In the case of redemption with retained earnings, the redemption shall be conducted pro
rata among the shareholders, unless the shareholders determine otherwise.

Shareholders' Meetings

Shareholders' meetings are either ordinary or extraordinary and, at such meetings, shareholders may exercise their powers under Articles 181 and 182 of the
Mexican General Corporation Law. Ordinary shareholders' meetings take place at least once a year within the first four months after the end of the fiscal year. Extraordinary shareholders' meetings
take place when called by our Board of Directors. In order for a general ordinary shareholders' meeting to be valid, at least 50% of the shares of the capital must be present. In order for a general
extraordinary shareholders' meeting to be valid, at least 75% of the shares of the capital must be present or represented by proxy. The Board of Directors must publish a notice in the Gaceta Oficial
del Distrito Federal or in a newspaper of general

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circulation
in Mexico City at least 15 days before the date of either an ordinary or extraordinary shareholders' meeting. Shareholders may attend the general shareholders' meetings in person or
by written proxy. Only shareholders registered in our shareholder registry may attend a shareholders' meeting. For purposes of establishing qualification to attend shareholders' meetings, the
shareholders' registry will be closed five business days before each meeting. Resolutions may be adopted at ordinary shareholders' meetings by majority vote, while resolutions may be adopted at
extraordinary shareholders' meetings by the favorable vote of the shareholders holding at least 50% of the outstanding shares.

MATERIAL CONTRACTS

On April 28, 2003, Grupo Minero México and we held extraordinary shareholders' meetings approving the merger of Grupo Minero
México with and into us. The merger between Grupo Minero México and us is effective as of October 1, 2003. The executed resolutions and accompanying merger
agreement were registered on July 2, 2003, with the Mexican Public Registry of Commerce. Under Mexican law, the merger is effective with respect to third parties 90 days after the
registration of the shareholders' resolutions and accompanying merger agreement with the Mexican Public Registry of Commerce.

On
April 29, 2003, we entered into a series of definitive agreements restructuring the terms of our indebtedness. The most significant of these agreements, the Common Agreement,
was entered into by and among us, certain of our subsidiaries, as guarantors of our obligations thereunder, the SEN Holders, the Bank Lenders, HSBC Bank USA, as collateral agent for the SEN Holders,
HSBC Bank USA, as shared payment and collateral agent for the SEN Holders and the Bank Lenders, Bank of America, as administrative agent for the Bank Lenders, and The Bank of New York, as the SEN
Trustee. Our repayment obligations to the SEN Holders and the Bank Lenders are divided into two tranches (Tranche A and Tranche B), with payments of principal occurring periodically beginning on
June 25, 2004, until maturity on March 30, 2007, for a total amount of $880.9 million, with a third tranche ("Tranche, C") which is applicable only in the event a
make-whole amount becomes payable under the terms of the Common Agreement. See Item 5. "Operating and Financial
Review and ProspectsOperating ResultsLiquidity and Capital Resources" and Exhibit 4(b) hereto.

In
connection with our restructuring and the Common Agreement, on April 29, 2003, we entered into the Amended and Restated Trust Indenture by and among us, certain of our
subsidiaries, as guarantors of our obligations thereunder, certain financial institutions and Bank of America, N.A. as the administrative agent for the financial institutions, pursuant to which
previous credit facilities entered into by us and our subsidiaries with the financial institutions were restructured. See Exhibit 4(c) hereto.

In
connection with our restructuring and the Common Agreement, on April 29, 2003, we entered into the SEN Security Agreement by and among us, as guarantor, certain of our
subsidiaries, as guarantors of our obligations thereunder, The Bank of New York, as trustee of Grupo México Export Master Trust No. 1 and as SEN Trustee, and HSBC Bank USA, as
collateral agent for the SEN Holders, pursuant to which we and certain guarantors pledged certain assets to such collateral agent as security for our indebtedness to the SEN Holders. See
Exhibit 4(d) hereto.

In
connection with our restructuring and the Common Agreement, on April 29, 2003, we entered into the U.S. Security Agreement by and among us, certain of our subsidiaries, as
grantors of collateral, HSBC Bank USA, as shared payment and collateral agent and HSBC Bank, pursuant to which we and our subsidiaries pledged certain U.S.-based assets to the shared payment and
collateral agent as security for the obligations thereunder. See Exhibit 4(e) hereto.

In
connection with our restructuring and the Common Agreement, on April 29, 2003, we entered into the Mexican Security Trust Agreement by and among us, certain of our
subsidiaries, as grantors of

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collateral,
GE Capital Bank, S.A., Institucion de Banca Múltiple and GE Capital Grupo Financiero, as trustee, pursuant to which we and certain guarantors pledged certain assets to the
trustee as security for our obligations thereunder. See Exhibit 4(f) hereto.

In
connection with our restructuring and the Common Agreement, on April 29, 2003, we entered into the Amended and Restated Credit Agreement by and among us, The Bank of New York,
as trustee of Grupo México Export Master Trust No. 1 and as issuer of the secured notes and HSBC Bank USA, as collateral agent for the SEN Holders, pursuant to which our
previously issued notes thereunder were restructured and reissued. See Exhibit 4(g) hereto.

EXCHANGE CONTROLS

Except for the period from September through December 1982 during the Mexican liquidity crisis, the Mexican Central Bank has consistently made foreign
currency available to Mexican private sector entities (such as us) to meet their foreign currency obligations. Nevertheless, in the event of renewed shortages of foreign currency, there can be no
assurance that the Mexican Central Bank would continue to make foreign currency available to private sector companies or that foreign currency needed by us to service foreign currency obligations
could be purchased in the open market without substantial additional cost.

No
assurance can be given that the Mexican government will not institute restrictive exchange control policies in the future. The imposition of such policies in the future could impair
our ability to obtain imported goods and to meet our U.S. dollar-denominated obligations and could have a material adverse effect on our business and financial condition.

TAXATION

The following summary contains a description of the principal U.S. federal income and Mexican federal tax consequences of the purchase, ownership and disposition
of Notes by a holder that is an individual citizen or resident of the United States, a U.S. domestic corporation or partnership, an estate the income of which is subject to U.S. federal income tax
regardless of source other than a foreign state, a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust or any holder of a Note whose income or gain with respect to its investment in such note is effectively connected with the
conduct of a U.S. trade or business (a "U.S. holder"), but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase the
Notes. In particular, this summary deals only with U.S. holders that will hold the Notes as capital assets and does not address the tax treatment of a U.S. holder that owns or is treated as owning 10%
or more of our voting shares, nor does it address the situation of holders of the Notes who did not acquire such Notes as part of the initial distribution (except where otherwise specifically noted).
Moreover, this summary deals only with Notes held as capital assets and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding Notes as a hedge or as a position in a "straddle" for tax purposes, or persons whose functional currency is not the U.S.
dollar.

The
summary is based upon tax laws of the United States and Mexico as in effect on the date of this Annual Report, including the provisions of the income tax treaty between the United
States and Mexico (the "Tax Treaty"), which are subject to change and (except with respect to the Tax Treaty) possibly with retroactive effect. Holders of the Notes should consult their own tax
advisers as to the
U.S., Mexican or other tax consequences of the purchase, ownership and disposition of the Notes including, in particular, the effect of any federal, foreign, state or local tax laws.

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For purposes of this summary, the term "non-resident holder" shall mean a holder that is not a resident of Mexico and that will not hold the Notes described in this Annual
Report, or a beneficial interest therein, in connection with the conduct of a trade or business through a permanent establishment in Mexico.

For
purposes of Mexican taxation, a natural person is a resident of Mexico if he has established his home in Mexico, unless he has resided in another country for more than
183 days during a calendar year, whether consecutive or not, and can demonstrate that he has become a resident of that country for tax purposes, and a legal entity is a resident of Mexico
either if it was established under Mexican law or if it has its principal place of business or its place of effective management in Mexico. If a non-resident has a permanent establishment
or fixed base in Mexico for tax purposes, all income attributable to such permanent establishment or fixed base will be subject to Mexican taxes, in accordance with applicable tax laws.

Mexican Taxation

Taxation of Interest and Principal

Under the Mexican Income Tax Law, payments of interest made by a Mexican issuer in respect of the Notes (including payments of principal in excess of the issue
price of such Notes, which, under Mexican law, are deemed to be interest) to a U.S. holder will generally be subject to a Mexican withholding tax assessed at a rate of 15%. If the Notes are registered
with the Special Section of the National Registry of Securities and Intermediaries (the "Registry"), the withholding tax rate will be 10%.

Pursuant
to the Mexican Income Tax Law, payments of interest made until June 30, 2001, by us in respect of the Notes to a non-resident holder that are subject to a
withholding tax will be subject to a reduced 4.9% Mexican withholding tax rate (the "Reduced Rate") if (i) the effective beneficiary is a resident of a country which has entered into a treaty
to avoid double taxation with Mexico, (ii) the requirements for the application of a lower rate established in the applicable treaty are satisfied, and (iii) the Notes are registered
with the Registry. Under the Tax Treaty, non-resident holders that are U.S. holders may be eligible for the Reduced Rate. In the
absence of legislation renewing the reduced rate of 4.9%, we believe that the withholding rate will be 10%.

Pursuant
to general tax rules issued by the Mexican Ministry of Finance and Public Credit (the "Special Rate Regulations"), in general, we are required to withhold Mexican tax at a 4.9%
rate in respect of the entirety of each payment of interest so long as no more than 5% of such payment of interest is made to effective beneficiaries of such payment of interest that are
(i) our shareholders that own, directly or indirectly, individually or collectively with related persons, more than 10% of our voting stock, or (ii) corporations, more than 20% of whose
stock is owned, directly or indirectly, individually or collectively with related persons, by us or by persons related to us, and certain other conditions are met. The Special Rate Regulations,
together with other tax regulations, are promulgated on an annual basis, and there can be no assurance that the Special Rate Regulations will be extended beyond June 30, 2001.

Apart
from the Reduced Rate, other special rates of Mexican withholding tax may apply. In particular, under the Tax Treaty, the Mexican withholding tax rate is reduced to 4.9% (the
"Treaty Rate") for certain holders that are residents of the United States (within the meaning of the Tax Treaty) under certain circumstances contemplated in this Annual Report.

Payments
of interest made by us with respect to the Notes to non-Mexican pension or retirement funds will be exempt from Mexican withholding taxes, provided that any such
fund (i) is the effective beneficiary of the interest, (ii) is duly incorporated pursuant to the laws of its country of origin, (iii) is

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exempt
from the payment of income tax in such country and (iv) is registered with the Ministry of Finance for that purpose.

Under
existing Mexican law and regulations, we will not subject a non-resident holder to any Mexican taxes in respect of payments of principal with respect to the Notes.

Additional Amounts

We have agreed, subject to specified exceptions and limitations, to pay Additional Amounts (as defined in the Indentures relating to the Notes included as
exhibits to the F-1 Registration Statement) to the holders of the Notes in respect of the Mexican withholding taxes mentioned above. If we pay Additional Amounts in respect of such Mexican
withholding taxes, any refunds received with respect to such Additional Amounts will be for our account.

Holders
or beneficial owners of the Notes may be requested to provide certain information or documentation necessary to enable us to establish the appropriate Mexican withholding tax
rate applicable to such holders or beneficial owners. In the event that the specified information or documentation concerning the holder or beneficial owner, if requested, is not provided on a timely
basis, our obligation to pay Additional Amounts will be limited.

Taxation of Dispositions

Capital gains resulting from the sale or other disposition of the Notes by a non-resident holder will not be subject to Mexican income or other taxes.

Other Mexican Taxes

There are no Mexican inheritance, gift, succession or value-added taxes applicable to the ownership, transfer or disposition of the Notes by
non-resident holders. There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-resident holders of the Notes.

U.S. Tax Considerations

General

A U.S. holder will treat the gross amount of interest and Additional Amounts (i.e., without reduction for Mexican
withholding taxes) received in respect of the Notes as ordinary interest income from a non-U.S. source. Mexican withholding taxes paid at the appropriate rate applicable to the U.S. holder
will generally be treated as foreign income taxes eligible for credit against such U.S. holder's U.S. federal income tax liability, subject to generally applicable limitations and conditions, or, at
the election of such U.S. holder, for deduction in computing such U.S. holder's taxable income. For foreign tax credit purposes, during any period in which the Special Rate Regulations are in effect,
as well as when the Treaty Rate is 4.9%, such income generally will constitute "passive income" or, in the case of certain holders, "financial services income." If the Mexican withholding tax rate
applicable to
the U.S. holder is 5% or more, however, such income generally will constitute "high withholding tax interest."

The
calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions, involves the application of rules that
depend on a U.S. holder's particular circumstances. U.S. holders should consult their own tax advisors regarding the availability of foreign tax credits and the treatment of Additional Amounts.

Foreign
tax credits will not be allowed for foreign withholding taxes imposed in respect of certain short-term or hedged positions in securities. U.S. holders should consult
their own advisors concerning the implications of these rules in light of their particular circumstances.

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Subject
to the discussion of backup withholding below, a holder or beneficial owner of the Notes that is not a U.S. holder (a "non-U.S. holder") generally will not be subject
to U.S. federal income or withholding tax on interest income and Additional Amounts earned in respect of the Notes.

Taxation of Dispositions

A U.S. holder generally will recognize gain or loss on the sale, redemption or other disposition of the Notes in an amount equal to the difference between the
amount realized on such sale, redemption or other disposition (less any amounts attributable to accrued but unpaid interest, which will be taxable as such) and the U.S. holder's tax basis in the
Notes. A U.S. holder's tax basis in the Notes generally will be its cost. Gain or loss realized by a U.S. holder on such sale, redemption or other disposition generally will be long-term
capital gain or loss if, at the time of the disposition, the Notes have been held for more than one year, provided the Notes are held as capital assets. Long-term capital gain realized by
a U.S. holder that is an individual generally is subject to a maximum federal income tax rate of 15%.

Subject
to the discussion of backup withholding below, a non-U.S. holder of Notes will not be subject to U.S. federal income or withholding tax on gain realized on the sale
or other disposition of Notes unless (i) such gain is effectively connected with the conduct by the non-U.S. holder of a trade or business in the United States or (ii) in the
case of gain realized by an individual non-U.S. holder, the non-U.S. holder is present in the United States for 183 days or more in the taxable year of the sale and
certain other conditions are met.

Backup Withholding and Information Reporting

The Paying Agent will be required to file information returns with the Internal Revenue Service with respect to payments made to certain U.S. holders of Notes. In
addition, certain U.S. holders may be subject to a 28% backup withholding tax in respect of such payments if they do not provide their accurate taxpayer identification numbers to the Paying Agent or
in certain other circumstances. Persons holding Notes who are non-U.S. holders may be required to comply with applicable certification procedures to establish that they are not U.S.
holders in order to avoid the application of such information reporting requirements and backup withholding tax.

DOCUMENTS ON DISPLAY

Our constituent documents, exhibits to this and previous Annual Reports and other documents referred to herein may be inspected at our main corporate office at
Baja California 200, Col. Roma Sur 06760, Mexico City, Federal District, México.

SUBSIDIARY INFORMATION

See the information set forth under Item 4. "Information on the CompanyOrganizational Structure."

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ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we hold or issue various financial instruments that expose us to financial risks involving fluctuations in currency exchange
rates and interest rates. Also, commodity price movements affect our metals business. We may use derivative financial and commodity instruments to manage these risks. All financial instruments held by
us are for purposes other than trading.

As
part of a risk management strategy, we have established an independent risk management team. The function of this team is to monitor and manage our risk exposure. This team has
developed a manual of policies and procedures for the use of derivatives as hedging instruments, reviewing limits, reports and authorization processes in order to monitor operations.

INTEREST RATE RISK

Our exposure to interest rate risk relates primarily to our Secured Export Notes and bank debt obligations. Our strategy is to manage our interest rate risk
through a combination of fixed and floating rate instruments. Currently, all of our debt is U.S. dollar- denominated. However, the interest rates have usually been more competitive for loans
negotiated in U.S. dollars than in Mexican pesos. As of December 31, 2003, 54% of our total debt was based on fixed interest rates, and 46% on floating rates.

All
of our floating rate debt is based on LIBOR quotations plus the corresponding margin. Provided below is information regarding our debt obligations that are sensitive to changes in
interest rates and we have assumed for the purposes of the chart below that all of our outstanding debt is current. We have seen some increase in the interest rate margin during the year.

Prior
to our restructuring, we made interest payments on all existing financial debt, but defaulted on some payments of principal. As a result, many of our financial instruments were
capable of being accelerated. We did not hold any interest rate-sensitive derivative financial instruments during the year.

The
table below presents the interest rate risk exposure, including the principal cash flows and related weighted average interest rates by expected restructuring maturity dates. The
fair value of long-term debt is based on the quoted market prices for the same or similar issues, as well as on the present value of future cash flows. The information in the table may not
necessarily correspond with the Financial Statements.

|                                  |  | Expected Maturity Date |      |   |   |       |   |  
|--------------------------------- |  | ---------------------- | ---- | - | - | ----- | - | -
|
|
|Fixed Rate Debt                   |  | $                      | 81.3 |   | $ | 86.3  |   | $
|Weighted Average Interest Rate(1) |  |                        | 9.81 | % |   | 9.64  | % |  
|Floating Rate Debt                |  | $                      | 72.9 |   | $ | 102.8 |   | $
|Weighted Average Interest Rate(2) |  |                        | 5.73 | % |   | 7.45  | % |  

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FOREIGN EXCHANGE RISK

We are also exposed to market risk associated with changes in foreign currency exchange rates as certain costs incurred are in currencies other than the Company's
functional currency. To manage the volatility related to this risk, the Company may enter into forward exchange contracts. The Company has only had limited involvement with derivative instruments and
does not use them for trading purposes. As of December 31, 2003, we did not hold any currency forwards.

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Although
all of our sales are priced and invoiced in U.S. dollars, a substantial portion of our cost of sales (approximately 74% in 2003) is denominated in pesos. Accordingly, when
inflation in Mexico increases without a corresponding devaluation of the peso, our operating income is negatively affected. Nevertheless, when inflation in Mexico is lower than the devaluation of the
peso, our operating income is positively affected.

COMMODITY PRICE RISK

Our exposure to commodity price fluctuations relates primarily to copper, zinc and silver, as well as other industrial and precious metals we produce. Our selling
prices depend principally upon market prices for metals, especially copper and, to a lesser extent, zinc and silver. Such prices can fluctuate widely and are beyond our control. Since the metals
produced by us can generally be sold at prevailing market prices, our results of operations are highly sensitive to such prices. See Item 5. "Operating and Financial Review and
ProspectsOperating ResultsCommodity Prices."

From
time to time we have entered into hedging transactions to provide partial protection against future decreases in the market price of metals and we may do so when we believe the
market presents the right conditions. Our policy is to enter into over-the-counter transactions with major international participants in the commodities options and futures
markets. Hedging transactions may take the form of put options that effectively establish a minimum price for our sale of a specified volume of a metal, or they may take the form of swaps, forward
sales or futures contracts that fix the price for a specified volume of a metal. We may also enter into combinations of transactions, with a view to establishing minimum prices for our metals products
while preserving potential benefits if market prices increase. Our senior management committee, currently consisting of our Executive President, the president of finance and administration and the
manager of risk management, makes decisions on each transaction and on hedging policy generally, to ensure that the risks and benefits have been appropriately evaluated.

Depending
upon market conditions, we may utilize swap contracts to hedge against adverse movements in the price of metals we produce. For example, swap contracts are sometimes used to
fix the selling price of copper and zinc refined when we enter into a supply contract.

The
table below provides information about our inventory of metals that are sensitive to changes in commodity prices. The table presents the fair value based on spot prices as of
December 31, 2003.

Inventory of Metals

Total
(Tons)

Fair Value
(millions of U.S. dollars)Copper

38,612

$
88.8Zinc

19,069


19.2Silver

201.2


38.5Lead

17,188


12.7Gold

.2


2.6


See
Item 5. "Operating and Financial Review and ProspectsOperating ResultsCommodity Prices."

SENSITIVITY ANALYSIS

A hypothetical, instantaneous change of 100 basis points in LIBOR applicable to our floating-rate financial assets and liabilities held at
December 31, 2003, would have resulted in additional net financing expense of approximately $6.1 million for the year. This sensitivity analysis is based on the assumption of an
unfavorable 100 basis point movement of the interest rates applicable to each homogeneous category of financial assets and liabilities. A homogeneous category is defined according to the currency in
which financial assets and liabilities are denominated and assumes the same interest rate movement with each homogeneous category.

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

79

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PART II.

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

As a result of the decline in the market prices of the metals we produce during the past several years, in 2001 and 2002 we were not in compliance with certain
debt covenants and were in default under certain payment obligations. On April 29, 2003, we entered into several definitive agreements through which we restructured the terms of our defaulted
indebtedness. Although we are not aware of any existing default with respect to the terms of our indebtedness after the financial restructuring, changes in commodity prices may place significant
strains on our results of operations and liquidity. As the market prices of the metals we produce is outside of our control, our restructuring may not result in any lasting improvement in our
financial condition and liquidity. In addition, we continue to be exposed to the other risks enumerated in these "Risk Factors" even after the restructuring. There can be no assurance that we will be
able to comply with the terms of our indebtedness or that we will not be in payment default in the future.

ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None reportable with regard to A through D.

ITEM 15.    CONTROLS AND PROCEDURES



ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

The Company's audit committee is comprised of three members each of whom has significant experience in analyzing and evaluating financial statements prepared in
accordance with generally accepted accounting principles in Mexico, as well as U.S. GAAP, including an understanding of internal controls and procedures for financial reporting. Our Board of Directors
has determined that Emilio Carrillo Gamboa is an audit committee financial expert as defined in Item 16A of Form 20-F.

ITEM 16B.    CODE OF ETHICS

We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting
officer and controller, or persons performing similar functions. Our code of business conduct and ethics may be obtained without charge, upon request. To request a copy of our code of ethics, please
contact Jorge Pulido at Avenida Baja California No. 200, Roma Sur, México, D.F., C.P. 06760, telephone number 52-55-5564-5126.

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ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our external auditors are PricewaterhouseCoopers, S.C. ("PWC"). Prior to June 2003, our external auditors were Galaz, Yamazaki, Ruiz Urquiza, S.C.
("Galaz"), a member firm of Deloitte Touche Tohmatsu and prior to June 10, 2002, our external auditors were Ruiz Urquiza y Cia, S.C. ("Ruiz Urquiza"), a former member firm of Andersen
Worldwide.

PWC
served as our external auditor for the fiscal year ended December 31, 2003, Galaz served as our external auditor for the fiscal years ended December 31, 2002 and Ruiz
Urquiza served as our external auditor for the fiscal year ended December 31, 2001 for which audited financial statements appear in this Annual Report on Form 20-F.

The
following table presents the aggregate fees for professional services and other services rendered by PWC and Galaz for 2003 and 2002, respectively.

Year ended
December 31,2003

2002(thousands of U.S. dollars)Audit Fees

356.7

543.3Audit-Related Fees

68.3

56.2Tax Fees

12.5

372.8Total

437.5

972.3


Audit Fees.Audit fees in the above table for the years ended December 31, 2003 and December 31, 2002 are the
aggregate fees billed by PWC and Galaz, respectively, in connection with the audit of our annual financial statements, the review of our quarterly financial statements and statutory and regulatory
audits.

Audit-Related Fees.Audit-related fees in the above table for the years ended December 31, 2003 and
December 31, 2002 are the aggregate fees billed by PWC and Galaz, respectively, for financial accounting and reporting consultations.

Tax Fees.Tax fees in the above table for the years ended December 31, 2003 and December 31, 2002 are fees
billed by PWC and Galaz, respectively, for services based upon existing facts and prior transactions in order to document, compute, and obtain government approval for amounts included in tax filings
such as value-added tax return assistance, transfer pricing documentation and requests for technical advice from taxing authorities.

Audit Committee Pre-approval Policies and Procedures

We have adopted pre-approval policies and procedures under which the engagement of our external auditors as well as all audit and
non-audit services provided by our external auditors must be pre-approved by the audit committee as set forth in the audit committee's charter. Any service proposals submitted
by external auditors need to be discussed and approved by the audit committee during its meetings, which take place four times a year. Once the proposed service is approved, we or our subsidiaries
formalize the engagement of services.

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

81

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ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

PART III.

ITEM 17.    FINANCIAL STATEMENTS

Not applicable.

ITEM 18.    FINANCIAL STATEMENTS

Our financial statements are included in this Annual Report beginning at page 1 of Annex F.







82

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ITEM 19.    EXHIBITS

|Exhibit |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4(a     | ) | Merger Agreement, dated May 28, 2003, among Minera México and Grupo Minero México (Translation from Spanish into English).(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4(b     | ) | Common Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Minera México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre, S.A. de C.V.,
Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad Civil por
Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., Bank of America N.A., as administrative agent to the bank holders, HSBC Bank USA, as shared payment agent and collateral agent, HSBC
Bank, USA, as SEN collateral agent, The Bank of New York, as trustee for Grupo Mexico Export Master Trust No. 1, as SEN Trustee.(2)
|4(c     | ) | Amended and Restated Trust Indenture, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., as issuer of the Borrower Notes, The Bank of New York, as trustee of Grupo Mexico Export Master Trust No. 1, as issuer of the Secured Notes
and HSBC Bank USA, as SEN collateral agent.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4(d     | ) | SEN Security Agreement, dated as of April 29, 2003, among Grupo Minero México, S.A. de C.V., as borrower, The Bank of New York, as trustee of Grupo México Export Master Trust No. 1, as SEN Trustee, Minera México, S.A. de C.V.,
Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre, S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y
Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad Civil por Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., as
guarantors and HSBC Bank USA, as SEN collateral agent.(4)                                                                                       
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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|4(e | ) | U.S. Security Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Minera México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre, S.A. de
C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad
Civil por Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., HSBC Bank USA, as shared payment agent and collateral agent, and HSBC Bank, USA, acting in its individual capacity.(5)
|--- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4(f | ) | Mexican Security Trust Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cobre, S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea,
S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Americas Mining Corporation, Minera México, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad Civil por
Acciones S.A. and México Compañía Inmobiliaria, S.A., collectively, as grantors, and GE Capital Bank, S.A., Institucion de Banca Múltiple and Capital Grupo Financiero, as trustees.(6)                          
|4(g | ) | Amended and Restated Credit Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Minera México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de
Cobre, S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí,
 Sociedad Civil por Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., certain financial institutions as Bank Holders, and Bank of America N.A., as administrative agent.(7)  
|4(h | ) | Credit Agreement dated February 6, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales Metálicos del
Norte, S.A. and Minerales y Minas Mexicanas, S.A. de C.V. (as guarantors), Bank of America, N.A. (as lender) and the Export-Import Bank of the United States in relation to a credit of U.S.$21,445,054 to finance the purchase of foreign capital
goods.(8)                                                                                                                                                                                    
|4(i | ) | Facility Agreement dated February 6, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales Metálicos del
Norte, S.A. and Minerales y Minas Mexicanas, S.A. de C.V. (as guarantors), Bank of America, N.A. (as lender) and the Export-Import Bank of the United States in relation to a facility of U.S.$49,878,640 to finance the purchase of foreign capital goods,
 equipment and spare parts.(9)                                                                                                                                                    
|4(j | ) | Down Payment Financing Agreement dated February 6, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales
Metálicos del Norte, S.A. and Minerales y Minas Mexicanas, S.A. de C.V. (as guarantors), Bank of America, N.A. (as lender) in relation to a loan of U.S.$11 million to refinance the down payment portion of the purchase price paid for certain
capital goods, equipment and replacements.(10)                                                                                                                                               
|4(k | ) | Line of Credit Agreement dated August 10, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales Metálicos
del Norte, S.A. (as guarantors) and Banco Nacional de Comercio Exterior, S.N.C. in relation to a facility of U.S.$50 million to finance working capital needs (Translation from Spanish into English).(11)                                                                                                                                                                                                                                   
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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|4(l  | ) | Credit Agreement dated August 30, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Grupo México S.A. de C.V. (parent guarantor), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de
Cananea, S.A. de C.V., Minerales Metálicos del Norte, S.A., Minera México Internacional, Inc. (as subsidiary guarantors), the lending institutions that become parties to the agreement, and the Bank of Nova Scotia as administrative agent
and sole lead manager in relation to a credit of U.S.$100 million to refinance previous indebtedness and finance capital expenditures and working capital needs.(12)
|---- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8    |   | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|12.1 |   | Certification of Chief Executive Officer of Minera México, S.A. de C.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|12.2 |   | Certification of Chief Financial Officer of Minera México, S.A. de C.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|13.1 |   | Certification of Chief Executive Officer of Minera México, S.A. de C.V., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|13.2 |   | Certification of Chief Financial Officer of Minera México, S.A. de C.V., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

---

85

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Signature Pages

The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
Annual Report on its behalf.

|                    |  | MINERA MÉXICO, S.A. DE C.V.
|------------------- |  | ---------------------------
|                    |  | By:                        
|                    |  | By:                        
|Date: July 14, 2004 |  |                            

86

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ANNEX A

GLOSSARY OF CERTAIN MINING TERMS

AssayThe act of determining the proportions of metal in ores or concentrates using analytical techniques.

BenchesA method used in open-pit mining involving the cutting of steps to prevent slides.

CalcareousRelating to rocks containing calcium carbonate.

CokeFuel source comprised of bituminous coal from which the volatile elements have been eliminated by heat.

ConcentrateMaterial that has been obtained through flotation in a concentrator.

ConcentratorThe facility in which ore is processed to separate minerals from the host rock.

Copper anodesSpecially shaped copper slabs produced in a smelter in the process of refining copper blister in a reverberatory
furnace.

Copper blisterAn impure intermediate product from converters in the process of refining copper. The name is derived from the
large blisters that form on the cast surface as a result of the liberation of sulfur dioxide and other gases.

Copper cathodesElectrolytically refined copper that has been deposited on the cathode of acidified copper sulfate solution.

Cut-off gradeThe lowest grade of mineralized material considered economic to extract. Cut-off grade
is used in the calculation of the ore reserves in a given deposit.

Dilution (extracting loss)The reduction in grade that results from inclusion of waste material from the foot wall and hanging
wall into the vein during exploitation of an underground mine.

DipThe angle at which a bed, stratum or vein is inclined from the horizontal by a structural surface
(i.e., a bedding or fault plane) and the horizontal measured perpendicular to the strike of the structure.

DrossThe material formed on the surface of molten metals as a result of oxidation or the distillation of impurities to the
surface; the copper sulfide formed on the surface of molten lead bullion.

Electrolytic refiningThe process of dissolving impure metal anode and depositing it in a pure state on the cathode.

ElectrowinningThe recovery of metals from a solution through electrolysis.

ExplorationProspecting, sampling, mapping, diamond drilling and other work involved in the search for mineralization.

FlotationA mineral recovery process by which minerals are separated from waste to produce mineral concentrates.

GradeThe percentage of metal content in ore.

Heap leachingA low-cost process for extracting metals from ore by percolating leaching solutions through heaps of
ore placed on impervious pads. Heap leaching is generally used on low-grade ores.

LeachingThe removal of soluble minerals or elements through the action of percolating solutions. These solutions, which
selectively dissolve metallic elements from ore, are solvents, and include sulfuric acid.

87

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MatteThe product produced in smelting sulfide ores of copper and lead or the smelting of copper bearing materials, usually in
a reverberatory furnace.

MineralAn inorganic substance occurring in nature.

Non-ferrous metalsMetals not containing, including, or relating to iron.

Open-pitSurface mining in which the ore is extracted from a pit.

OreA material containing metal or minerals of commercial value.

OverburdenWaste material overlying ore in an open-pit mine.

OxideThat portion of a mineral deposit within which sulfide minerals have been oxidized, usually by surface weathering
processes.

Porphyry copperDisseminated replacement deposit in which the copper minerals occur as discrete grains and veinlets throughout
a large volume of rock.

Probable reservesReserves for which quantity and grade are computed from information similar to that used for proven reserves
but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough
to assume continuity between points of observation.

Proven reservesReserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or
drill holes; (b) grade and/or quality are computed from the results of detailed sampling; and (c) the sites for inspection, sampling and measurement are spaced so closely and the
geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established.

PyriteA brassy-colored mineral of iron sulphide (compound of iron and sulfur).

RefineryA metallurgical plant in which the refining of metals takes place.

RefiningThe final stage of metal purification in which final impurities are removed.

ReserveThat part of a mineral deposit, which could be economically and legally extracted or produced at the time of the
reserve determination.

Room-and-pillarA system of mining in which the distinguishing feature is that 50% of the ore is
extracted in the first working. The ore is mined in rooms separated by narrow ribs or pillars. The ore in the pillars is extracted by subsequent working.

SamplingCutting a representative part of an ore deposit, which should represent its average value.

SchistCrystalline rock whose component minerals are arranged in a parallel structure developed by shearing and
recrystallization under pressure.

ShaftA mine excavation of limited area compared with its depth made for mining ore, raising water, hoisting ore, lowering
miners and material and ventilating underground workings.

SlimesMaterial discharged from a refinery after the primary valuable minerals have been recovered. Slimes may contain
quantities of gold and silver.

SmelterA metallurgical plant in which the smelting of the concentrates and ores takes place.

SmeltingThe chemical reduction of a metal from its ore by a process usually involving fusion so that other impurities can be
removed from the reduced metal.

88

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Solvent extractionA method of separating one or more metals from ore, by treating a solution containing the ore with a
solvent that dissolves the required substances.

Solvent extraction-electrowinning or SX-EWA method which is a combination of solvent extraction and
electrowinning.

Spot priceThe current market price of a metal for immediate delivery.

StockworkA solid mass of ore, or a rock mass so interpenetrated by small veins of ore that the whole must be mined together.

StopeThe underground excavation from which ore is extracted.

StrippingThe process of removing overburden to expose ore.

Stripping ratioThe ratio of waste materials plus leaching ore to ore mined in the material moved in an open-pit
operation.

SulphideA mineral characterized by the linkages of sulfur with a metal, such as galena, spalerite, chalcocite and pyrite.
Also a zone in which sulphide minerals occur.

TailingsThe waste material from ore after the economically recoverable metals or minerals have been extracted. Changes in
metal prices and improvements in technology can sometimes make the tailings economic to reprocess at a later date.

Toll arrangementA contractual arrangement for the treatment of any material in a smelter or refinery under which metal
content of the smelted or refined product is returned or credited to the account of the customer of such smelter or refinery.

Total leaching recoveryThe amount of metal recovered in the leaching process expressed as a percentage of the metal contained
in the ore.

Total metal recoverableThe amount of metal recoverable after the flotation process. The calculation of total metal
recoverable takes account of dilution and total mill recovery.

Total mill recoveryThe amount of metal recovered in the concentrator expressed as a percentage of the metal contained in the
ore.

WasteRock lacking sufficient grade and/or other characteristics of ore to be economically mined.

89

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ANNEX F    FINANCIAL STATEMENTS OF MINERA MÉXICO, S.A. DE C.V.

---



MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Americas Mining Corporation)        CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003 AND 2002

---



MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Americas Mining Corporation)        CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003 AND 2002

INDEX

Contents

PageReports of Independent Registered Public Accounting Firms

F-1 and F-2Consolidated Financial Statements:Balance Sheets

F-3Statements of Operations

F-4Statements of Changes in Stockholders' Equity

F-5Statements of Cash Flows

F-6Notes to Consolidated Financial Statements

F-7 to F-34


---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mexico
City, April 16, 2004, except as to Notes 16 b. and 18, for which the date is April 30, 2004 and July 2, 2004, respectively

To
the Board of Directors and Stockholders of
Minera México, S. A. de C. V.

We
have audited the accompanying consolidated balance sheet of Minera México, S. A. de C. V. and Subsidiaries ("the Company") as of December 31, 2003, and the
related consolidated statements of income, of changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Minera México, S. A. de C. V.
and Subsidiaries as of December 31, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the
United States of America.

/s/
PricewaterhouseCoopers

Ruben
Rivera R.
Mexico City, Mexico

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Stockholders of
Minera México, S. A. de C. V.

We
have audited the accompanying consolidated balance sheet of Minera Mexico, S. A. de C. V. (a Mexican corporation) and subsidiaries (the "Company") as of December 31, 2002, and
the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2002 and 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002, and the results of
its operations and its
cash flows for the years ended December 31, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 18, the reconciliation to U.S. GAAP of stockholders' equity as of December 31, 2002 and net income (loss) for the years ended December 31, 2002
and 2001 previously reported in the consolidated financial statements of the Company's former subsidiary Grupo Minero México, S. A. de C. V. ("GMM"), which ceased existence as a legal
entity pursuant to the merger between GMM and the Company, has been restated.

/s/
Galaz, Yamazaki, Ruiz Urquiza, S. C.
A member firm of Deloitte Touche Tohmatsu

C.P.C.
Jorge I. Peralta Álvarez
Mexico City, Mexico
May 13, 2003 except as to Note 18, which the date is July 2, 2004

F-2

---





MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Americas Mining Corporation)        CONSOLIDATED BALANCE SHEETS        (US$ in thousands)

|                                                                                                                                                                                                              |  | December 31, |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------
|
|ASSETS                                                                                                                                                                                                        |  |              |          
|CURRENT ASSETS:                                                                                                                                                                                               |  |              |          
|Cash and cash equivalents (Note 4)                                                                                                                                                                            |  | $            | 56,138   
|Cash retained in collateral accounts                                                                                                                                                                          |  |              |          
|Trade receivablesNet of allowance for doubtful accounts of $8,173 in 2003 and $7,348 in 2002                                                                                                                 |  |              | 87,669   
|Recoverable taxes                                                                                                                                                                                             |  |              | 31,238   
|Due from affiliated companies (Note 12)                                                                                                                                                                       |  |              | 4,574    
|Other                                                                                                                                                                                                         |  |              | 18,291   
|InventoriesNet (Note 5)                                                                                                                                                                                      |  |              | 231,129  
|Prepaid expenses and other                                                                                                                                                                                    |  |              | 5,372    
|                                                                                                                                                                                                              |  |              |          
|Total current assets                                                                                                                                                                                          |  |              | 434,411  
|PROPERTY, PLANT AND EQUIPMENTNet (Note 6)                                                                                                                                                                    |  |              | 1,922,498
|GOODWILLNet (Note 3f.)                                                                                                                                                                                       |  |              | 17,042   
|OTHER ASSETSNet (Note 7)                                                                                                                                                                                     |  |              | 190,595  
|                                                                                                                                                                                                              |  |              |          
|                                                                                                                                                                                                              |  | $            | 2,564,546
|                                                                                                                                                                                                              |  |              |          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                          |  |              |          
|CURRENT LIABILITIES:                                                                                                                                                                                          |  |              |          
|Current portion of long-term debt (Note 8)                                                                                                                                                                    |  | $            | 55,307   
|Trade accounts payable                                                                                                                                                                                        |  |              | 59,867   
|Accrued interest                                                                                                                                                                                              |  |              | 13,494   
|Accrued salaries and wages                                                                                                                                                                                    |  |              | 5,635    
|Other accrued liabilities                                                                                                                                                                                     |  |              | 81,891   
|Due to affiliated companies (Note 12)                                                                                                                                                                         |  |              | 17,683   
|Income asset taxes payable and employees' statutory profit sharing                                                                                                                                            |  |              | 5,316    
|Deferred income taxes and employees' statutory profit sharing (Note 13)                                                                                                                                       |  |              | 59,942   
|                                                                                                                                                                                                              |  |              |          
|Total current liabilities                                                                                                                                                                                     |  |              | 299,135  
|Due to affiliatesGrupo México, S. A. de C. V.                                                                                                                                                                |  |              | 52,468   
|Long-term debt (Note 8)                                                                                                                                                                                       |  |              | 1,266,881
|Labor liabilities (Note 9)                                                                                                                                                                                    |  |              | 29,291   
|Deferred income taxes and employees' statutory profit sharing (Note 13)                                                                                                                                       |  |              | 134,436  
|                                                                                                                                                                                                              |  |              |          
|Total liabilities                                                                                                                                                                                             |  |              | 1,782,211
|                                                                                                                                                                                                              |  |              |          
|MINORITY INTEREST                                                                                                                                                                                             |  |              | 74,485   
|                                                                                                                                                                                                              |  |              |          
|STOCKHOLDERS' EQUITY (Note 10):                                                                                                                                                                               |  |              |          
|Common stock, Class I (630,000,000 shares authorized and outstanding at December 31, 2003 and 2002) and Class II (139,604,346 and 29,463,779 shares authorized and outstanding at December 31, 2003 and
2002) |  |              | 431,536  
|Treasury stock                                                                                                                                                                                                |  |              | (71,578  
|Additional paid-in capital                                                                                                                                                                                    |  |              | 104,553  
|Accumulated other comprehensive loss                                                                                                                                                                          |  |              | (14,713  
|Retained earnings                                                                                                                                                                                             |  |              | 258,052  
|                                                                                                                                                                                                              |  |              |          
|Total stockholders' equity                                                                                                                                                                                    |  |              | 707,850  
|                                                                                                                                                                                                              |  |              |          
|                                                                                                                                                                                                              |  | $            | 2,564,546
|                                                                                                                                                                                                              |  |              |          

The accompanying notes are an integral part of these consolidated financial statements.

F-3

---



MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        (US$ in thousands, except per share data)

|                                                                                  |  | Year ended December 31, |        
|--------------------------------------------------------------------------------- |  | ----------------------- | -------
|
|Net sales                                                                         |  | $                       | 781,597
|Costs and operating expenses:                                                     |  |                         |        
|Cost of sales (exclusive of depreciation, amortization and depletion shown below) |  |                         | 551,777
|Administrative expenses                                                           |  |                         | 36,350 
|Depreciation, amortization and depletion                                          |  |                         | 103,479
|                                                                                  |  |                         |        
|Income from operations                                                            |  |                         | 89,991 
|                                                                                  |  |                         |        
|Interest expense                                                                  |  |                         | 104,125
|Interest income                                                                   |  |                         | (1,835 
|Remeasurement (gain) lossNet                                                     |  |                         | (19,726
|Realized loss on hedging activities                                               |  |                         |       
|OtherNet                                                                         |  |                         | 4,041  
|                                                                                  |  |                         |        
|                                                                                  |  |                         | 86,605 
|                                                                                  |  |                         |        
|Income (loss) before income taxes and minority interest                           |  |                         | 3,386  
|Provision (benefit) for income taxes                                              |  |                         | 35,469 
|Minority interest                                                                 |  |                         | 3,104  
|                                                                                  |  |                         |        
|Consolidated net (loss) income                                                    |  | $                       | (35,187
|                                                                                  |  |                         |        
|Majority (loss) income per share                                                  |  | $                       | (0.047 
|                                                                                  |  |                         |        
|Weighted average number of shares outstanding (thousands)                         |  |                         | 738,717
|                                                                                  |  |                         |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-4

---





MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001        (US$ in thousands)

|                                                      |  |             |  |             |  |   |         |  |   |         |   | Accumulated
other
comprehensive
income
(loss) |         |  |   |         |  
|----------------------------------------------------- |  | ----------- |  | ----------- |  | - | ------- |  | - | ------- | - | --------------------------------------------- | ------- |  | - | ------- | -
|
|
|
|Balances at December 31, 2000                         |  | 630,000,000 |  | 29,463,779  |  | $ | 406,096 |  | $ | (57,020 | ) | $                                             | 424     |  | $ | (2,210  | )
|Decrease in treasury stock                            |  |             |  |             |  |   |         |  |   | 4,204   |   |                                               |         |  |   |         |  
|Comprehensive result:                                 |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Net loss for the year                                 |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Reversal of realized losses on securities, net of tax |  |             |  |             |  |   |         |  |   |         |   |                                               | 303     |  |   | (6,436  | )
|Additional liability for employee benefit obligations |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   | (11,821 | )
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Balances at December 31, 2001                         |  | 630,000,000 |  | 29,463,779  |  |   | 406,096 |  |   | (52,816 | ) |                                               | 727     |  |   | (20,467 | )
|Increase in treasury stock                            |  |             |  |             |  |   |         |  |   | (960    | ) |                                               |         |  |   |         |  
|Advances for future increases in capital stock        |  |             |  |             |  |   |         |  |   |         |   |                                               | 17,745  |  |   |         |  
|Comprehensive result:                                 |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Net income for the year                               |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Additional liability for employee benefit obligations |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   | (3,487  | )
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Balances at December 31, 2002                         |  | 630,000,000 |  | 29,463,779  |  |   | 406,096 |  |   | (53,776 | ) |                                               | 18,472  |  |   | (23,954 | )
|Increase in capital stock                             |  |             |  | 110,140,567 |  |   | 25,440  |  |   |         |   |                                               | 86,081  |  |   |         |  
|Increase in treasury stock                            |  |             |  |             |  |   |         |  |   | (17,802 | ) |                                               |         |  |   |         |  
|Comprehensive result:                                 |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Net loss for the year                                 |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Additional liability for employee benefit obligations |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   | 9,241   |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  
|Balances at December 31, 2003                         |  | 630,000,000 |  | 139,604,346 |  | $ | 431,536 |  | $ | (71,578 | ) | $                                             | 104,553 |  | $ | (14,713 | )
|                                                      |  |             |  |             |  |   |         |  |   |         |   |                                               |         |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.

F-5

---



MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (US$ in thousands)

|                                                                                               |  | Year ended December 31, |         
|---------------------------------------------------------------------------------------------- |  | ----------------------- | --------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |  |                         |         
|Net (loss) income for the year                                                                 |  | $                       | (35,187 
|Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |  |                         |         
|Depreciation, amortization and depletion                                                       |  |                         | 103,479 
|Cost of sale of property and equipment                                                         |  |                         | 512     
|Amortization of deferred charges                                                               |  |                         | 1,976   
|Amortization of goodwill                                                                       |  |                         |         
|Deferred income taxes                                                                          |  |                         | 7,924   
|Deferred employees' profit sharing                                                             |  |                         | 2,040   
|Minority interest in earnings of subsidiaries                                                  |  |                         | 3,104   
|Employee benefit liabilities                                                                   |  |                         | 9,059   
|Remeasurement (gain) loss                                                                      |  |                         | (19,726 
|Allowance for doubtful accounts                                                                |  |                         | 2,206   
|Allowance for obsolescence of materials                                                        |  |                         | 1,117   
|CHANGES IN OPERATING ASSETS AND LIABILITIES:                                                   |  |                         |         
|Trade receivables                                                                              |  |                         | (24,409 
|Others accounts receivable                                                                     |  |                         | 14,537  
|Inventories                                                                                    |  |                         | (382    
|Other assets                                                                                   |  |                         | (4,405  
|Accounts payable and accrued liabilities                                                       |  |                         | (152,020
|                                                                                               |  |                         |         
|Net cash (used in) provided by operating activities                                            |  |                         | (90,175 
|                                                                                               |  |                         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |  |                         |         
|Capital expenditures                                                                           |  |                         | (54,555 
|Proceeds from the sale of fixed assets                                                         |  |                         | 5,123   
|Other                                                                                          |  |                         | 50      
|Sales of securities                                                                            |  |                         |         
|                                                                                               |  |                         |         
|Net cash used in investing activities                                                          |  |                         | (49,382 
|                                                                                               |  |                         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |  |                         |         
|Proceeds from long-term debt                                                                   |  |                         |         
|Payments to long-term debt                                                                     |  |                         |         
|Investment in treasury stock                                                                   |  |                         | (17,802 
|Cash restricted as collateral accounts                                                         |  |                         | 88,048  
|Advances for future increases in capital stock                                                 |  |                         |         
|Increase in capital stock                                                                      |  |                         | 111,521 
|                                                                                               |  |                         |         
|Net cash provided by (used in) financing activities                                            |  |                         | 181,767 
|                                                                                               |  |                         |         
|Effect of exchange rate changes on cash and cash equivalents                                   |  |                         | (13,606 
|                                                                                               |  |                         |         
|Increase (decrease) in cash and cash equivalents                                               |  |                         | 28,604  
|Cash and cash equivalents at beginning of the year                                             |  |                         | 27,534  
|                                                                                               |  |                         |         
|Cash and cash equivalents at end of the year                                                   |  | $                       | 56,138  
|                                                                                               |  |                         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                            |  |                         |         
|Cash paid during the period for:                                                               |  |                         |         
|Interest                                                                                       |  | $                       | 100,385 
|                                                                                               |  |                         |         
|Income taxes                                                                                   |  | $                       | 23,801  
|                                                                                               |  |                         |         
|Supplemental schedule of non-cash investing and financing activities:                          |  |                         |         
|Additional liability for employee benefit obligations                                          |  | $                       | (9,241  
|                                                                                               |  |                         |         

The accompanying notes are an integral part of these consolidated financial statements.

F-6

---





MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Americas Mining Corporation)        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003, 2002 AND 2001
    (US$ in thousands)

NOTE 1DESCRIPTION OF BUSINESS AND SIGNIFICANT EVENTS:

The operating companies that comprise Minera México, S. A. de C. V. (MM) and subsidiaries (collectively, the Company) are in the metallurgical
mining industry. They engage in the exploration, mining and processing of metallic and nonmetallic minerals as well as the mining of coal and the refinement of copper, zinc, gold and silver. The
majority of the Company's sales market is in the United States and Mexico. The Company is a 98.91%-owned indirect subsidiary of Grupo México, S. A. de C. V.
(GMEXICO), through its holding company Americas Mining Corporation (AMC).

At
the General Extraordinary Stockholders' Meeting held on May 28, 2003, the stockholders agreed to merge Grupo Minero México, S. A. de C. V. (GMM), a wholly-owned
subsidiary, into MM. As the companies were under common control, the merger was accounted for in a manner similar to a pooling-of-interests based on the accounting values of
each of the combining entities included in the accounting records of GMEXICO at the date of the merger. The merger became effective as of October 1, 2003, as a result of which MM acquired all
the assets, liabilities and capital of the merged company, which ceased to exist as a legal entity.

NOTE 2BASIS OF PRESENTATION:

a.Consolidation of financial statements

The
consolidated financial statements as of December 31, 2003 and 2002 include the financial statements of GMM and those of its subsidiaries that consolidate the financial
statements of their subsidiaries. The major operating subsidiaries of the Company are as follows:

Company

Ownership percentage as of
December 31, 2003 (%)Mexicana de Cobre, S. A. de C. V. (Mexcobre)

95.74Mexicana de Cananea, S. A. de C. V. (Mexcananea)

98.49Industrial Minera México, S. A. de C. V. (Immsa)

100Minerales Metálicos del Norte, S. A. (Mimenosa)

100Minera México Internacional, Inc. (MMI)

100Mexicana del Arco, S. A. de C. V.

100Servicios de Apoyo Administrativo, S. A. de C. V.

100México Compañía Inmobiliaria, S. A. de C. V.

100


The
consolidated financial statements include the accounts of the Company and its subsidiaries, all under the same management. All significant intercompany balances and transactions have
been eliminated in consolidation.

MM
is a majority-owned indirect subsidiary of GMEXICO.

b.Foreign exchange effect and basis of presentation and remeasurement into U.S. dollars

The
Company's functional currency is the U.S. dollar. MM maintains its books in Mexican pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current
exchange rates except for inventory, property, plant and equipment and other assets which are remeasured at historical exchange rates. Revenues and expenses are generally translated at average
exchange rates in effect

F-7

---



during
the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates. The most significant difference between Mexican GAAP and U.S. GAAP, as
they relate to the Company, is that Mexican GAAP recognizes the comprehensive effects of inflation on financial statements. The accompanying financial statements have been remeasured from Mexican
pesos into U.S. dollars by applying the procedures specified in Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency Translation".

Relevant
exchange rates used in the preparation of the financial statements were as follows (Mexican pesos per one U.S. dollar):

2003

2002

2001Exchange rate at December 31

Ps11.2360

Ps10.3125

Ps9.1692Weighted average exchange rate for the year ended

Ps10.7869

Ps9.6589

Ps9.3387


c.Reclassifications

Certain
amounts in the financial statements as of and for the years ended December 31, 2002 and 2001 have been reclassified in order to conform to the presentation of the
consolidated financial statements as of and for the year ended December 31, 2003.

NOTE 3SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies of the Company are as follows:

a.Cash and cash equivalents

Cash
and cash equivalents are primarily short-term investment funds, variable income securities and bank deposits with original maturities of three months or less and are
valued at market.

b.Inventories

Metal
inventories are stated at the lower of average cost or market value. Costs incurred in the production of metal inventories exclude general and administrative costs.

Materials
and supplies are stated at the lower of average cost or market value. Supplies are valued at average cost less an allowance for obsolescence.

Work-in-process
inventories represent materials that are in the process of being converted into a saleable product. Conversion processes vary depending on the
nature of the copper ore and the specific mining operation. For sulfide ores, processing includes milling and
concentrating and the results from the production of copper and molybdenum concentrates. Molybdenum in-process inventory includes the cost of molybdenum concentrates and the costs incurred
to convert those concentrates into various high-purity molybdenum chemicals or metallurgical products.

Finished
goods include saleable products (e.g., copper concentrates, copper anodes, copper cathodes, copper rod, high-purity molybdenum chemicals and other metallurgical
products).

c.Impairment of long-lived assets

Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are
determined to be impaired when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The Company measures an
impairment loss as the difference between the carrying value of the asset and its fair value. No impairment charges were recorded during the years ended December 31, 2003, 2002 and 2001.

F-8

---



d.Property, Plant and Equipment

Property,
plant and equipment are carried at cost. Additions, improvements and expenditures for repairs and maintenance that significantly add to the productive capacity or life of an
asset are capitalized; other expenditures for repairs and maintenance are expensed as incurred.

The
principal depreciation method used for mining, smelting and refining operations is the straight-line method applied on a group basis.

Upon
disposal of assets depreciated on a group basis, cost less salvage is charged to accumulated depreciation.

Values
for mining properties represent mainly acquisition costs. Depletion of mines is computed on the basis of an overall unit rate applied to the pounds of principal products sold from
mine production.

Mine
exploration costs to maintain production of operating mines are charged to operations as incurred. Mine development expenditures at new mines, and major development expenditures at
operating mines outside existing pit limits that are expected to benefit future production beyond a minimum of one year, are capitalized and amortized using the straight-line method.

e.Other assets





F-9

---





f.Goodwill

The
goodwill originated with the acquisition of a minority interest in Mexcananea in 1998. Effective January 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets". Under SFAS No. 142, goodwill and intangible assets that have indefinite useful lives are not amortized but rather tested at least annually for impairment. As of
December 31, 2003, the Company had goodwill of $28,402 less accumulated amortization of $11,360 for a total of $17,042, net.

Upon
completion of the transitional impairment tests, no impairment charge was recognized as the fair value of the reporting unit to which the goodwill was assigned was greater than the
related carrying amount. The pro forma effect of not amortizing goodwill in 2001 would have reduced goodwill amortization expense by $2,840 and reduced the net loss by the same amount. Loss per share
would have also been reduced by approximately $.004.

g.Environmental remediation costs

In
accordance with Statement of Position 96-1 (SOP 96-1) "Environmental Remediation Liabilities", the Company accrues the costs associated with environmental
remediation obligations when such costs are probable and determinable and generally not later than upon completion of the remediation feasibility study. Such accruals are adjusted as new information
develops or circumstances change and recorded at gross amount net of estimated land. Recoveries of environmental remediation costs from other parties are recorded as assets when the recovery is deemed
probable.

h.Comprehensive result

Comprehensive
result is defined as the change in equity of a business enterprise during a period arising from transactions and other events and circumstances involving
non-owner sources. For
the years ended December 31, 2003, 2002 and 2001, comprehensive result was composed of net income (loss), the change in the additional minimum pension liability, and for 2001, also the reversal
of the unrealized losses on securities which were sold.

i.Employee benefits

At
December 31, 2003, the Company had three stock-based option plans. The Company accounts for the stock option plans by measuring compensation cost using the
intrinsic-value-based method presented by Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees", and related interpretations. No compensation cost is reflected
in consolidated net income (loss), as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of the grant.

MM
has a trust fund, which at December 31, 2003 and 2002 held 44,043,196 and 31,734,189 shares, representing 5.6% and 4.9%, respectively, of GMEXICO's capital stock. These shares
are valued at market and the price was 28.83 and 11.5 Mexican pesos per share at December 31, 2003 and 2002, respectively (presented as treasury stock in stockholders' equity), and are intended
for sale to non-unionized employees and to workers of subsidiaries and operating and affiliated companies that directly or indirectly form part of GMEXICO.

j.Employee benefit obligations

The
Company records the liabilities for seniority premiums, pensions and retirement payments similar to pensions as accrued, using actuarial calculations based on the projected unit
credit method and real interest rates. Accordingly, the liability is being accrued which at present value will cover the obligation for benefits projected to the estimated retirement date of the
Company's employees. Indemnity payments are charged to results in the period in which they become payable.

F-10

---



Mexcananea
provides medical and hospital services to all active employees and retired unionized employees and the members of their families through a subsidiary. Mexcananea records the
liability for postretirement medical benefits based on actuarial calculations under the projected unit credit method.

When
there is a significant reduction in personnel due to the restructuring of the labor force or the closing of a plant, the corresponding indemnity costs, net of the corresponding
reduction in the projected benefit obligation and the related items to be amortized, are charged to income.

k.Income tax, asset tax and employees' statutory profit sharing

The
Company recognizes deferred income tax and employees' statutory profit sharing assets and liabilities for the future tax consequences of all temporary differences between the
financial statement carrying amounts of assets and liabilities and their respective income tax or employee statutory profit-sharing bases, measured using enacted rates. The effects of changes in the
statutory rates are accounted for in the period that includes the enactment date. Deferred income tax assets are also recognized for the estimated future effects of tax loss carryforwards and asset
tax credit carryforwards. Deferred income tax and employees' statutory profit sharing assets are reduced by a valuation allowance for these estimated amounts, which in the opinion of management, will
more likely than not will not be realized.

l.Foreign currency balances and transactions

Monetary
assets and liabilities denominated in foreign currency are translated into U.S. dollars at the applicable exchange rate in effect at the balance sheet date. Revenues and
expenses are translated at average rates in effect for the period. Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date. Exchange fluctuations
are recorded in income in the consolidated statements of operations.

m.Revenue recognition

The
Company sells its products pursuant to sales contracts entered into with its customers. Revenue for all our products is recognized when title and risk of loss pass to the customer
and when collectibility is reasonably assured. The passing of title and risk of loss to the customer is based on terms of the sales contract, generally upon shipment of product. Product pricing is
based upon quoted commodity prices plus applicable premiums or prevailing market prices.

Certain
of our sales agreements provide for provisional pricing based on either the New York Commodity Exchange or the London Metal Exchange (as specified in the contract) when shipped.
At December 31, 2003, the difference between the spot rate at that date and the provisional price for outstanding contracts was not significant.

Amounts
billed to customers for shipping and handling are classified as net sales. Amounts incurred for shipping and handling are included in cost of sales.

n.Income (loss) per share

Basic
income (loss) per share is calculated by dividing consolidated net income (loss) by the weighted average number of common shares outstanding during the year. The options awarded to
employees do not have a material effect on the determination of basic loss per share.

o.Hedging activities

Derivative
instruments may be used to manage exposure to market risk from changes in commodity prices (metal and energy products), interest rates or the value of the Company's assets and
liabilities. Derivative financial instruments are recognized as either assets or liabilities in the balance sheet. To qualify for hedge accounting, derivative instruments must be designated as a hedge
in writing at acquisition or inception of the hedge. In addition, such instruments must be periodically evaluated

F-11

---



and
deemed to be "highly effective" at reducing the risk associated with the exposure being hedged. Any ineffectiveness of the hedge is reported in current earnings. Unrealized gains or losses of
derivative financial instruments that fail to qualify for hedge accounting are recognized in earnings.

The
Company does not maintain or issue financial instruments for speculative purposes. Generally, the Company's derivative instruments are not designed in hedging relationships for
accounting purposes. Decisions with respect to each transaction and to the overall hedging policies are made by an Executive Risk Committee. The objective of the committee, which is currently
comprised of the Chairman of the Board of Directors, the Chief Financial Officer and the Assistant Director of Risk Management, is to ensure that the risks and benefits have been appropriately
assessed.

The
Company enters into swap and option transactions or a combination of both to reduce or eliminate the risk of purchase or sales price fluctuations. For instance, for the purpose of
reducing the risk of fluctuations in metal prices, the Company may purchase put options or create synthetic put options to reduce or eliminate the risk of metal price declines below the option strike
price on a portion of its anticipated future sales.

The
Company did not enter into transactions with derivative financial instruments during 2003, 2002 or 2001.

p.Concentration of credit risk

Financial
instruments that potentially subject the Company to a concentration of credit risk consist principally of accounts receivable. Management believes this risk is minimal as the
Company routinely performs credit evaluations on its customers.

The
Company is exposed to credit loss in cases where the financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and currency/interest
rate swaps) are unable to pay when they owe funds as a result of protection agreements with them. To minimize the risk of such losses, the Company only uses highly rated financial institutions that
meet certain requirements. The Company also periodically reviews the creditworthiness of these institutions to ensure that they are maintaining their ratings. The Company does not anticipate that any
of the financial institutions will default on their obligations.

The
Companys' three largest customers accounted for 14%, 12% and 8% of total sales in 2003, 23%, 7% and 7% of total sales in 2002 and 10%, 10% and 5% of total sales in 2001,
respectively.

F-12

---



The table below represents the rollforward of the allowance for doubtful accounts:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 4,038 |           | $ | 795        |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 4,829 |           | $ | 2,581      |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 7,348 |           | $ | 2,206      |  | $                       
|                             |  |                                |       |           |   |            |  |                         

q.Estimates

The
accounting policies followed by the Company require that management make certain estimates and use certain assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Although these estimates are based on management's best knowledge of current circumstances, actual results may differ.

r.Impact of New Accounting Standards

Effective
January 1, 2003, the Company adopted SFAS No. 143 "Accounting for Asset Retirement Obligations". This statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred. The liability is measured at fair value and is adjusted to its present value in subsequent periods as accretion expense
is recorded. The corresponding asset retirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over the asset's useful life. The
adoption of SFAS No. 143 did not have a material effect on the Company's financial statements. The Company did not have any significant legal obligations for asset retirements as of
December 31, 2003 and 2002. In addition, the Company has instituted extensive environmental conservation programs at its mining facilities. The Company's environmental programs and other
regulations applicable to concessions and properties include water recovery systems to conserve water and minimize contamination of nearby streams, revegetation programs to stabilize the surfaces of
the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions. Company's management does not believe that continued compliance with the Environmental Law or
Mexican state environmental laws will have a material adverse effect on its business, properties, results of operations or financial condition.

Effective
January 1, 2003, the Company implemented SFAS No. 145 "Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections", under which
gains and losses from extinguishment of debt are classified as extraordinary items only if they meet criteria outlined in Accounting Principles Statement No. 30. There were no effects on the
Company's financial statements as a result of the implementation of SFAS No. 145.

Effective
January 1, 2003, the Company adopted SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability Recognition for Certain Employees'
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The adoption of SFAS No. 146 did not have a material effect on the Company's
financial statements.

Effective
January 1, 2003, the Company adopted FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, the Company must disclose and may be required to recognize a liability for the fair value of the obligation it
assumes under that guarantee. The initial recognition and measurement requirement of FIN 45 is effective for guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did
not have a material effect on the Company's financial statements.

F-13

---



Effective
January 1, 2003, the Company adopted SFAS No. 148 "Accounting for Stock-Based CompensationTransition and Disclosure". SFAS No. 148 does not
alter the provisions of SFAS No. 123, nor does it require stock-based compensation to be measured under the fair-value approach under SFAS No. 123. The Company uses the
disclosure only provisions of SFAS No. 123. The adoption of SFAS No. 148 did not have a material effect on the Company's financial statements.

FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities" (FIN 46) addresses consolidation by business enterprises of variable interest entities. Under this
interpretation, certain entities known as Variable Interest Entities ("VIEs") must be consolidated by the primary beneficiary of the entity. The primary beneficiary is generally defined as having the
majority of the risks and rewards arising from the VIEs. For VIEs in which a significant (but not majority) variable interest is held, certain disclosures are required. The Company is in the process
of evaluating the effect of FIN 46 on the Company's consolidated financial position, results of operations or cash flows.

In
April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This statement amends and clarifies financial
accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under
SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. The Company adopted the provisions of SFAS No. 149 in 2003, which did not have a material effect on the
Company's financial statements.

In
May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes
standards of how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective July 1, 2003. The Company adopted the provisions of SFAS No. 150 in 2003, which did not have a material effect on the Company's financial statements.

NOTE 4CASH AND CASH EQUIVALENTS:

December 31,2003

2002Cash

$
15,601

$
27,163Cash equivalents


40,537


371$
56,138

$
27,534


NOTE 5INVENTORIES:

December 31,2003

2002Materials and supplies

$
107,137

$
129,509Finished goods metals


125,652


105,683Work-in-process


2,186


2,054Merchandise in transit


4,864


3,173239,839


240,419Allowance for obsolescence


(8,710
)

(7,846
)$
231,129

$
232,573


F-14

---



The
table below represents the rollforward of the allowance for obsolescence:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 6,980 |           | $ | 285        |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 7,190 |           | $ | 1,096      |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 7,846 |           | $ | 1,117      |  | $                       
|                             |  |                                |       |           |   |            |  |                         

NOTE 6PROPERTY, PLANT AND EQUIPMENT:

December 31,2003

2002Land

$
61,505

$
64,834Mine development


17,752


20,766Building and leasehold improvements


926,602


935,232Infrastructure


40,536


63,452Automobiles and trucks


33,823


6,403Mobile equipment


1,729,334


1,703,921Processing equipment


434,814


429,3863,244,366


3,223,994Accumulated depreciation


(1,352,334
)

(1,271,295
)1,892,032


1,952,699Construction-in-progress


30,466


47,159$
1,922,498

$
1,999,858


The
average annual depreciation and amortization rates are as follows:

December 31,2003

2002Buildings and improvements

2.88
%
2.72
%Infrastructure

3.03
%
3.03
%Automobiles and trucks

6.77
%
5.64
%Mobile equipment

5.81
%
4.59
%Processing equipment

3.94
%
3.73
%


During
2001, the operations of the Santa Eulalia mining unit in the State of Chihuahua, Velardeña, in the State of Durango, the Monterrey plant in the State of Nuevo
León, and Rosario in the State of Sinaloa, were interrupted due to low mineral grades and high operating costs, which prevented the Company from conducting profitable operations at such
locations. At December 31, 2003 and 2002, the net carrying value of these plants was $20,079.

F-15

---



NOTE 7OTHER ASSETS:

December 31,2003

2002Stripping costs and leachable materialNet of accumulated amortization and depletion of $31,557 in 2003 and $12,428 in 2002

$
176,297

$
151,395Debt issuance costs


9,181


4,776Intangible asset arising from employee benefits


223


838Investment in shares of associated and other unconsolidated companies


3,740


3,790Other


5,787


5,17218,931


14,576Accumulated amortization


(4,633
)

(2,657
)14,298


11,919$
190,595

$
163,314


The
Company's estimated annual amortization over each of the next five years is approximately $25,350.

The
Company spent $13,100 in 2001, $6,700 in 2002 and $7,200 in 2003 on exploration programs, which were recognized as operating expenses in those years.

NOTE 8LONG-TERM DEBT:

In prior years, the Company's financial results were significantly affected by the drop in the international prices of the principal metals it produces. As a
result, at December 31, 2002 and 2001, it was not in compliance with certain debt covenants and was in default on certain payments. During 2001, the Company entered into a debt renegotiation
process, and on December 4, 2002, signed a Term Sheet with the holders of its Secured Export Notes (SEN Holders) and its bank creditors, in which the new terms and conditions of the
restructured debt were set forth.

The
Company concluded its debt renegotiation on April 29, 2003, through the execution of a Common Agreement among the Company, its principal subsidiaries (as guarantors), the SEN
Holders, the Bank Holders, HSBC Bank USA, as shared payment and collateral agent for the SEN Holders, Bank of America, as the administrative agent for the Bank Holders, and The Bank of New York, as
the SEN Trustee (the "Common Agreement").

This
agreement establishes that the combined debt of the SEN Holders and Bank Holders will be divided into two tranches (Tranche A and B), with repayment periods from June 25,
2004, to March 30, 2007; with a third tranche (Tranche C) which is applicable only in event a make-whole amount becomes payable under the terms of the Common Agreement. The
Company determined the possible effects of

F-16

---



the
restructuring of the debt following the criteria outlined in the EITF Issue 96-19. The restructured loans, their respective amounts and interest rates are detailed below:

December 31,Maturity2003

20022004

$
55,307

$
55,3072005


94,000


94,0002006


94,000


94,0002007


637,636


637,6362008


316,245


316,2452028


125,000


125,0001,322,188


1,322,188LessCurrent portion of long-term debt


55,307Long-term debt

$
1,266,881

$
1,322,188


At
December 31, 2003 and 2002 interest payable amounted to $13.5 million and $18.0 million, respectively.

|                                        |  |                                  |  |   |           | Restructured |   |        
|--------------------------------------- |  | -------------------------------- |  | - | --------- | ------------ | - | -------
|
|
|The Bank of New York (Agent)            |  | 10.26%, 11.18% and
Libor + 3.75% |  | $ | 473,231   |              | $ | 145,205
|Bank of America (Agent)                 |  | Libor + 3.75%                    |  |   | 104,000   |              |   | 31,911 
|Bank of America (Agent)                 |  | Libor + 3.75%                    |  |   | 7,694     |              |   | 2,361  
|Bank of America and Export-Import Bank  |  | Libor + 3.75%                    |  |   | 36,747    |              |   | 11,275 
|Bank of Nova Scotia Bank                |  | Libor + 3.75%                    |  |   | 102,237   |              |   | 31,370 
|Banco Nacional de Comercio Exterior     |  | Libor + 3.75%                    |  |   | 50,000    |              |   | 15,342 
|Bank of America (Agent)                 |  | Libor + 3.75%                    |  |   | 39,826    |              |   | 12,220 
|Export Development Corporation          |  | Libor + 3.75%                    |  |   | 39,580    |              |   | 12,145 
|Société Générale and Import-Export Bank |  | Libor + 3.75%                    |  |   | 7,628     |              |   | 2,341  
|Siemens Financial and West LB AG        |  | Libor + 3.75%                    |  |   | 20,000    |              |   | 6,137  
|                                        |  |                                  |  |   |           |              |   |        
|                                        |  |                                  |  |   | 880,943   |              | $ | 270,307
|                                        |  |                                  |  |   |           |              |   |        
|Yankee Bond (Notes)                     |  | Not restructured                 |  |   | 441,245   | (*)          |   |        
|                                        |  |                                  |  |   |           |              |   |        
|                                        |  |                                  |  | $ | 1,322,188 |              |   |        
|                                        |  |                                  |  |   |           |              |   |        

---

Series

Principal

Interest
rate

Due date"A"

$
375,000

8.25
%
April 1, 2008"B"


125,000

9.25
%
April 1, 2028$
500,000


The notes are guaranteed by Mexcobre, Mexcananea, Immsa, Mimenosa and MMI. During 2000 GMM acquired and cancelled $58,755 of these notes, so that
at December 31, 2003 the remaining balance due under these notes was $441,245.

F-17

---



At
December 31, 2003, the Company was in compliance with the guarantees and restrictions established by the debt agreements, which include financial covenants and restrictions on
contracting additional debt and on certain capital expenditures.

The
following are among the most important covenants contained in the Common Agreement:



The
Common Agreement contains the following remedies:



F-18

---





The
following are certain mandatory prepayment provisions in the Common Agreement:



Debt guarantees

Performance
of the Company's obligations under the Common Agreement is secured pursuant to a Trust Agreement executed by the Company, Immsa, Mexcobre, Mimenosa, Mexcananea, Mexarco, MMI,
AMC, MM, Compañía de Terrenos e Inversiones de San Luis Potosí, S. A. and Mexci, as grantors, and GE Capital Bank, S. A., Institución de
Banca Múltiple and GE Capital Grupo Financiero, as Trustees.

The
assets described below have been pledged and transferred to the Trustees under the Trust Agreement:



F-19

---





NOTE 9EMPLOYEE BENEFIT OBLIGATIONS:

The liabilities from seniority premiums payable at retirement are recorded based on external actuarial calculations using the projected unit credit method. The
Company uses a December 31 measurement date for its plans.

The
seniority premium liability under SFAS No. 87 "Employers' Accounting for Pensions", is as follows:

|                                                                           |  | December 31, |        
|-------------------------------------------------------------------------- |  | ------------ | -------
|
|
|Actuarial present value of benefit obligation:                             |  |              |        
|Vested benefit obligation                                                  |  | $            | 15,240 
|Non-vested benefit obligation                                              |  |              | 15,624 
|                                                                           |  |              |        
|Accumulated benefit obligation                                             |  |              | 30,864 
|Excess of projected benefit obligation over accumulated benefit obligation |  |              | 4,169  
|                                                                           |  |              |        
|Projected benefit obligation                                               |  |              | 35,033 
|Plan assets                                                                |  |              | (11,955
|                                                                           |  |              |        
|Projected benefit obligation in excess of plan assets                      |  |              | 23,078 
|Unrecognized prior service cost                                            |  |              |        
|Unrecognized net actuarial loss                                            |  |              | (11,017
|Unrecognized transition obligation                                         |  |              | 1,777  
|Additional minimum liability                                               |  |              | 6,426  
|Fair value of plan assets at beginning of the year                         |  |              | (1,744 
|                                                                           |  |              |        
|Net pension liability                                                      |  | $            | 18,520 
|                                                                           |  |              |        

F-20

---



Additional
disclosures required by SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits", an Amendment to FASB Statements No. 87, 88 and
106, are as follows:

|                                                  |  | December 31, |       
|------------------------------------------------- |  | ------------ | ------
|
|
|Change in benefit obligation:                     |  |              |       
|Projected benefit obligation at beginning of year |  | $            | 36,835
|Service cost                                      |  |              | 2,301 
|Interest cost                                     |  |              | 2,594 
|Actuarial (loss) gainNet                         |  |              | (2,420
|Acquisition                                       |  |              |       
|Benefits paid                                     |  |              | (1,249
|Settlements                                       |  |              |       
|Inflation adjustment                              |  |              | (3,028
|                                                  |  |              |       
|Projected benefit obligation at end of year       |  | $            | 35,033
|                                                  |  |              |       
|Change in plan assets:                            |  |              |       
|Fair value of plan assets at beginning of year    |  | $            | 8,653 
|Actuarial return on plan assets                   |  |              | 3,302 
|                                                  |  |              |       
|Fair value of plan assets at end of year          |  | $            | 11,955
|                                                  |  |              |       

The
assumptions used to determine the pension obligation and seniority premiums as of year-end and net cost in the ensuring year were:

Weighted-average assumptions

2003

2002

2001Weighted average discount rate

10
%
10
%
13
%Expected long-term rate of return on plan assets

12
%
12
%
15
%Rate of increase in future compensation level

6
%
6
%
10
%


Components of net periodic benefit cost

The
components of net periodic pension and seniority premium plan cost as of December 31, consists of the following:

2003

2002

2001Service cost

$
2,717

$
2,897

$
3,353Interest cost


4,738


5,071


9,801Expected return on plan assets


(738
)

(1,019
)

(4,379
)Amortization of transition assetsNet


1,366


1,416


1,497Recognized net actuarial loss


976


1,034


430Total net periodic benefit cost

$
9,059

$
9,399

$
10,702


F-21

---



Insured
other benefits cost trend rates have a significant effect on the amount reported of the other benefits plan. One percentage-point change in assumed other benefits cost trend
rates would have the following effects:

Percentage
point increase

Percentage
point decreaseEffect on total service and interest cost components

$
3,185

$
2,492Effect on the post-retirement benefit obligation

$
51,405

$
41,310


The
Company's policy for determining asset mix-targets includes periodic consultation with recognized third-party investment consultants. The expected long-term
rate of return on plan assets is updated periodically, taking into consideration assets allocations, historical returns and the current economic environment. The fair value of plan assets is impacted
by general market conditions. If actual returns on plan assets vary from the expected returns, actual results could differ.

These
plans accounted for approximately 30 percent of benefit obligations. The following table represents the asset mix of the investment portfolio at December 31:

2003

2002Asset category:Equity securities

87
%
69
%Treasury bills

13
%
31
%100
%
100
%


The
amount of contributions that the Company expects to be paid to the plan during 2004 is not material.

NOTE 10STOCKHOLDERS' EQUITY:

At the stockholders' meetings held on March 17 and May 28, 2003, the stockholders agreed to issue 103,584,081 and 6,558,428 shares, respectively, of
Series "B" Class II stock to AMC for $111,521 and a nominal value of $25,440.

Issuance
would be offered to the stockholders in proportion to their shareholding percentage to subscribe and pay, in accordance with their preferential right, in the amount of Ps.12.78
per share to which they are entitled, based on the number of shares held. The subscription price is substantially equal to the book value of the shares, which represent the capital stock at the date
of said stockholders' meetings.

At
December 31, 2003, the Company's capital stock amounted to $431,536, represented by 769,604,346 shares, of which 630,000,000 Class I shares correspond to the fixed
portion and 139,604,346 Class II shares to the variable portion.

Dividends
paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Any excess over this account is subject to a tax equivalent to 49.25% or 47.06%, depending
on whether paid in 2004 or 2005, respectively. The tax is payable by the Company and may be credited against its income tax in the same year or the following two years. Dividends paid are not subject
to tax withholding. In the event of a capital reduction, any excess of stockholders' equity over capital contributions, the latter restated in accordance with the provisions of the Income Tax Law, is
accorded the same tax treatment as dividends.

F-22

---



NOTE 11SEGMENT INFORMATION:

Based on the information available to the Company's executive committee, the Company has concluded that its operations are within one reportable segment.
Accordingly, only the financial information with respect to the principal business of producing copper has been presented.

The
prices of almost all of the Company's products are determined by international market quotations in U.S. dollars. The Company made direct sales in the following countries:

Year ended December 31,2003

2002

2001United States

$
308,758

$
284,886

$
503,164Germany


6,032Japan


5,540China


45,268Belgium


14,118


12,409


19,015Guatemala


5,832Peru


895


2,641Mexico


390,051


414,302


361,077Total previous countries


776,494


714,238


883,256Other countries


5,103


9,533


18,275Total worldwide

$
781,597

$
723,771

$
901,531


NOTE 12BALANCES AND TRANSACTIONS WITH RELATED PARTIES:

a.     Balances
receivable and payable with affiliated companies and related parties are shown below:

December 31,2003

2002Accounts receivable:Intermodal México, S. A. de C. V.

$
2,726

$
2,252AMC


1,099Other


749


12$
4,574

$
2,264Accounts payable:GMEXICO

$
7,009

$
21,700Ferrocarril Mexicano, S. A.


2,018


12,900Asarco, Inc.


4,872Southern Peru Copper Corporation


1,456Infraestructura y Transportes México, S. A. de C. V.


2,031AMC





5Other


297


1,063$
17,683

$
35,668


The
Company has an outstanding loan payable to GMEXICO at an annual interest rate of 5.50% with a maturity date of December 31, 2005, which is included in non-current
liabilities in the accompanying balance sheets.

F-23

---



b.     The
main transactions carried out with affiliated companies and related parties were as follows:

Year ended December 31,2003

2002

2001Revenues:Sales

$
6,321

$
2,198

$
18,885Interest paid

$
836

$
485

$
131Other services

$
30

$
1,802

$
192Expenses:Purchases

$
12,197

$
5,947

$
23,271Transportation services

$
13,828

$
17,726

$
17,636Interest

$
3,417

$
3,392

$
3,778Other services

$
624

$
129

$
105Purchase of fixed assets

$
1,372


c.     The
Larrea family controls a majority of the capital stock of Grupo México, and has interests in other businesses, including oil drilling services,
construction and real estate. The Company engages in certain transactions in the ordinary course of business with other entities controlled by the Larrea family, including mining and refining, the
lease of office space, and air transportation and construction services. These transactions amounted to approximately $4,100 in 2003 ($6,600 in 2002 and $13,200 in 2001). All of these transactions
were conducted under standard terms.

The
Company lends to and borrows among affiliates from time to time to fund acquisitions and for other corporate purposes. These financing transactions bear interest at market rates.

NOTE 13INCOME TAX, ASSET TAX AND EMPLOYEES' STATUTORY PROFIT SHARING:

In accordance with Mexican tax law, the Company is subject to asset tax and income tax, which take into consideration the taxable and deductible effects of
inflation. Through December 31, 2001, the Mexican income tax rate was 35%, with the obligation to pay 30% currently and the option of deferring the remaining 5% until profits are eventually
distributed. The new tax law enacted January 1, 2002, eliminated the option to defer the portion of the income tax payment and reduces the 35% income tax rate by one percentage point each year
until it reaches 32% in 2005. The deduction of the employees' statutory profit sharing amount and the obligation to withhold taxes on dividends paid to individuals and foreign residents was also
eliminated.

Asset
tax is calculated by applying 1.8% to the Company's asset position, as defined in the law, and is payable only to the extent that it exceeds the income tax payable for the same
period. If in any year asset tax exceeds the income tax payable, the asset tax payment for such excess may be reduced by the amount by which the income tax exceeded asset tax in the three preceding
years and any required payment of asset tax is creditable against the excess of the income tax over asset tax of the following 10 years.

a.     Taxable
incomeThe principal items which affect the determination of taxable income of Mexican companies are the differences between purchases and cost of
sales, recognition of the effects of inflation on depreciation and on monetary assets and liabilities through the inflationary component, which differ for book and tax purposes.

F-24

---





MM and its subsidiaries obtained authorization to file a consolidated income and asset tax return. Thus, the Company prepares a consolidated income tax return, including all of
its subsidiaries. Additionally, the Company's subsidiaries file individual income tax returns. The Mexican Income Tax Law limits the tax consolidation to 60% of the parent's equity interest.

The
Company calculates employees' statutory profit sharing using the guidelines established in the Income Tax Law. The provision for employees' statutory profit sharing is included in
cost of sales.

b.     The
components of the provision for income tax, deferred income tax and asset tax are summarized below:

Year ended December 31,2003

2002

2001Current:Income tax

$
905

$
807

$
404Asset tax


26,640


21,334


10,03127,545


22,141


10,435Deferred:Income tax


7,924


(146,759
)

15,332$
35,469

$
(124,618
)
$
25,767


The
employees' profit sharing expense was as follows:

Year ended December 31,2003

2002

2001Current

$
295

$
2,802

$
5,118Deferred


2,040


6,819


1,430$
2,335

$
9,621

$
6,548


Income
tax expense for the years ended December 31, 2003, 2002 and 2001 differs from the Mexican Statutory income tax rate as follows:

2003

2002

2001Income (loss) before income taxes and minority interest

$
1,151

$
(12,280
)
$
(46,220
)Increase (decrease) due to:Inflationary tax componentNet


12,461


(42,712
)

17,659Effects of GMM tax loss carryforwards and asset tax


68,318Non-deductible items


5,145


(3,501
)

7,752Tax effect of shares sold





(8,782
)

880Consolidated tax effect








765Subsidiaries which generated tax losses


12,965


14,356


8,384Other


(982
)

(1,192
)

19,32999,058


(54,111
)

8,549Valuation allowance for tax loss carryforward and recoverable asset tax


(63,589
)

(70,507
)

17,218Tax at effective tax rate

$
35,469

$
(124,618
)
$
25,767


The
deferred income tax effect from the reduction in the 2002 income tax rates, related to the gradual reduction of the income tax rates explained above, resulted in the
recalculation of the deferred income tax liability recorded as of December 31, 2001. The various rates applicable beginning in 2003 were applied to the temporary differences based on their
estimated reversal date.

F-25

---



c.     At
December 31, 2003 and 2002, the main items comprising the (asset) liability balance of deferred income tax and employees' statutory profit sharing were as
follows:

2003

2002Deferred
income
tax

Deferred
employees'
statutory
profit sharing

Deferred
income
tax

Deferred
employees'
statutory
profit sharingCurrent:Inventories

$
59,173

$
17,918

$
67,378

$
19,804Exchange (loss) gain


(135
)

(168
)




4,693Non-deductible reserves


(12,928
)

(3,918
)

(31,317
)

(9,200
)46,110


13,832


36,061


15,297Long-term:Property, plant and equipment


123,387


41,671


150,104


51,119Tax loss carryforwards


(115,710
)




(138,598
)Recoverable asset tax


(46,953
)




(98,525
)Deferred charges


56,772


16,974


55,227


16,24317,496


58,645


(31,792
)

67,362Valuation allowance


58,295





121,88475,791





90,092


67,362$
121,901

$
72,477

$
126,153

$
82,659


d.     Tax
loss carryforwards and recoverable asset tax paid for which the deferred income tax asset and prepaid income tax, respectively, have been recognized can be recovered
subject to certain conditions. Restated amounts as of December 31, 2003 and expiration dates are as follows:

Year of expiration

Tax loss
carryforwards

Recoverable
asset tax2010




$
1,5522011





5,1732013

$
134,052


14,331$
134,052

$
21,056


NOTE 14FINANCIAL INSTRUMENTS:

a.Fair value of financial instruments

For
certain of the Company's financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, the carrying amounts 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 of the Company at December 31, 2003 and 2002:

2003

2002Fair
value

Book
value

Fair
value

Book
valueLiabilities:Long-term debt (excluding financial leases and interest)

$
1,277,614

$
1,322,188

$
1,341,524

$
1,322,188


F-26

---



The
following method and assumptions were used to estimate the fair value of each type of financial instrument:



b.Concentration of risk

Financial
instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents, short-term investments and
trade accounts receivable.

The
Company invests or maintains available cash with various high quality banks principally in Mexico and USA or in commercial paper of highly-rated companies. As part of its cash
management process, the Company regularly monitors the relative credit standing of these institutions and, by policy, limits the amount of credit exposure to any one institution. In the normal course
of its activities, the Company grants credit to its customers. Although the accounts receivable resulting from these transactions are not guaranteed, the Company has not had any significant portfolio
recovery problems.

NOTE 15CONTINGENCIES AND COMMITMENTS:

The Company is involved in various legal proceedings derived from its normal operations. The Company does not expect that any of these proceedings will have a
material adverse effect on its financial condition or results of operations.

In
July 1991, the agricultural community of Pilares de Nacozari Ejido (the "Ejido") commenced an action ("Amparo") in the first federal district court in Sonora, Mexico against
the Ministry of Agrarian Reform (the "Ministry"), alleging that the expropriation of approximately 1,500 hectares of land on which certain of Mexcobre's facilities are currently located, which land is
adjacent to the land where the mine is located, was improper. Mexcobre was not named as a defendant in the Amparo, although it was included as an interested third party due to its ownership of the
land. Mexcobre bought the land in question in 1976 from the Banco Nacional de Obras y Servicios Públicos, which had previously acquired it as a beneficiary of the expropriation by the
Ministry in 1973.

The
claim alleged by the Ejido states that the Ministry failed to notify one of three legal representatives of the Ejido of the expropriation. In 1994, the Mexican District Court Judge
of Hermosillo granted the Amparo ruling the expropriation by the Ministry legally void and in 1997 made a second ruling ordering the Ministry to return the land. As a result of the second ruling,
Mexcobre filed an ancillary action alleging the impossibility of returning the land.

There
has been no final resolution of this matter, but the Mexican District Court Judge of Hermosillo before whom this matter is presently docketed has twice before issued a ruling
stating that it is impossible to return the land as a mean of restitution. A third and final ruling from the Mexican District Court Judge of Hermosillo is expected soon. We believe, along with
Mexcobre, that if the Ejido requests indemnity instead of a return of the land, Mexcobre's financial responsibility with respect to such compensation would not be material.

NOTE 16SUBSEQUENT EVENTS:

a.     On
February 3, 2004, GMEXICO, the largest stockholder of Southern Peru Copper Corporation (SPCC), presented a proposal regarding the possible sale to SPCC of all
the shares of GMEXICO's subsidiary, MM, representing approximately 99% of MM's outstanding shares, in return for the issuance of additional shares of SPCC. MM holds substantially all of GMEXICO's
Mexican mining assets.

SPCC
has formed a Special Committee of Disinterested Directors, comprised of members of its Board, to evaluate the proposal. There is no assurance that this transactions will be
consummated.

F-27

---



b.     On
April 30, 2004 the Company prepaid $106 million of its long-term debt in accordance with the mandatory prepayment provisions of the Common
Agreement.

NOTE 17GUARANTOR FINANCIAL:

Under the terms of certain debt agreements, substantially all of the subsidiaries guarantee the debt irrevocably and unconditionally. Presented hereafter is
condensed consolidating information as of December 31, 2003 and 2002 and for the years then ended for the: i) parent company; ii) non-wholly-owned guarantor subsidiaries;
iii) the combined wholly-owned guarantor subsidiaries; iv) eliminations, and v) the consolidated totals.

Investments
in subsidiaries are accounted for by the parent company under the equity method of accounting. Earnings of subsidiaries are therefore reflected in the parent company's
investment in subsidiaries and intercompany balances and transactions.

The
Company has not presented separate financial statements and other disclosures of the wholly-owned guarantor subsidiaries (with the exception of Immsa) because management has
determined that such information is not material to investors.

Financial
statements of Immsa, a wholly-owned subsidiary, are included separately in this Annual Report pursuant to Rule 3-16 of Regulation S-X of
the Securities and Exchange Commission. In the accompanying information below, Immsa is included in the column of "wholly-owned guarantor".

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2003

(US$ in thousands)

|                                                       |  |   |           | Non wholly
owned guarantor |   |           |  |   |         | 
|------------------------------------------------------ |  | - | --------- | -------------------------- | - | --------- |  | - | ------- | 
|
|
|Cash and cash equivalents                              |  | $ | 28,735    |                            | $ | 14,979    |  | $ | 6,374   | 
|Inventories                                            |  |   | 159       |                            |   | 90,838    |  |   | 31,846  | 
|Affiliated companies                                   |  |   | 6,106     |                            |   | 721,264   |  |   | 11,268  | 
|Property, plant and equipment                          |  |   | 17,661    |                            |   | 1,117,929 |  |   | 484,837 | 
|Other assets                                           |  |   | 2,559,852 |                            |   | 63,258    |  |   | 193,397 | 
|Goodwill                                               |  |   | 17,042    |                            |   |           |  |   |         | 
|                                                       |  |   |           |                            |   |           |  |   |         | 
|Total assets                                           |  | $ | 2,629,555 |                            | $ | 2,008,268 |  | $ | 727,722 | 
|                                                       |  |   |           |                            |   |           |  |   |         | 
|Current portion of long-term debt and interest payable |  | $ | 54,076    |                            | $ | 1,256     |  |   |         | 
|Other current liabilities                              |  |   | 50,572    |                            |   | 89,806    |  | $ | 105,235 | 
|                                                       |  |   |           |                            |   |           |  |   |         | 
|Total current liabilities                              |  |   | 104,648   |                            |   | 91,062    |  |   | 105,235 | 
|Due to Grupo México, S. A. de C. V.                    |  |   | 52,468    |                            |   |           |  |   |         | 
|Long-term debt                                         |  |   | 1,248,107 |                            |   | 18,743    |  |   |         | 
|Other noncurrent liabilities                           |  |   | 441,997   |                            |   | 98,414    |  |   | 37,981  | 
|Minority interest                                      |  |   | 74,485    |                            |   |           |  |   |         | 
|Stockholders' equity                                   |  |   | 707,850   |                            |   | 1,800,049 |  |   | 584,506 | 
|                                                       |  |   |           |                            |   |           |  |   |         | 
|Total liabilities and stockholders' equity             |  | $ | 2,629,555 |                            | $ | 2,008,268 |  | $ | 727,722 | 
|                                                       |  |   |           |                            |   |           |  |   |         | 

F-28

---



SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2002

(US$ in thousands)

|                                           |  |   |           | Non wholly
owned guarantor |   |           |  |   |         | 
|------------------------------------------ |  | - | --------- | -------------------------- | - | --------- |  | - | ------- | 
|
|
|Cash and cash equivalents                  |  | $ | 64,854    |                            | $ | 28,501    |  | $ | 13,845  | 
|Inventories                                |  |   | 159       |                            |   | 101,803   |  |   | 32,576  | 
|Affiliated companies                       |  |   | 18,852    |                            |   | 627,669   |  |   | 7,890   | 
|Property, plant and equipment              |  |   | 17,508    |                            |   | 1,149,706 |  |   | 516,445 | 
|Other assets                               |  |   | 2,559,893 |                            |   | 75,490    |  |   | 157,112 | 
|Goodwill                                   |  |   | 17,042    |                            |   |           |  |   |         | 
|                                           |  |   |           |                            |   |           |  |   |         | 
|Total assets                               |  | $ | 2,678,308 |                            | $ | 1,983,169 |  | $ | 727,868 | 
|                                           |  |   |           |                            |   |           |  |   |         | 
|Total current liabilities                  |  | $ | 93,675    |                            | $ | 121,251   |  | $ | 148,642 | 
|Due to Grupo México, S. A. de C. V.        |  |   | 548,664   |                            |   |           |  |   |         | 
|Long-term debt                             |  |   | 1,317,533 |                            |   | 20,000    |  |   |         | 
|Other noncurrent liabilities               |  |   | 995       |                            |   | 117,008   |  |   | 42,731  | 
|Minority interest                          |  |   | 77,364    |                            |   |           |  |   |         | 
|Stockholders' equity                       |  |   | 640,077   |                            |   | 1,724,910 |  |   | 536,495 | 
|                                           |  |   |           |                            |   |           |  |   |         | 
|Total liabilities and stockholders' equity |  | $ | 2,678,308 |                            | $ | 1,983,169 |  | $ | 727,868 | 
|                                           |  |   |           |                            |   |           |  |   |         | 

SUPPLEMENTAL CONDENSED CONSOLDATING OF OPERATIONS        FOR THE YEAR ENDED DECEMBER 31, 2003        (US$ in thousands)

|                                                                               |  |   |         | Non wholly
owned guarantor |   |         |   |   |         |   |  
|------------------------------------------------------------------------------ |  | - | ------- | -------------------------- | - | ------- | - | - | ------- | - | -
|
|
|Net sales                                                                      |  |   |         |                            | $ | 434,196 |   | $ | 239,080 |   | $
|Cost of sales                                                                  |  |   |         |                            |   | 346,456 |   |   | 141,804 |   |  
|Operating expenses                                                             |  | $ | 5,801   |                            |   | 48,279  |   |   | 50,178  |   |  
|                                                                               |  |   |         |                            |   |         |   |   |         |   |  
|Operating (loss) income                                                        |  |   | (5,801  | )                          |   | 39,461  |   |   | 47,098  |   |  
|Integral result of financing                                                   |  |   | 140,480 |                            |   | (38,477 | ) |   | 1,217   |   |  
|(Benefits) provisions for income taxes and employees' statutory profit sharing |  |   | (66,856 | )                          |   | 2,672   |   |   | (2,916  | ) |  
|                                                                               |  |   |         |                            |   |         |   |   |         |   |  
|(Loss) income before minority interest                                         |  |   | (79,425 | )                          |   | 75,266  |   |   | 48,797  |   |  
|Minority interest                                                              |  |   | (44,238 | )                          |   | 1       |   |   |         |   |  
|                                                                               |  |   |         |                            |   |         |   |   |         |   |  
|(Loss) income net income for the year                                          |  | $ | (35,187 | )                          | $ | 75,265  |   | $ | 48,797  |   | $
|                                                                               |  |   |         |                            |   |         |   |   |         |   |  

F-29

---





SUPPLEMENTAL CONDENSED CONSOLIDATING OF OPERATIONS        FOR THE YEAR ENDED DECEMBER 31, 2002        (US$ in thousands)

|                                                                               |  |   |          | Non wholly
owned guarantor |   |         |   |   |         |   |  
|------------------------------------------------------------------------------ |  | - | -------- | -------------------------- | - | ------- | - | - | ------- | - | -
|
|
|Net sales                                                                      |  |   |          |                            | $ | 430,494 |   | $ | 200,221 |   | $
|Cost of sales                                                                  |  |   |          |                            |   | 363,922 |   |   | 147,522 |   |  
|Operating expenses                                                             |  | $ | 8,860    |                            |   | 45,779  |   |   | 35,804  |   |  
|                                                                               |  |   |          |                            |   |         |   |   |         |   |  
|Operating (loss) income                                                        |  |   | (8,860   | )                          |   | 20,793  |   |   | 16,895  |   |  
|Integral result of financing                                                   |  |   | 141,452  |                            |   | (55,112 | ) |   | (7,213  | ) |  
|(Benefits) provisions for income taxes and employees' statutory profit sharing |  |   | (49,828  | )                          |   | (62,777 | ) |   | (75,297 | ) |  
|                                                                               |  |   |          |                            |   |         |   |   |         |   |  
|(Loss) income before minority interest                                         |  |   | (100,484 | )                          |   | 138,682 |   |   | 99,405  |   |  
|Minority interest                                                              |  |   | (184,858 | )                          |   | (22     | ) |   |         |   |  
|                                                                               |  |   |          |                            |   |         |   |   |         |   |  
|Net income (loss) for the year                                                 |  | $ | 84,374   |                            | $ | 138,704 |   | $ | 99,405  |   | $
|                                                                               |  |   |          |                            |   |         |   |   |         |   |  

F-30

---



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS        FOR THE YEAR ENDED DECEMBER 31, 2003        (US$ in thousands)

|                                                                                            |  |   |          | Non wholly
owned guarantor |   |          |   |   |         |   |  
|------------------------------------------------------------------------------------------- |  | - | -------- | -------------------------- | - | -------- | - | - | ------- | - | -
|
|
|Cash flows from operating activities:                                                       |  |   |          |                            |   |          |   |   |         |   |  
|Net (loss) income                                                                           |  | $ | (35,187  | )                          | $ | 75,265   |   | $ | 48,797  |   | $
|Items that did not require (generate) resourcesEmployee benefit liabilities                |  |   |          |                            |   | 189      |   |   | (2,489  | ) |  
|Depreciation, amortization and depletion                                                    |  |   | 467      |                            |   | 34,548   |   |   | 42,670  |   |  
|Amortization of deferred charges                                                            |  |   |          |                            |   | 1,976    |   |   |         |   |  
|Deferred income taxes                                                                       |  |   | (77,768  | )                          |   | (4,254   | ) |   | (7,480  | ) |  
|Deferred employees' statutory profit sharing                                                |  |   |          |                            |   |          |   |   |         |   |  
|Minority interest                                                                           |  |   | (44,238  | )                          |   | (1       | ) |   |         |   |  
|Loss (gain) on sale of property and equipment                                               |  |   |          |                            |   |          |   |   |         |   |  
|Remeasurement (gain) loss                                                                   |  |   | 4,412    |                            |   | (12,181  | ) |   | (786    | ) |  
|Resources provided by (used in) working capital                                             |  |   | 25,465   |                            |   | (103,843 | ) |   | (50,881 | ) |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Resources (used in) provided by operations                                                  |  |   | (126,849 | )                          |   | (8,301   | ) |   | 29,831  |   |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Investing:                                                                                  |  |   |          |                            |   |          |   |   |         |   |  
|Capital expenditures                                                                        |  |   | (620     | )                          |   | (2,086   | ) |   | (41,281 | ) |  
|Net increase investment in share of associated companies and other unconsolidated companies |  |   | 3        |                            |   |          |   |   |         |   |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Resources used in investing activities                                                      |  |   | (617     | )                          |   | (2,086   | ) |   | (41,281 | ) |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Financing:                                                                                  |  |   |          |                            |   |          |   |   |         |   |  
|Cash restricted as collateral accounts                                                      |  |   | 64,585   |                            |   | 23,463   |   |   |         |   |  
|Investment in treasury stock                                                                |  |   | (17,802  | )                          |   |          |   |   |         |   |  
|Advances for future increases in capital stock                                              |  |   | 111,521  |                            |   |          |   |   |         |   |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Resources provided by financing activities                                                  |  |   | 158,304  |                            |   | 23,463   |   |   |         |   |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Effect of exchange rate on cash                                                             |  |   | (2,372   | )                          |   | (7,296   | ) |   | 3,981   |   |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Increase (decrease) in cash and cash equivalents                                            |  |   | 28,466   |                            |   | 5,780    |   |   | (7,469  | ) |  
|Cash and cash equivalents at beginning or year                                              |  |   | 269      |                            |   | 5,038    |   |   | 13,845  |   |  
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  
|Cash and cash equivalents at end of year                                                    |  | $ | 28,735   |                            | $ | 10,818   |   | $ | 6,376   |   | $
|                                                                                            |  |   |          |                            |   |          |   |   |         |   |  

F-31

---



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS        POSITION FOR THE YEAR ENDED DECEMBER 31, 2002        (US$ in thousands)

|                                                                                             |  |   |          | Non wholly
owned guarantor |   |         |   |   |         |   |  
|-------------------------------------------------------------------------------------------- |  | - | -------- | -------------------------- | - | ------- | - | - | ------- | - | -
|
|
|Cash flows from operating activities:                                                        |  |   |          |                            |   |         |   |   |         |   |  
|Net income                                                                                   |  | $ | 84,374   |                            | $ | 138,704 |   | $ | 99,405  |   | $
|Items that did not require (generate) resourcesEmployee benefit liabilities                 |  |   |          |                            |   | 358     |   |   | 3,148   |   |  
|Depreciation, amortization and depletion                                                     |  |   |          |                            |   | 33,354  |   |   | 27,047  |   |  
|Amortization of deferred charges                                                             |  |   |          |                            |   | 8,046   |   |   |         |   |  
|Deferred income taxes                                                                        |  |   | (65,867  | )                          |   | (62,777 | ) |   | (73,510 | ) |  
|Deferred employee's statutory profit sharing                                                 |  |   |          |                            |   |         |   |   |         |   |  
|Participation in subsidiary companies                                                        |  |   | 73,625   |                            |   |         |   |   |         |   |  
|Loss (gain) on sale of property and equipment                                                |  |   |          |                            |   |         |   |   |         |   |  
|Remeasurement (gain) loss                                                                    |  |   | (3,070   | )                          |   | (25,270 | ) |   | 2,335   |   |  
|Resources provided by (used in) working capital                                              |  |   | 223,165  |                            |   | (48,705 | ) |   | 16,184  |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Resources provided by (used in) operations                                                   |  |   | 312,227  |                            |   | 43,710  |   |   | 74,609  |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Investing:                                                                                   |  |   |          |                            |   |         |   |   |         |   |  
|Capital expenditures                                                                         |  |   | (920     | )                          |   | (5,449  | ) |   | (64,127 | ) |  
|Net increase investments in share of associated companies and other unconsolidated companies |  |   | (249,628 | )                          |   |         |   |   |         |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Resources provided by (use in) investing activities                                          |  |   | (250,548 | )                          |   | (5,449  | ) |   | (64,127 | ) |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Financing:                                                                                   |  |   |          |                            |   |         |   |   |         |   |  
|Proceeds from long-term debt                                                                 |  |   | (17,876  | )                          |   |         |   |   |         |   |  
|Restricted flow in collateral account                                                        |  |   |          |                            |   | (26,016 | ) |   |         |   |  
|Investment in treasury stock                                                                 |  |   |          |                            |   |         |   |   |         |   |  
|Advances for future increases in capital stock                                               |  |   | 17,745   |                            |   |         |   |   |         |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Resources (used in) provided by financing activities                                         |  |   | (131     | )                          |   | (26,016 | ) |   |         |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Effect of exchange rate on cash                                                              |  |   |          |                            |   | 9,216   |   |   | 1       |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Increase (decrease) in cash and cash equivalents                                             |  |   | 61,548   |                            |   | 21,461  |   |   | 10,483  |   |  
|Cash and cash equivalents at beginning or year                                               |  |   | 3,306    |                            |   | 7,040   |   |   | 3,362   |   |  
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  
|Cash and cash equivalents at end of year                                                     |  | $ | 64,854   |                            | $ | 28,501  |   | $ | 13,845  |   | $
|                                                                                             |  |   |          |                            |   |         |   |   |         |   |  

F-32

---



NOTE 18RESTATEMENT OF PREVIOUSLY REPORTED U.S. GAAP FINANCIAL INFORMATION RESULTING FROM COMPANY'S DETERMINATION TO ADOPT U.S. DOLLAR AS FUNCTIONAL
CURRENCY FOR 2003:

Under U.S. GAAP, a definition of the functional currency is required, which may differ from the reporting currency. The Company's management has determined the
U.S. dollar as its functional currency in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, as mentioned in Note 2b.

Subsequent
to the issuance of GMM's December 31, 2002 consolidated financial statements, prepared in accordance with Mexican GAAP and accordingly expressed in thousands of Mexican
pesos of purchasing power as of December 31, 2002, the Company's management determined that GMM's reconciliation of net income (loss) and shareholders equity from Mexican GAAP to U.S. GAAP were
not prepared assuming that the U.S. dollar was the functional currency, but rather reflected the Mexican peso as the functional currency. Therefore, the reconciliation of net income (loss) and
stockholders' equity to U.S. GAAP as of and for the years ended December 31, 2002 and 2001, have been restated to give effect to the identification of the U.S. dollar as the functional
currency.

Under
U.S. GAAP, with the U.S. dollar as the functional currency, the effects of inflation recognized under Mexican GAAP must be eliminated in the reconciliation to U.S. GAAP.

Accordingly,
the restated amounts shown below have been remeasured into U.S. dollars and translated back into the reporting currency, the Mexican peso, by applying the procedures
specified in SFAS No. 52.

The
objective of the remeasurement process is to produce the same results that would have been reported if the accounting records had been kept in U.S. dollars. Accordingly, the
comprehensive effects of inflation are removed from the Mexican peso-denominated financial statements. Monetary assets and liabilities are remeasured at the balance sheet date (current)
exchange rate. Non-monetary assets are recorded at their historical exchange rate at the time of purchase. Prior transactions in currencies other than the U.S. dollar are remeasured at the
exchange rates in effect when the transactions occurred. Revenues and expenses are remeasured on a monthly basis at the average rates of exchange in effect during the period, except for consumption of
non-monetary assets, which are remeasured at the rates of exchange in effect when the respective assets were acquired. Translation gains and losses on monetary assets and liabilities
arising from the remeasurement are included in the determination of net loss in the period such gains and losses arise.

The
amounts obtained from the remeasurement process referred to above are translated back into Mexican pesos following the provisions of SFAS No. 52. Assets and liabilities are
translated at the current selling exchange rate of Mexican pesos of 10.31 and 9.14 per U.S. dollar as of December 31, 2002 and 2001, respectively. Revenues, expenses, gains and losses reported
in the income statement are translated at the exchange rate existing at the time of each transaction or, if appropriate, at the weighted average exchange rate during the period. Translation effects of
exchange rate changes are included in other comprehensive income as a cumulative translation adjustment in stockholders' equity.

F-33

---



The
effect of the restatement is shown in the table below:

|                                                                                    |  | Year ended
December 31,
2002 |           | Year ended
December 31,
2001 |   
|----------------------------------------------------------------------------------- |  | ---------------------------- | --------- | ---------------------------- | --
|
|U.S. GAAP net income (loss) as previously reported                                  |  | Ps                           | 156,586   |                              | Ps
|Impact of restatement for change in functional currency                             |  |                              | 1,156,966 |                              |   
|                                                                                    |  |                              |           |                              |   
|U.S. GAAP net income (loss) as restated                                             |  | Ps                           | 1,313,552 |                              | Ps
|                                                                                    |  |                              |           |                              |   
|Basic and diluted earnings (loss) per share under U.S. GAAP, as previously reported |  | Ps.                          | 24        |                              | Ps
|                                                                                    |  |                              |           |                              |   
|Basic and diluted earnings (loss) per share under U.S. GAAP, as restated            |  | Ps                           | 2.02      |                              | Ps
|                                                                                    |  |                              |           |                              |   
|
|U.S. GAAP stockholders' equity as previously reported                               |  | Ps                           | 6,889,864 |                              | Ps
|Impact of restatement for change in functional currency                             |  |                              | (9,612    | )                            |   
|                                                                                    |  |                              |           |                              |   
|U.S. GAAP stockholders' equity as restated                                          |  | Ps                           | 6,880,252 |                              | Ps
|                                                                                    |  |                              |           |                              |   

F-34

---



ANNEX F-1    FINANCIAL STATEMENTS OF MEXICANA DE COBRE, S.A. DE C.V.

---



MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003 AND 2002

---



MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003 AND 2002

INDEX

Contents

PageReports of Independent Registered Public Accounting Firms

F-1 and F-2Consolidated Financial Statements:Balance Sheets

F-3Statements of Operations

F-4Statements of Changes in Stockholders' Equity

F-5Statements of Cash Flows

F-6Notes to Consolidated Financial Statements

F-7 to F-22


---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM

Mexico
City, April 16, 2004, except as to Note 17 for which the date is July 2, 2004

To
the Board of Directors and Stockholders of
Mexicana de Cobre, S. A. de C. V.

We
have audited the accompanying consolidated balance sheets of Mexicana de Cobre, S. A. de C. V. and Subsidiaries ("the Company") as of December 31, 2003, and the related consolidated
statements of income, of changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mexicana de Cobre, S. A. de C. V. and
Subsidiaries as of December 31, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States
of America.

/s/PRICEWATERHOUSECOOPERS

Ruben
Rivera R.
Mexico City, Mexico

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Stockholders of
Mexicana de Cobre, S. A. de C. V.:

We
have audited the accompanying consolidated balance sheet of Mexicana de Cobre, S. A. de C. V. (a Mexican corporation) and subsidiaries (the "Company") as of December 31, 2002, and the
related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2002 and 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002, and the results of its
operations and its cash flows for the years ended December 31, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 17, the reconciliation to U.S. GAAP of stockholders' equity as of December 31, 2002 and net income (loss) for the years ended December 31, 2002 and 2001 previously
reported in the consolidated financial statements of the Company has been restated.

/s/GALAZ, YAMAZAKI, RUIZ URQUIZA, S. C.A member firm of Deloitte Touche Tohmatsu

C.P.C.
Jorge I. Peralta lvarez
Mexico City, Mexico
July 2, 2004

F-2

---





MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        CONSOLIDATED BALANCE SHEETS        (US$ in thousands)

|                                                                                              |  | December 31, |          
|--------------------------------------------------------------------------------------------- |  | ------------ | ---------
|
|ASSETS                                                                                        |  |              |          
|CURRENT ASSETS:                                                                               |  |              |          
|Cash and cash equivalents (Note 4)                                                            |  | $            | 14,979   
|Cash retained in collateral accounts                                                          |  |              |          
|Trade receivablesNet of allowance for doubtful accounts of $3,020 in 2003 and $1,520 in 2002 |  |              | 26,021   
|Recoverable taxes                                                                             |  |              | 8,969    
|Due from affiliated companies (Note 12)                                                       |  |              | 208,540  
|Other                                                                                         |  |              | 4,733    
|InventoriesNet (Note 5)                                                                      |  |              | 90,838   
|                                                                                              |  |              |          
|Total current assets                                                                          |  |              | 354,080  
|PROPERTY, PLANT AND EQUIPMENTNet (Note 6)                                                    |  |              | 1,117,929
|Due from affiliatesMinera México, S. A. de C. V. (Note 12)                                   |  |              | 505,818  
|Due from affiliatesGrupo México, S. A. de C. V.                                              |  |              | 6,906    
|OTHER ASSETSNet (Note 7)                                                                     |  |              | 23,535   
|                                                                                              |  |              |          
|                                                                                              |  | $            | 2,008,268
|                                                                                              |  |              |          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                          |  |              |          
|CURRENT LIABILITIES:                                                                          |  |              |          
|Current portion of long-term debt (Note 8)                                                    |  | $            | 1,257    
|Trade accounts payable                                                                        |  |              | 22,460   
|Accrued interest                                                                              |  |              |          
|Accrued salaries and wages                                                                    |  |              |          
|Other accrued liabilities                                                                     |  |              | 22,618   
|Due to affiliated companies (Note 12)                                                         |  |              | 11,929   
|Income asset taxes payable and employees' statutory profit sharing                            |  |              | 38       
|Deferred income taxes and employees' statutory profit sharing (Note 13)                       |  |              | 32,760   
|                                                                                              |  |              |          
|Total current liabilities                                                                     |  |              | 91,062   
|Long-term debt (Note 8)                                                                       |  |              | 18,743   
|Labor liabilities (Note 9)                                                                    |  |              | 2,490    
|Deferred income taxes and employees' statutory profit sharing (Note 13)                       |  |              | 95,945   
|                                                                                              |  |              |          
|Total liabilities                                                                             |  |              | 208,240  
|                                                                                              |  |              |          
|CONTINGENCIES AND COMMITMENTS (Note 15)                                                       |  |              |          
|MINORITY INTEREST                                                                             |  |              | (21      
|                                                                                              |  |              |          
|STOCKHOLDERS' EQUITY (Note 10):                                                               |  |              |          
|Common stock (1,043,271,843 shares authorized and outstanding at December 31, 2003 and 2002)  |  |              | 534,829  
|Additional paid-in capital                                                                    |  |              | 525,940  
|Accumulated other comprehensive loss                                                          |  |              | (387     
|Retained earnings                                                                             |  |              | 739,667  
|                                                                                              |  |              |          
|Total stockholders' equity                                                                    |  |              | 1,800,049
|                                                                                              |  |              |          
|                                                                                              |  | $            | 2,008,268
|                                                                                              |  |              |          

The accompanying notes are an integral part of these consolidated financial statements.

F-3

---



MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        (US$ in thousands, except per share data)

|                                                                    |  | Year ended December 31, |              
|------------------------------------------------------------------- |  | ----------------------- | -------------
|
|Net sales                                                           |  | $                       | 434,196      
|Costs and operating expenses:                                       |  |                         |              
|Cost of sales (exclusive of depreciation, amortization shown below) |  |                         | 346,456      
|Administrative expenses                                             |  |                         | 10,740       
|Depreciation and amortization                                       |  |                         | 37,539       
|                                                                    |  |                         |              
|Income from operations                                              |  |                         | 39,461       
|                                                                    |  |                         |              
|Interest expense                                                    |  |                         | 2,594        
|Interest income                                                     |  |                         | (30,999      
|Remeasurement (gain) lossNet                                       |  |                         | (12,181      
|Realized loss on hedging activities                                 |  |                         |              
|OtherNet                                                           |  |                         | 2,109        
|                                                                    |  |                         |              
|                                                                    |  |                         | (38,477      
|                                                                    |  |                         |              
|Income before income taxes and minority interest                    |  |                         | 77,938       
|Provision (benefit) for income taxes                                |  |                         | 2,672        
|Minority interest                                                   |  |                         | 1            
|                                                                    |  |                         |              
|Consolidated net income                                             |  | $                       | 75,265       
|                                                                    |  |                         |              
|Income per share                                                    |  | $                       | 0.072        
|                                                                    |  |                         |              
|Weighted average number of shares outstanding                       |  |                         | 1,043,271,843
|                                                                    |  |                         |              

The
accompanying notes are an integral part of these consolidated financial statements.

F-4

---





MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001    
(US$ in thousands)

|                                                      |  | Outstanding
shares |  | Common
stock |         | Additional
paid-in
capital |   | Accumulated other
comprehensive
income
(loss) |  | Retained
earnings |      | Total
stockholders'
equity |  
|----------------------------------------------------- |  | ------------------ |  | ------------ | ------- | -------------------------- | - | --------------------------------------------- |  | ----------------- | ---- | -------------------------- | -
|Balances at December 31, 2000                         |  | 1,043,271,843      |  | $            | 534,829 |                            | $ | 525,940                                       |  |                   |      |                            | $
|Comprehensive result:                                 |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Net income for the year                               |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|                                                      |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Balances at December 31, 2001                         |  | 1,043,271,843      |  |              | 534,829 |                            |   | 525,940                                       |  |                   |      |                            |  
|Comprehensive result:                                 |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Net income for the year                               |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Additional liability for employee benefit obligations |  |                    |  |              |         |                            |   |                                               |  | $                 | (261 | )                          |  
|                                                      |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Total comprehensive result                            |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|                                                      |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Balances at December 31, 2002                         |  | 1,043,271,843      |  |              | 534,829 |                            |   | 525,940                                       |  |                   | (261 | )                          |  
|Comprehensive result:                                 |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Net income for the year                               |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Additional liability for employee benefit obligations |  |                    |  |              |         |                            |   |                                               |  |                   | (126 | )                          |  
|                                                      |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Total comprehensive result                            |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|                                                      |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  
|Balances at December 31, 2003                         |  | 1,043,271,843      |  | $            | 534,829 |                            | $ | 525,940                                       |  | $                 | (387 | )                          | $
|                                                      |  |                    |  |              |         |                            |   |                                               |  |                   |      |                            |  

The accompanying notes are an integral part of these consolidated financial statements.

F-5

---



MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (US$ in thousands)

|                                                                                               |  | Year ended December 31, |         
|---------------------------------------------------------------------------------------------- |  | ----------------------- | --------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |  |                         |         
|Net income for the year                                                                        |  | $                       | 75,265  
|Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |  |                         |         
|Depreciation, amortization and depletion                                                       |  |                         | 37,539  
|Net loss (gain) on sale of property and equipment                                              |  |                         | 1,005   
|Amortization of deferred charges                                                               |  |                         | 2,815   
|Deferred income taxes                                                                          |  |                         | (4,254  
|Deferred employees' profit sharing                                                             |  |                         | 268     
|Employee benefit liabilities                                                                   |  |                         | 189     
|Remeasurement (gain) loss                                                                      |  |                         | (12,181 
|Allowance for doubtful accounts                                                                |  |                         | 1,502   
|Allowance for obsolescence of materials                                                        |  |                         | 97      
|CHANGES IN OPERATING ASSETS AND LIABILITIES:                                                   |  |                         |         
|Trade receivables                                                                              |  |                         | 315     
|Other accounts receivable                                                                      |  |                         | 11,197  
|Inventories                                                                                    |  |                         | 9,528   
|Other assets                                                                                   |  |                         | (2,435  
|Accounts payable and accrued liabilities                                                       |  |                         | (126,480
|                                                                                               |  |                         |         
|Net cash (used in) provided by operating activities                                            |  |                         | (5,901  
|                                                                                               |  |                         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |  |                         |         
|Capital expenditures                                                                           |  |                         | (8,332  
|Proceeds from the sale of fixed assets                                                         |  |                         | 380     
|                                                                                               |  |                         |         
|Net cash used in investing activities                                                          |  |                         | (7,952  
|                                                                                               |  |                         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |  |                         |         
|Cash restricted as collateral accounts                                                         |  |                         | 23,465  
|                                                                                               |  |                         |         
|Net cash used in financing activities                                                          |  |                         | 23,465  
|                                                                                               |  |                         |         
|Effect of exchange rate changes on cash and cash equivalents                                   |  |                         | 331     
|                                                                                               |  |                         |         
|Increase (decrease) in cash and cash equivalents                                               |  |                         | 9,943   
|Cash and cash equivalents at beginning of the year                                             |  |                         | 5,036   
|                                                                                               |  |                         |         
|Cash and cash equivalents at end of the year                                                   |  | $                       | 14,979  
|                                                                                               |  |                         |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                            |  |                         |         
|Cash paid during the period for:                                                               |  |                         |         
|Interest                                                                                       |  | $                       | 1,901   
|                                                                                               |  |                         |         
|Income taxes                                                                                   |  | $                       | 7,197   
|                                                                                               |  |                         |         
|Supplemental schedule of non-cash investing and financing activities:                          |  |                         |         
|Additional liability for employee benefit obligations                                          |  | $                       | 248     
|                                                                                               |  |                         |         

The
accompanying notes are an integral part of these consolidated financial statements.

F-6

---





MEXICANA DE COBRE, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003, 2002 AND 2001
      (US$ in thousands)

NOTE 1DESCRIPTION OF BUSINESS AND SIGNIFICANT EVENTS:

The operating companies that comprise Mexicana de Cobre, S. A. de C. V. (Mexcobre) and subsidiaries (collectively, Company) are in the metallurgical mining
industry. They engage in the exploration, mining and processing of metallic and nonmetallic minerals and the refinement of copper, gold and silver. The majority of the Company's sales market is in the
United States and Mexico. The Company is a 98.91%-owned indirect subsidiary of Grupo México, S. A. de C. V. (GMEXICO) through its holding company Minera México, S. A. de
C. V. (MM) (formerly Grupo Minero México, S. A. de C. V.).

NOTE 2BASIS OF PRESENTATION:

a.Consolidation of financial statements

The
consolidated financial statements as of December 31, 2003 and 2002 include the financial statements of Mexcobre and those of its subsidiaries that consolidate the financial
statements of their subsidiaries:

Company

Ownership percentage
as of December 31, 2003 (%)Compañía Hotelera la Caridad, S. A. de C. V.

50.90Minera Pilares, S. A. de C. V.

51.20


The
consolidated financial statements include the accounts of the Company and its subsidiaries, all under the same management. All significant intercompany balances and transactions have
been eliminated in consolidation.

Mexcobre
is a majority-owned indirect subsidiary of MM.

b.Foreign exchange effect and basis of presentation and remeasurement into U.S. dollars

The
Company's functional currency is the U.S. dollar. Mexcobre maintains its books in Mexican pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current
exchange rates except for inventory, property, plant and equipment and other assets which are remeasured at historical exchange rates. Revenues and expenses are generally translated at average
exchange rates in effect during the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates. The most significant difference between Mexican
GAAP and U.S. GAAP, as they relate to the Company, is that Mexican GAAP recognizes the comprehensive effects of inflation on financial statements. The accompanying financial statements have been
remeasured from Mexican pesos into U.S. dollars by applying the procedures specified in Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency Translation".

F-7

---



Relevant
exchange rates used in the preparation of the financial statements were as follows (Mexican pesos per one U.S. dollar):

2003

2002

2001Exchange rate at December 31

Ps
11.2360

Ps
10.3125

Ps
9.1692Weighted average exchange rate for the year ended

Ps
10.7869

Ps
9.6589

Ps
9.3387


c.Reclassifications

Certain
amounts in the financial statements as of and for the years ended December 31, 2002 and 2001 have been reclassified in order to conform to the presentation of the
consolidated financial statements as of and for the year ended December 31, 2003.

NOTE 3SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies of the Company are summarized as follows:

a.Cash and cash equivalents

Cash
and cash equivalents are primarily short-term investment funds, variable income securities and bank deposits with original maturities of three months or less and are valued at
market.

b.Inventories

Metal
inventories are stated at the lower of average cost or market value. Costs incurred in the production of metal inventories exclude general and administrative costs.

Materials
and supplies are stated at the lower of average cost or market value. Supplies are valued at average cost less an allowance for obsolescence.

Work-in-process
inventories represent materials that are in the process of being converted into a saleable product. Conversion processes vary depending on the nature of the copper ore
and the specific mining operation. For sulfide ores, processing includes milling and concentrating and the results from the production of copper and molybdenum concentrates. Molybdenum in-process
inventory includes the cost of molybdenum concentrates and the costs incurred to convert those concentrates into various high-purity molybdenum chemicals or metallurgical products.

Finished
goods include saleable products (e.g., copper concentrates, copper anodes, copper cathodes, copper rod, high-purity molybdenum chemicals and other metallurgical products).

c.Impairment of long-lived assets

Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are determined to
be impaired when the estimated future undiscounted cash flows expected to result from the use of the asset are less
than the carrying value of the asset. The Company measures an impairment loss as the difference between the carrying value of the asset and its fair value. No impairment charges were recorded during
the years ended December 31, 2003, 2002 and 2001.

d.Property, plant and equipment

Property,
plant and equipment are carried at cost. Additions, improvements and expenditures for repairs and maintenance that significantly add to the productive capacity or life of an
asset are capitalized; other expenditures for repairs and maintenance are expensed as incurred.

The
principal depreciation method used for mining, smelting and refining operations is the straight-line method applied on a group basis.

F-8

---



Upon
disposal of assets depreciated on a group basis, cost less salvage is charged to accumulated depreciation.

Values
for mining properties represent mainly acquisition costs. Depletion of mines is computed on the basis of an overall unit rate applied to the pounds of principal products sold from
mine production.

Mine
exploration costs to maintain production of operating mines are charged to operations as incurred. Mine development expenditures at new mines, and major development expenditures at
operating mines outside existing pit limits that are expected to benefit future production beyond a minimum of one year, are capitalized and amortized using the straight-line method.

e.Other assets



The
Company's policy results in the smoothing of stripping costs over the life of the mine and, in the opinion of the Company, better facilitates the matching of mine production costs
over the life of the mine with the related revenues.



f.Environmental remediation costs

In
accordance with Statement of Position 96-1 (SOP 96-1) "Environmental Remediation Liabilities", the Company accrues the costs associated with environmental remediation obligations when
such costs are probable and determinable and generally not later than upon completion of the remediation feasibility study. Such accruals are adjusted as new information develops or circumstances
change and recorded at gross amount net of estimated land. Recoveries of environmental remediation costs from other parties are recorded as assets when the recovery is deemed probable.

g.Comprehensive result

Comprehensive
result is defined as the change in equity of a business enterprise during a period arising from transactions and other events and circumstances involving non-owner sources.
For the years ended December 31, 2003, 2002 and 2001, comprehensive result was composed of net income (loss) and the change in the additional minimum pension liability.

F-9

---



h.Employee benefit obligations

The
Company records the liabilities for seniority premiums, pensions and retirement payments similar to pensions as accrued, using actuarial calculations based on the projected unit
credit method and real interest rates. Accordingly, the liability is being accrued which at present value will cover the obligation for benefits projected to the estimated retirement date of the
Company's employees. Indemnity payments are charged to results in the period in which they become payable.

When
there is a significant reduction in personnel due to the restructuring of the labor force or the closing of a plant, the corresponding indemnity costs, net of the corresponding
reduction in the projected benefit obligation and the related items to be amortized, are charged to income.

i.Income tax, asset tax and employees' statutory profit sharing

The
Company recognizes deferred income tax and employees' statutory profit sharing assets and liabilities for the future tax consequences of all temporary differences between the
financial statement carrying amounts of assets and liabilities and their respective income tax or employees' statutory profit sharing bases, measured using enacted rates. The effects of changes in the
statutory rates are accounted for in the period that includes the enactment date. Deferred income tax assets are also recognized for the estimated future effects of tax loss carryforwards and asset
tax credit carryforwards. Deferred income tax and employees' statutory profit sharing assets are reduced by a valuation allowance for those estimates amounts, which in the opinion of management, will
more likely than not will not be realized.

j.Foreign currency balances and transactions

Monetary
assets and liabilities denominated in foreign currency are translated into U.S. dollars at the applicable exchange rate in effect at the balance sheet date. Revenues and
expenses are translated at average rates in effect for the period. Foreign currency transactions are recorded at the applicable
exchange rate in effect at the transaction date. Exchange fluctuations are recorded in income in the consolidated statements of operations.

k.Revenue recognition

The
Company sells its products pursuant to sales contracts entered into with its customers. Revenue for all the Company's products is recognized when title and risk of loss pass to the
customer and when collectibility is reasonably assured. The passing of title and risk of loss to the customer is based on terms of the sales contract, generally upon shipment of product. Product
pricing is based upon quoted commodity prices plus applicable premiums or prevailing market prices.

Certain
of our sales agreements provide for provisional pricing based on either the New York Commodity Exchange or the London Metal Exchange (as specified in the contract) when shipped.
At December 31, 2003, the difference between the spot rate at that date and the provisional price for outstanding contracts was not significant.

Amounts
billed to customers for shipping and handling are classified as net sales. Amounts incurred for shipping and handling are included in cost of sales.

l.Income per share

Basic
income per share is calculated by dividing consolidated net income by the weighted average number of common shares outstanding during the year.

m.Hedging activities

Derivative
instruments may be used to manage exposure to market risk from changes in commodity prices (metal and energy products), interest rates or the value of the Company's assets and
liabilities. Derivative financial instruments are recognized as either assets or liabilities in the balance

F-10

---



sheet.
To qualify for hedge accounting, derivative instruments must be designated as a hedge in writing at acquisition or inception of the hedge. In addition, such instruments must be periodically
evaluated and deemed to be "highly effective" at reducing the risk associated with the exposure being hedged. Any ineffectiveness of the hedge is reported in current earnings. Unrealized gains or
losses of derivative financial instruments that fail to qualify for hedge accounting are recognized in earnings.

The
Company does not maintain or issue financial instruments for speculative purposes. Generally, the Company's derivative instruments are not designated in hedging relationships for
accounting purposes. Decisions with respect to each transaction and to the overall hedging policies are made by an Executive Risk Committee. The objective of the committee, which is currently
comprised of the Chairman of the Board of Directors, the Chief Financial Officer and the Assistant Director of Risk Management, is to ensure that the risks and benefits have been appropriately
assessed.

The
Company enters into swap and option transactions or a combination of both to reduce or eliminate the risk of purchase or sales price fluctuations. For instance, for the purpose of
reducing the risk of fluctuations in metal prices, the Company may purchase put options or create synthetic put options to reduce or eliminate the risk of metal price declines below the option strike
price on a portion of its anticipated future sales.

The
Company did not enter into transactions with derivative financial instruments during 2003, 2002 or 2001.

n.Concentration of credit risk

Financial
instruments that potentially subject the Company to a concentration of credit risk consist principally of accounts receivable. Management believes this risk is minimal as the
Company routinely performs credit evaluations on its customers.

The
Company is exposed to credit loss in cases where the financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and currency/interest
rate swaps) are unable to pay when they owe funds as a result of protection agreements with them. To minimize the risk of such losses, the Company only uses highly rated financial institutions that
meet certain requirements. The Company also periodically reviews the creditworthiness of these institutions to
ensure that they are maintaining their ratings. The Company does not anticipate that any of the financial institutions will default on their obligations.

The
Company's three largest customers accounted for 14%, 13% and 10% of total sales in 2003, 37%, 14% and 6% of total sales in 2002 and 45%, 7% and 7% of total sales in 2001,
respectively.

The
table below represents the rollforward of the allowance for doubtful accounts:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 568   |           | $ |           |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 568   |           | $ | 952        |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 1,520 |           | $ | 1,502      |  | $                       
|                             |  |                                |       |           |   |            |  |                         

o.Estimates

The
accounting policies followed by the Company require that management make certain estimates and use certain assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Although these estimates are based on management's best knowledge of current circumstances, actual results may differ.

F-11

---



p.Impact of New Accounting Standards

Effective
January 1, 2003, the Company adopted SFAS No. 143 "Accounting for Asset Retirement Obligations". This statement requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred. The liability is measured at fair value and is adjusted to its present value in subsequent periods as accretion expense is
recorded. The corresponding asset retirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over the asset's useful life. The adoption of SFAS No.
143 did not have a material effect on the Company's financial statements. The Company did not have any significant legal obligations for asset retirements as of December 31, 2003 and 2002. In
addition, the Company has instituted extensive environmental conservation programs at its mining facilities. Company's environmental programs and other regulations applicable to concessions and
properties include water recovery systems to conserve water and minimize contamination of nearby streams, revegetation programs to stabilize the surfaces of the tailings dams and the implementation of
scrubbing technology in the mines to reduce dust emissions. Company's management does not believe that continued compliance with the Environmental Law or Mexican state environmental laws will have a
material adverse effect on its business, properties, results of operations or financial condition.

Effective
January 1, 2003, the Company implemented SFAS No. 145 "Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections", under which gains and losses from
extinguishment of debt are classified as extraordinary items only if they meet criteria outlined in Accounting Principles Statement No. 30. There were no effects on the Company's financial statements
as a result of the implementation of SFAS No. 145.

Effective
January 1, 2003, the Company adopted SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employees' Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)". The adoption of SFAS No. 146 did not have a material effect on the Company's financial statements.

Effective
January 1, 2003, the Company adopted FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, the Company must disclose
and may be required to recognize a liability for the fair value of the obligation it assumes under that guarantee. The initial recognition and measurement requirement of FIN 45 is effective for
guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material effect on the Company's financial statements.

Effective
January 1, 2003, the Company adopted SFAS No. 148 "Accounting for Stock-Based CompensationTransition and Disclosure". SFAS No. 148 does not alter the provisions of
SFAS No. 123, nor does it require stock-based compensation to be measured under the fair-value approach under SFAS No. 123. The Company uses the disclosure only provisions of SFAS No. 123. The
adoption of SFAS No. 148 did not have a material effect on the Company's financial statements.

In
January 2003, the FASB issued FASB interpretation No. 46 "Consolidation of Variable Interest Entities" ("FIN 46"). In December 2003, FIN 46 was replaced by FASB Interpretation No. 46
(revised December 2003) "Consolidation of Variable Interest Entities" ("FIN 46(R)") FIN 46(R) clarifies the application of Accounting Research Statement No. 51 "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46(R) requires an enterprise to consolidate a variable interest entity if that enterprise will absorb a majority of the entity's
expected losses, is entitled to receive a majority of the entity's expected residual returns or both. For investments in variable interest entities

F-12

---



formed
after December 31, 2003, the Company will be required to apply FIN 46(R) as of January 1, 2004. For investments in variable interest entities formed on or before December 31, 2003, the Company
will be required to apply FIN 46(R) in the first annual period beginning after December 15, 2004. The Company does not expect the adoption of FIN 46(R) to have a material impact on its financial
statements.

In
April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Company adopted the provisions of SFAS No. 149 in 2003, which did not have a material effect on the Company's financial statements.

In
May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes standards of how
an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. The
Company adopted the provisions of SFAS No. 150 in 2003, which did not have a material effect on the Company's financial statements.

NOTE 4CASH AND CASH EQUIVALENTS:

December 31,2003

2002Cash

$
4,868

$
4,915Cash equivalents


10,111


121$
14,979

$
5,036


F-13

---



NOTE 5INVENTORIES:

December 31,2003

2002Materials and supplies

$
48,703

$
55,465Finished goods metals


42,600


48,086Work-in-process


906Merchandise in transit


47492,683


103,551Allowance for obsolescence


(1,845
)

(1,748
)$
90,838

$
101,803


The
table below represents the rollforward of the allowance for obsolescence:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 827   |           | $ | 16         |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 796   |           | $ | 955        |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 1,748 |           | $ | 97         |  | $                       
|                             |  |                                |       |           |   |            |  |                         

NOTE 6PROPERTY, PLANT AND EQUIPMENT:

December 31,2003

2002Land

$
804

$
629Mine development


1,087


2,738Building and leasehold improvements


439,933


502,192Automobiles and tracks


16,636


16,922Mobile equipment


186,347


151,958Processing equipment


1,023,915


985,2151,668,722


1,659,654Accumulated depreciation


(565,544
)

(526,462
)1,103,178


1,133,192Construction-in-progress


14,751


16,514$
1,117,929

$
1,149,706


The
average annual depreciation and amortization rates are as follows:

December 31,2003

2002Buildings and improvements

2.88
%
2.74
%Automobiles and trucks

6.77
%
5.64
%Mobile equipment

5.81
%
4.59
%Processing equipment

3.94
%
3.63
%


F-14

---



NOTE 7OTHER ASSETS:

December 31,2003

2002Stripping costsNet of accumulated amortization of $3,516 in 2003 and $1,951 in 2002

$
21,319

$
20,133Intangible asset arising from employee benefits


50


190Investment in shares of associated and other unconsolidated companies


1,648


1,648Other


1,021


2,9672,719


4,805Accumulated amortization


(503
)

(1,402
)2,216


3,403$
23,535

$
23,536


The
Company's estimated annual amortization over each of the next five years is $1,218.

The
Company spent $1,200 in 2001, $1,300 in 2002 and $774 in 2003 on exploration programs, which were recognized as operating expenses in those years.

NOTE 8LONG-TERM DEBT:

In 2002, a lawsuit was filed against Mexcobre by Siemens Financial Services GMBH, a U.S. entity, and West LB AG, a U.S. bank, for noncompliance of payments
related to the purchase of an electrolitic cathode for $20 million. A restructuring agreement was subsequently reached and this amount included in long-term debt of MM which maturity will be 2007 with
an interest rate of LIBOR+3.75%.

NOTE 9EMPLOYEE BENEFIT OBLIGATIONS:

The liabilities from seniority premiums payable at retirement are recorded based on external actuarial calculations using the projected unit credit method.

The
seniority premium liability under SFAS No. 87 "Employers' Accounting for Pensions", is as follows:

Pension benefits
December 31,2003

2002Actuarial present value of benefit obligation:Vested benefit obligation

$
1,753

$
1,785Non-vested benefit obligation


319


318Accumulated benefit obligation


2,072


2,103Excess of projected benefit obligation over accumulated benefit obligation


512


504Projected benefit obligation


2,584


2,607Unrecognized net actuarial loss


(342
)

(440
)Additional minimum liability


248


323Net pension liability

$
2,490

$
2,490


F-15

---



Additional
disclosures required by SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits", an Amendment to FASB Statements No. 87, 88 and 106, are as
follows:

December 31,2003

2002Change in benefit obligation:Projected benefit obligation at beginning of year

$
2,607

$
(2,942
)Service cost


197


(240
)Interest cost


167


(231
)Actuarial (loss) gainNet


29


509Benefits paid


(202
)

220Settlements





77Inflation adjustment


(214
)Projected benefit obligation at end of year

$
2,584

$
2,607


The
assumptions used to determine the pension obligation and seniority premiums as of year-end and net costs in the ensuring year were:

Weighted-average assumptions

2003

2002

2001Weighted average discount rate

10
%
10
%
13
%Expected long-term rate of return on plan assets

12
%
12
%
15
%Rate of increase in future compensation level

6
%
6
%
10
%


Components of net periodic benefit cost

The components of net periodic pension and seniority premium plan cost as of December 31, consist of the following:

2003

2002

2001Service cost

$
197

$
240

$
250Interest cost


167


231


295Expected return on plan assetsAmortization of transition assetsNetRecognized net actuarial loss


17


35


51Total net periodic benefit cost

$
381

$
506

$
596


NOTE 10STOCKHOLDERS' EQUITY:

At December 31, 2003, the Company's capital stock amounted to $534,829, represented by 1,043,271,843 shares, of which 903,667,499 Class I shares, Series A
correspond to the fixed portion.

Dividends
paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Any excess over this account is subject to a tax equivalent to 49.25% and 47.06%, depending
on whether paid in 2004 and 2005, respectively. The tax is payable by the Company and may be credited against its income tax in the same year or the following two years. Dividends paid are not subject
to tax withholding. In the event of a capital reduction, any excess of stockholders' equity over capital contributions, the latter restated in accordance with the provisions of the Income Tax Law, is
accorded the same tax treatment as dividends.

F-16

---



NOTE 11SEGMENT INFORMATION:

Based on the information reviewed by the Company's executive committee, the Company has concluded that its operations are within one reportable segment.
Accordingly, only the financial information with respect to the principal business of producing copper has been presented.

The
prices of almost all of the Company's products are determined by international market quotations in U.S. dollars. The Company made direct sales in the following countries:

Year ended December 31,2003

2002

2001United States

$
155,870

$
185,629

$
331,983Germany


3,644China


5,342Mexico


266,165


238,770


213,324Total previous countries


431,021


424,399


545,307Other countries


3,175


6,095


14,945Total worldwide

$
434,196

$
430,494

$
560,252


NOTE 12BALANCES AND TRANSACTIONS WITH RELATED PARTIES:

a.     Balances
receivable and payable with affiliated companies and related parties are shown below:

December 31,2003

2002Accounts receivable:Minera México, S. A. de C. V. (Note 1)

$
101,606

$
327,373Mexicana de Cananea, S. A. de C. V.


54,377


41,571Industrial Minera México, S. A. de C. V.


23,853


41,707Minera Mexico International, Inc.


25,801


32,337Other


2,903


31$
208,540

$
443,019


December 31,2003

2002Accounts payable:Asarco, Inc.

$
6,479

$
9,243Ferrocarril Mexicano, S. A. de C. V.


1,179


6,122Minerales Metálicos del Norte, S. A.





3,577México Transportes Aéreos, S. A. de C. V.


235


2,384Servicios de Apoyo Administrativo, S. A. de C. V.


517


716Western Copper Supplies, Inc.


156


32Southern Peru Copper Corporation


3,363$
11,929

$
22,074


F-17

---



b.     The
main transactions carried out with affiliated companies and related parties were as follows:

Year ended December 31,2003

2002

2001Revenues:Sales

$
71,993

$
161,416

$
251,891Interest

$
30,803

$
29,038

$
37,655Other services

$
3,422

$
1,253

$
7,832Expenses:Purchases

$
129,870

$
181,910

$
151,104Transportation services

$
8,623

$
8,454

$
13,552Other services

$
8,109

$
9,499

$
14,917Purchase of fixed assets







$
2,194


The
Company lends to and borrows among our affiliates from time to time to fund acquisitions and for other corporate purposes. These financing transactions bear interest at market rates.

NOTE 13INCOME TAX, ASSET TAX AND EMPLOYEES' STATUTORY PROFIT SHARING:

In accordance with Mexican tax law, the Company is subject to asset tax and income tax, which take into consideration the taxable and deductible effects of
inflation. Through December 31, 2001, the Mexican income tax rate was 35%, with the obligation to pay 30% currently and the option of deferring the remaining 5% until profits are eventually
distributed. The new tax law enacted January 1, 2002, eliminated the option to defer the portion of the income tax payment and reduces the 35% income tax rate by one percentage point each year
until it reaches 32% in 2005. The deduction of the employees' statutory profit sharing amount and the obligation to withhold taxes on dividends paid to individuals and foreign residents was also
eliminated.

Asset
tax is calculated by applying 1.8% to the Company's asset position, as defined in the law, and is payable only to the extent that it exceeds the income tax payable for the same
period. If in any year asset tax exceeds the income tax payable, the asset tax payment for such excess may be reduced by the amount by which the income tax exceeded asset tax in the three preceding
years and any required payment of asset tax is creditable against the excess of the income tax over asset tax of the following 10 years.

a.     Taxable
incomeThe principal items which affect the determination of taxable income of Mexican companies are the differences between purchases and cost of
sales, recognition of the effects of inflation on depreciation and on monetary assets and liabilities through the inflationary component, which differ for book and tax purposes.

MM
and its subsidiaries obtained authorization to file a consolidated income and asset tax return. Thus, the Company prepares a consolidated income tax return, including all of its
subsidiaries. Additionally, the Company's subsidiaries file individual income tax returns. The Mexican Income Tax Law limits the tax consolidation to 60% of the parent's equity interest.

The
Company calculates employees' statutory profit sharing using the guidelines established in the Income Tax Law. The provision for employees' statutory profit sharing is included in
cost of sales.

F-18

---



b.     The
components of the provision for income tax, deferred income tax and asset tax are summarized below:

Year ended December 31,2003

2002

2001Current:Asset tax

$
7,197Deferred:Income tax


(4,525
)
$
(62,777
)
$
37,518$
2,672

$
(62,777
)
$
37,518


The
employees' statutory profit sharing expense was as follows:

Year ended December 31,2003

2002

2001Deferred

$
268

$
5,402

$
(3,388
)


Income
tax expense for the years ended December 31, 2003, 2002 and 2001 differs from the Mexican Statutory income tax rate as follows:

2003

2002

2001Income (loss) before income taxes and minority interest

$
26,499

$
26,567

$
23,770Increase (decrease) due to:Inflationary tax componentNet


(8,723
)

(11,079
)

(6,695
)Non-deductible items


2,872


4,040


1,793Other income


(131
)

(581
)

(2,068
)Variation rate assets


(9,099
)

(9,693
)Tax loss carryforwards


(3,791
)

(47,029
)

52,272Other


(4,955
)

(25,002
)

(31,554
)Tax at effective tax rate

$
2,672

$
(62,777
)
$
(37,518
)


The
deferred income tax effect from the reduction in the 2002 income tax rates, related to the gradual reduction of the income tax rates explained above, resulted in the recalculation of
the deferred income tax liability recorded as of December 31, 2001. The various rates applicable beginning in 2003 were applied to the temporary differences based on their estimated reversal date.

F-19

---



c.     At
December 31, 2003 and 2002, the main items comprising the (asset) liability balance of deferred income tax and employees' statutory profit sharing were as follows:

2003

2002Deferred
income
tax

Deferred,
employees'
statutory
profit sharing

Deferred
income
tax

Deferred,
employees'
statutory
profit sharingCurrent:Inventories

$
25,301

$
7,667

$
30,900

$
9,088Exchange (loss) gain











3,876Non-deductible reserves


(160
)

(48
)

(10,603
)

(3,118
)25,141


7,619


20,297


9,846Long-term:Property, plant and equipment


95,476


36,544


110,360


37,993Tax loss carryforwards


(38,375
)




(42,834
)Recoverable asset tax


(6,855
)




(1,214
)Deferred charges


7,020


2,135


7,907


2,32657,266


38,679


74,219


40,319$
82,407

$
46,298

$
94,516

$
50,165


d.     Tax
loss carryforwards and recoverable asset tax paid for which the deferred income tax asset and prepaid income tax, respectively, have been recognized can be recovered
subject to certain conditions. Restated amounts as of December 31, 2003 and expiration dates are as follows:

Year of expiration

Tax loss
carryforwards

Recoverable
asset tax2007

$
6,8582009


66,58120102011


18,7222014


24,125

$
6,855$
116,286

$
6,855


NOTE 14FINANCIAL INSTRUMENTS:

a.Fair value of financial instruments

For
certain of the Company's financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, the carrying amounts 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 of the Company at December 31, 2003 and 2002:

|                                                         |  | 2003 |        | 2002
|-------------------------------------------------------- |  | ---- | ------ | ----
|
|Liabilities:                                             |  |      |        |     
|Long-term debt (excluding financial leases and interest) |  | $    | 20,000 |     

The
following method and assumptions were used to estimate the fair value of each type of financial instrument:



F-20

---





b.Concentration of risk

Financial
instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents, short-term investments and trade accounts
receivable.

The
Company invests or maintains available cash with various leading banks principally in Mexico and the U.S. or in commercial paper of highly-rated companies. As part of its cash
management process, the Company regularly monitors the relative credit standing of these institutions and, by policy, limits the amount of credit exposure to any one institution. In the normal course
of its activities, the Company grants credit to its customers. Although the accounts receivable resulting from these transactions are not guaranteed, the Company has not had any significant portfolio
recovery problems.

NOTE 15CONTINGENCIES AND COMMITMENTS:

The Company is involved in various legal proceedings derived from its normal operations. The Company does not expect that any of these proceedings will have a
material adverse effect on its financial condition or results of operations.

In
July 1991, the agricultural community of Pilares de Nacozari Ejido (the "Ejido") commenced an action ("Amparo") in the first federal district court in Sonora, Mexico against the
Ministry of Agrarian Reform (the "Ministry"), alleging that the expropriation of approximately 1,500 hectares of land on which certain of Mexcobre's facilities are currently located, which land is
adjacent to the land where the mine is located, was improper. Mexcobre was not named as a defendant in the Amparo, although it was included as an interested third party due to its ownership of the
land. Mexcobre bought the land in question in 1976 from the Banco Nacional de Obras y Servicios P(7)blicos, which had previously acquired it as a beneficiary of the expropriation by the Ministry in
1973.

The
claim alleged by the Ejido states that the Ministry failed to notify one of three legal representatives of the Ejido of the expropriation. In 1994, the Mexican District Court Judge
of Hermosillo granted the Amparo ruling the expropriation by the Ministry legally void and in 1997 made a second ruling ordering the Ministry to return the land. As a result of the second ruling,
Mexcobre filed an ancillary action alleging the impossibility of returning the land.

There
has been no final resolution of this matter, but the Mexican District Court Judge of Hermosillo before whom this matter is presently docketed has twice issued a ruling stating that
it is impossible to return the land as a mean of restitution. A third and final ruling from the Mexican District Court Judge of Hermosillo is expected soon. We believe, along with Mexcobre, that if
the Ejido requests indemnity instead of a return of the land, Mexcobre's financial responsibility with respect to such compensation would not be material.

NOTE 16SUBSEQUENT EVENTS:

On February 3, 2004, GMEXICO, the largest stockholder of Southern Peru Copper Corporation (SPCC), presented a proposal regarding the possible sale to SPCC of all
the shares of GMEXICO's subsidiary, MM, representing approximately 99% of MM's outstanding shares, in return for the issuance of additional shares of SPCC. MM holds substantially all of GMEXICO's
Mexican mining assets.

SPCC
has formed a Special Committee of Disinterested Directors, comprised of members of its Board, to evaluate the proposal. There is no assurance that this transaction will be
consummated.

NOTE 17RESTATEMENT OF PREVIOUSLY REPORTED U.S. GAAP FINANCIAL INFORMATION RESULTING FROM COMPANY'S DETERMINATION TO ADOPT U.S. DOLLAR AS FUNCTIONAL CURRENCY FOR
2003:

Under U.S. GAAP, a definition of the functional currency is required, which may differ from the reporting currency. The Company's management has determined the
U.S. dollar as its functional

F-21

---



currency
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, as mentioned in Note 2b.

Subsequent
to the issuance of the Company's December 31, 2002 consolidated financial statements, prepared in accordance with Mexican GAAP and accordingly expressed in thousands of
Mexican pesos of purchasing power as of December 31, 2002, the Company's management determined that its reconciliation of net income (loss) and stockholders' equity from Mexican GAAP to U.S. GAAP were
not prepared assuming that the U.S. dollar was the functional currency, but rather reflected the Mexican peso as the functional currency. Therefore, the reconciliation of net income (loss) and
stockholders' equity to U.S. GAAP as of and for the years ended December 31, 2002 and 2001, have been restated to give effect to the identification of the U.S. dollar as the functional currency.

Under
U.S. GAAP, with the U.S. dollar as the functional currency, the effects of inflation recognized under Mexican GAAP must be eliminated in the reconciliation to U.S. GAAP.

Accordingly,
the restated amounts shown below have been remeasured into U.S. dollars and translated back into the reporting currency, the Mexican peso, by applying the procedures
specified in SFAS No. 52.

The
objective of the remeasurement process is to produce the same results that would have been reported if the accounting records had been kept in U.S. dollars. Accordingly, the
comprehensive effects of inflation are removed from the Mexican peso-denominated financial statements. Monetary assets and liabilities are remeasured at the balance sheet date (current) exchange rate.
Non-monetary assets are recorded at their historical exchange rate at the time of purchase. Prior transactions in currencies other than the U.S. dollar are remeasured at the exchange rates in effect
when the transactions occurred. Revenues and expenses are remeasured on a monthly basis at the average rates of exchange in effect during the period, except for consumption of non-monetary assets,
which are remeasured at the rates of exchange in effect when the respective assets were acquired. Translation gains and losses on monetary assets and liabilities arising from the remeasurement are
included in the determination of net loss in the period such gains and losses arise.

The
amounts obtained from the remeasurement process referred to above are translated back into Mexican pesos following the provisions of SFAS No. 52. Assets and liabilities are
translated at the current selling exchange rate of Mexican pesos of 10.31 and 9.14 per U.S. dollar as of December 31, 2002 and 2001, respectively. Revenues, expenses, gains and losses reported in the
income statement are translated at the exchange rate existing at the time of each transaction or, if appropriate, at the weighted average exchange rate during the period. Translation effects of
exchange rate changes are included in other comprehensive income as a cumulative translation adjustment in stockholders' equity.

The
effect of the restatement is shown in the table below:

|                                                                                    |  | Year ended December 31, 2002 |            | Year ended December 31, 2001 |   
|----------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | ---------------------------- | --
|
|U.S. GAAP net income (loss) as previously reported                                  |  | Ps                           | 987,782    |                              | Ps
|Impact of restatement for change in functional currency                             |  |                              | 351,946    |                              |   
|                                                                                    |  |                              |            |                              |   
|U.S. GAAP net income (loss) as restated                                             |  | Ps                           | 1,339,728  |                              | Ps
|                                                                                    |  |                              |            |                              |   
|Basic and diluted earnings (loss) per share under U.S. GAAP, as previously reported |  | Ps                           | .95        |                              | Ps
|                                                                                    |  |                              |            |                              |   
|Basic and diluted earnings (loss) per share under U.S. GAAP, as restated            |  | Ps                           | 1.28       |                              | Ps
|                                                                                    |  |                              |            |                              |   
|U.S. GAAP stockholders' equity as previously reported                               |  | Ps                           | 17,774,839 |                              | Ps
|Impact of restatement for change in functional currency                             |  |                              | 788,166    |                              |   
|                                                                                    |  |                              |            |                              |   
|U.S. GAAP stockholders' equity as restated                                          |  | Ps                           | 18,563,005 |                              | Ps
|                                                                                    |  |                              |            |                              |   

F-22

---



ANNEX F-2    FINANCIAL STATEMENTS OF MEXICANA DE CANANEA, S.A. DE C.V.

---



MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003 AND 2002

---



MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES
(Subsidiary of Minera México, S. A. de C. V.)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2003 AND 2002

INDEX

|Contents                                                  |  | Page       
|--------------------------------------------------------- |  | -----------
|Reports of Independent Registered Public Accounting Firms |  | F-1 and F-2
|Consolidated Financial Statements:                        |  |            
|Balance Sheets                                            |  | F-3        
|Statements of Operations                                  |  | F-4        
|Statements of Changes in Stockholders' Equity             |  | F-5        
|Statements of Cash Flows                                  |  | F-6        
|Notes to Consolidated Financial Statements                |  | F-7 to F-23

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mexico
City, April 16, 2004, except as to Note 15, for which the date is July 2, 2004

To
the Board of Directors and Stockholders of
Mexicana de Cananea, S. A. de C. V.

We
have audited the accompanying consolidated balance sheets of Mexicana de Cananea, S. A. de C. V. and Subsidiaries ("the Company") as of December 31, 2003, and the related
consolidated statements of income, of changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mexicana de Cananea, S. A. de C. V. and
Subsidiaries as of December 31, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United
States of America.

/s/
PricewaterhouseCoopers

Ruben
Rivera R.
Mexico City, Mexico

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Stockholders of
Mexicana de Cananea, S. A. de C. V.:

We
have audited the accompanying consolidated balance sheet of Mexicana de Cananea, S. A. de C. V. (a Mexican corporation) and subsidiaries (the "Company") as of December 31,
2002, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2002 and 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002, and the results of
its operations and its cash flows for the years ended December 31, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 15, the reconciliation to U.S. GAAP of stockholders' equity as of December 31, 2002 and net income (loss) for the years ended December 31, 2002
and 2001 previously reported in the consolidated financial statements of the Company has been restated.

/s/
Galaz, Yamazaki, Ruiz Urquiza, S. C.
A member firm of Deloitte Touche Tohmatsu

C.P.C.
Jorge I. Peralta Álvarez
Mexico City, Mexico
July 2, 2004

F-2

---





MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        CONSOLIDATED BALANCE SHEETS        (US$ in thousands)

|                                                                                           |  | December 31, |        
|------------------------------------------------------------------------------------------ |  | ------------ | -------
|
|ASSETS                                                                                     |  |              |        
|CURRENT ASSETS:                                                                            |  |              |        
|Cash                                                                                       |  | $            | 6,374  
|Trade receivablesNet of allowance for doubtful accounts of $27 in 2002                    |  |              | 19,267 
|Recoverable taxes                                                                          |  |              | 5,387  
|Due from affiliated companies (Note 10)                                                    |  |              | 8,458  
|InventoriesNet (Note 4)                                                                   |  |              | 31,846 
|Prepaid expenses and other                                                                 |  |              | 3,618  
|                                                                                           |  |              |        
|Total current assets                                                                       |  |              | 74,950 
|PROPERTY, PLANT AND EQUIPMENTNet (Note 5)                                                 |  |              | 484,837
|DUE FROM AFFILIATESMINERA MÉXICO, S. A. DE C. V.                                          |  |              | 2,810  
|DEFERRED INCOME TAX                                                                        |  |              | 9,800  
|OTHER ASSETSNet (Note 6)                                                                  |  |              | 155,325
|                                                                                           |  |              |        
|                                                                                           |  | $            | 727,722
|                                                                                           |  |              |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                       |  |              |        
|CURRENT LIABILITIES:                                                                       |  |              |        
|Trade accounts payable                                                                     |  | $            | 26,886 
|Accrued salaries and wages                                                                 |  |              | 973    
|Other accrued liabilities                                                                  |  |              | 18,185 
|Due to affiliated companies (Note 10)                                                      |  |              | 57,518 
|Income asset taxes payable and employees' statutory profit sharing                         |  |              | 741    
|Deferred income taxes and employees' statutory profit sharing (Note 11)                    |  |              | 932    
|                                                                                           |  |              |        
|Total current liabilities                                                                  |  |              | 105,235
|Labor liabilities (Note 7)                                                                 |  |              | 22,453 
|Deferred income taxes and employees' statutory profit sharing (Note 11)                    |  |              | 15,528 
|                                                                                           |  |              |        
|Total liabilities                                                                          |  |              | 143,216
|                                                                                           |  |              |        
|CONTINGENCIES AND COMMITMENTS (Note 13)                                                    |  |              |        
|STOCKHOLDERS' EQUITY (Note 8):                                                             |  |              |        
|Common stock (201,798,896 shares authorized and outstanding at December 31, 2003 and 2002) |  |              | 513,917
|Accumulated other comprehensive loss                                                       |  |              | (5,083 
|Retained earnings                                                                          |  |              | 75,672 
|                                                                                           |  |              |        
|Total stockholders' equity                                                                 |  |              | 584,506
|                                                                                           |  |              |        
|                                                                                           |  | $            | 727,722
|                                                                                           |  |              |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-3

---





MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        (US$ in thousands, except per share data)

|                                                                                  |  | Year ended December 31, |            
|--------------------------------------------------------------------------------- |  | ----------------------- | -----------
|
|Net sales                                                                         |  | $                       | 239,080    
|Costs and operating expenses:                                                     |  |                         |            
|Cost of sales (exclusive of depreciation, amortization and depletion shown below) |  |                         | 141,804    
|Administrative expenses                                                           |  |                         | 7,508      
|Depreciation, amortization and depletion                                          |  |                         | 42,670     
|                                                                                  |  |                         |            
|Income (loss) from operations                                                     |  |                         | 47,098     
|                                                                                  |  |                         |            
|Interest expense                                                                  |  |                         | 3,272      
|Interest income                                                                   |  |                         | (66        
|Remeasurement (gain) lossNet                                                     |  |                         | (6,408     
|OtherNet                                                                         |  |                         | 4,419      
|                                                                                  |  |                         |            
|                                                                                  |  |                         | (1,217     
|                                                                                  |  |                         |            
|Income (loss) before income taxes                                                 |  |                         | 45,881     
|Provision (benefit) for income taxes                                              |  |                         | (2,916     
|                                                                                  |  |                         |            
|Consolidated net income (loss)                                                    |  | $                       | 48,797     
|                                                                                  |  |                         |            
|Income (loss) per share                                                           |  | $                       | 0.24       
|                                                                                  |  |                         |            
|Weighted average number of shares outstanding                                     |  |                         | 201,798,896
|                                                                                  |  |                         |            

The
accompanying notes are an integral part of these consolidated financial statements.

F-4

---





MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001    
   (US$ in thousands)

|                                                      |  | Outstanding
shares |  | Common
stock |         | Accumulated
other
comprehensive
income
(loss) |   | Retained
earnings |   | Total
stockholders'
equity |         
|----------------------------------------------------- |  | ------------------ |  | ------------ | ------- | --------------------------------------------- | - | ----------------- | - | -------------------------- | --------
|Balances at December 31, 2000                         |  | 201,798,896        |  | $            | 513,917 |                                               | $ | (6,632            | ) | $                          | 41,138  
|Comprehensive result:                                 |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Net loss for the year                                 |  |                    |  |              |         |                                               |   |                   |   |                            | (113,668
|                                                      |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Balances at December 31, 2001                         |  | 201,798,896        |  |              | 513,917 |                                               |   | (6,632            | ) |                            | (72,530 
|Comprehensive result:                                 |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Net income for the year                               |  |                    |  |              |         |                                               |   |                   |   |                            | 99,405  
|Additional liability for employee benefit obligations |  |                    |  |              |         |                                               |   | 2,335             |   |                            |         
|                                                      |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Total comprehensive result                            |  |                    |  |              |         |                                               |   |                   |   |                            |         
|                                                      |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Balances at December 31, 2002                         |  | 201,798,896        |  |              | 513,917 |                                               |   | (4,297            | ) |                            | 26,875  
|Comprehensive result:                                 |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Net income for the year                               |  |                    |  |              |         |                                               |   |                   |   |                            | 48,797  
|Additional liability for employee benefit obligations |  |                    |  |              |         |                                               |   | (786              | ) |                            |         
|                                                      |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Total comprehensive result                            |  |                    |  |              |         |                                               |   |                   |   |                            |         
|                                                      |  |                    |  |              |         |                                               |   |                   |   |                            |         
|Balances at December 31, 2003                         |  | 201,798,896        |  | $            | 513,917 |                                               | $ | (5,083            | ) | $                          | 75,672  
|                                                      |  |                    |  |              |         |                                               |   |                   |   |                            |         

The
accompanying notes are an integral part of these consolidated financial statements.

F-5

---





MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (US$ in thousands)

|                                                                                               |  | Year ended December 31, |        
|---------------------------------------------------------------------------------------------- |  | ----------------------- | -------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |  |                         |        
|Net (loss) income for the year                                                                 |  | $                       | 48,797 
|Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |  |                         |        
|Depreciation, amortization and depletion                                                       |  |                         | 42,670 
|Cost of sale of property and equipment                                                         |  |                         | 18     
|Deferred income taxes                                                                          |  |                         | (8,838 
|Deferred employees' statutory profit sharing                                                   |  |                         | 1,361  
|Employee benefit liabilities                                                                   |  |                         | 5,494  
|Remeasurement (gain) loss                                                                      |  |                         | (6,408 
|Allowance for obsolescence of materials                                                        |  |                         | 1,021  
|CHANGES IN OPERATING ASSETS AND LIABILITIES:                                                   |  |                         |        
|Trade receivables                                                                              |  |                         | (5,351 
|Other accounts receivable                                                                      |  |                         | (37    
|Inventories                                                                                    |  |                         | (291   
|Other assets                                                                                   |  |                         | 2,672  
|Accounts payable and accrued liabilities                                                       |  |                         | (46,461
|                                                                                               |  |                         |        
|Net cash provided by operating activities                                                      |  |                         | 34,647 
|                                                                                               |  |                         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |  |                         |        
|Capital expenditures                                                                           |  |                         | (39,973
|Proceeds from the sale of fixed assets                                                         |  |                         | 220    
|                                                                                               |  |                         |        
|Net cash used in investing activities                                                          |  |                         | (39,753
|                                                                                               |  |                         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |  |                         |        
|Cash restricted as collateral accounts                                                         |  |                         |        
|                                                                                               |  |                         |        
|Net cash provided by (used in) financing activities                                            |  |                         |        
|                                                                                               |  |                         |        
|Effect of exchange rate changes on cash and cash equivalents                                   |  |                         | (2,365 
|                                                                                               |  |                         |        
|Increase (decrease) in cash and cash equivalents                                               |  |                         | (7,471 
|Cash and cash equivalents at beginning of the year                                             |  |                         | 13,845 
|                                                                                               |  |                         |        
|Cash and cash equivalents at end of the year                                                   |  | $                       | 6,374  
|                                                                                               |  |                         |        
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                            |  |                         |        
|Cash paid during the period for                                                               |  |                         |        
|Interest                                                                                       |  | $                       | 109    
|                                                                                               |  |                         |        
|Income taxes                                                                                   |  | $                       | 404    
|                                                                                               |  |                         |        
|Supplemental schedule of non-cash investing and financing activities:                          |  |                         |        
|Additional liability for employee benefit obligations                                          |  | $                       | (786   
|                                                                                               |  |                         |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-6

---





MEXICANA DE CANANEA, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Minera México, S. A. de C. V.)        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2003, 2002 AND
2001        (US$ in thousands)

NOTE 1DESCRIPTION OF BUSINESS AND SIGNIFICANT EVENTS:

The operating companies that comprise Mexicana de Cananea, S. A. de C. V. (Mexcananea) and subsidiaries (collectively, the Company) are in the metallurgical
mining industry. They engage in the exploration, mining and processing of metallic and nonmetallic minerals. The majority of the Company's sales market is in the United States and Mexico. The Company
is a 98.91%-owned indirect subsidiary of Grupo México, S. A. de C. V. (GMEXICO), through its holding company Minera México, S. A. de C. V. (MM) (formerly Grupo Minero
México, S. A. de C. V.).

NOTE 2BASIS OF PRESENTATION:

a.Consolidation of financial statements

The
consolidated financial statements as of December 31, 2003 and 2002 include the financial statements of Mexcananea and those of its subsidiaries that consolidate the financial
statements of their subsidiaries. The major operating subsidiaries of the Company are as follows:

Company

Ownership
percentage as of
December 31, 2003 (%)Hospital del Ronquillo, S. de R. L. de C. V.

100.00Proyecciones Urbanísticas, S. de R. L. de C. V.

100.00Minera Cumobabi, S. A. de C. V.

99.99


The
consolidated financial statements include the accounts of the Company and its subsidiaries, all under the same management. All significant intercompany balances and transactions have
been eliminated in consolidation.

Mexcananea
is a majority-owned indirect subsidiary of MM.

b.Foreign exchange effect and basis of presentation and remeasurement into U.S. dollars

The
Company's functional currency is the U.S. dollar. Mexcananea maintains its books in Mexican pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current
exchange rates except for inventory, property, plant and equipment and other assets which are remeasured at historical exchange rates. Revenues and expenses are generally translated at average
exchange rates in effect during the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates. The most significant difference between Mexican
GAAP and U.S. GAAP, as they relate to the Company, is that Mexican GAAP recognizes the comprehensive effects of inflation on financial statements. The accompanying financial statements have been
remeasured from Mexican pesos (Ps) into U.S. dollars by applying the procedures specified in Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency Translation".

F-7

---



Relevant
exchange rates used in the preparation of the financial statements were as follows (Mexican pesos per one U.S. dollar):

2003

2002

2001Exchange rate at December 31

Ps 11.2360

Ps 10.3125

Ps 9.1692Weighted average exchange rate for the year ended

Ps 10.7869

Ps 9.6589

Ps 9.3387


c.Reclassifications

Certain
amounts in the financial statements as of and for the years ended December 31, 2002 and 2001 have been reclassified in order to conform to the presentation of the
consolidated financial statements as of and for the year ended December 31, 2003.

NOTE 3SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies of the Company are summarized as follows:

a.Cash and cash equivalents

Cash
and cash equivalents are primarily short-term investment funds, variable income securities and bank deposits with original maturities of three months or less and are
valued at market.

b.Inventories

Metal
inventories are stated at the lower of average cost or market value. Costs incurred in the production of metal inventories exclude general and administrative costs.

Materials
and supplies are stated at the lower of average cost or market value. Supplies are valued at average cost less an allowance for obsolescence.

Work-in-process
inventories represent materials that are in the process of being converted into a saleable product. Conversion processes vary depending on the
nature of the copper ore and the specific mining operation. For sulfide ores, processing includes milling and concentrating and the results from the production of copper and molybdenum concentrates.
Molybdenum in-process inventory includes the cost of molybdenum concentrates and the costs incurred to convert those concentrates into various high-purity molybdenum chemicals
or metallurgical products.

Finished
goods include saleable products (e.g., copper concentrates, copper anodes, copper cathodes, copper rod, high-purity molybdenum chemicals and other metallurgical
products).

c.Impairment of long-lived assets

Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are
determined to be impaired when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The Company measures an
impairment loss as the difference between the carrying value of the asset and its fair value. No impairment charges were recorded during the years ended December 31, 2003, 2002 and 2001.

d.Property, Plant and Equipment

Property,
plant and equipment are carried at cost. Additions, improvements and expenditures for repairs and maintenance that significantly add to the productive capacity or life of an
asset are capitalized; other expenditures for repairs and maintenance are expensed as incurred.

The
principal depreciation method used for mining, smelting and refining operations is the straight-line method applied on a group basis.

F-8

---



Upon
disposal of assets depreciated on a group basis, cost less salvage is charged to accumulated depreciation.

Values
for mining properties represent mainly acquisition costs. Depletion of mines is computed on the basis of an overall unit rate applied to the pounds of principal products sold from
mine production.

Mine
exploration costs to maintain production of operating mines are charged to operations as incurred. Mine development expenditures at new mines, and major development expenditures at
operating mines outside existing pit limits that are expected to benefit future production beyond a minimum of one year are capitalized and amortized using the straight-line method.

e.Other assets



The
Company's policy results in the smoothing of stripping costs over the life of the mine and, in the opinion of the Company, better facilitates the matching of mine production costs
over the life of the mine with the related revenues.



f.Environmental remediation costs

In
accordance with Statement of Position 96-1 (SOP 96-1) "Environmental Remediation Liabilities", the Company accrues the costs associated with environmental
remediation obligations when such costs are probable and determinable and generally not later than upon completion of the remediation feasibility study. Such accruals are adjusted as new information
develops or circumstances change and are recorded at gross amount net of estimated land. Recoveries of environmental remediation costs from other parties are recorded as assets when recovery is deemed
probable.

F-9

---



g.Comprehensive result

Comprehensive
result is defined as the change in equity of a business enterprise during a period arising from transactions and other events and circumstances involving
non-owner sources. For the years ended December 31, 2003, 2002 and 2001, comprehensive result was composed of net income (loss) and the change in the additional minimum pension
liability.

h.Employee benefit obligations

The
Company records the liabilities for seniority premiums, pensions and retirement payments similar to pensions as accrued, using actuarial calculations based on the projected unit
credit method and real interest rates. Accordingly, the liability is being accrued which at present value will cover the obligation for benefits projected to the estimated retirement date of the
Company's employees. Indemnity payments are charged to results in the period in which they become payable.

Mexcananea
provides medical and hospital services to all active employees and retired unionized employees and the members of their families through a subsidiary. Mexcananea records the
liability for postretirement medical benefits based on actuarial calculations under the projected unit credit method.

When
there is a significant reduction in personnel due to the restructuring of the labor force or the closing of a plant, the corresponding indemnity costs, net of the corresponding
reduction in the projected benefit obligation and the related items to be amortized, are charged to income.

i.Income tax, asset tax and employees' statutory profit sharing

The
Company recognizes deferred income tax and employees' statutory profit sharing assets and liabilities for the future tax consequences of all temporary differences between the
financial statement carrying amounts of assets and liabilities and their respective income tax or employees' statutory profit sharing bases, measured using enacted rates. The effects of changes in the
statutory rates are accounted for in the period that includes the enactment date. Deferred income tax assets are also recognized for the estimated future effects of tax loss carryforwards and asset
tax credit carryforwards. Deferred income tax and employees' statutory profit sharing assets are reduced by a valuation allowance for those estimates amounts, wich in the opinion of management, will
more likely than not will not be realized.

j.Foreign currency balances and transactions

Monetary
assets and liabilities denominated in foreign currency are translated into U.S. dollars at the applicable exchange rate in effect at the balance sheet date. Revenues and
expenses are translated at average rates in effect for the period. Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date. Exchange fluctuations
are recorded in income in the consolidated statements of operations.

k.Revenue recognition

The
Company sells its products pursuant to sales contracts entered into with its customers. Revenue for all our products is recognized when title and risk of loss pass to the customer
and when collectibility is reasonably assured. The passing of title and risk of loss to the customer is based on terms of the sales contract, generally upon shipment of product. Product pricing is
based upon quoted commodity prices plus applicable premiums or prevailing market prices. Certain of our sales agreements provide for provisional pricing based on either the New York Commodity Exchange
or the London Metal Exchange (as specified in the contract) when shipped. At December 31, 2003, the difference between the spot rate at that date and the provisional price for outstanding
contracts was not significant.

Amounts
billed to customers for shipping and handling are classified as net sales. Amounts incurred for shipping and handling are included in cost of sales.

F-10

---



l.Income (loss) per share

Basic
income (loss) per share is calculated by dividing consolidated net income (loss) by the weighted average number of common shares outstanding during the year.

m.Hedging activities

Derivative
instruments may be used to manage exposure to market risk from changes in commodity prices (metal and energy products), interest rates or the value of the Company's assets and
liabilities. Derivative financial instruments are recognized as either assets or liabilities in the balance sheet. To qualify for hedge accounting, derivative instruments must be designated as a hedge
in writing at acquisition or inception of the hedge. In addition, such instruments must be periodically evaluated and deemed to be "highly effective" at reducing the risk associated with the exposure
being hedged. Any ineffectiveness of the hedge is reported in current earnings. Unrealized gains or losses of derivative financial instruments that fail to qualify for hedge accounting are recognized
in earnings.

The
Company does not maintain or issue financial instruments for speculative purposes. Generally, the Company's derivative instruments are not designated in hedging relationships for
accounting purposes. Decisions with respect to each transaction and to the overall hedging policies are made by an Executive Risk Committee. The objective of the committee, which is currently
comprised of the Chairman of the Board of Directors, the Chief Financial Officer and the Assistant Director of Risk Management, is to ensure that the risks and benefits have been appropriately
assessed.

The
Company enters into swap and option transactions or a combination of both to reduce or eliminate the risk of purchase or sales price fluctuations. For instance, for the purpose of
reducing the risk of fluctuations in metal prices, the Company may purchase put options or create synthetic put options to reduce or eliminate the risk of metal price declines below the option strike
price on a portion of its anticipated future sales.

The
Company did not enter into transactions with derivative financial instruments during 2003, 2002 or 2001.

n.Concentration of credit risk

F-11

---



Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of accounts receivable. Management believes this risk is minimal as the
Company routinely performs credit evaluations on its customers.

The
Company is exposed to credit loss in cases where the financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and currency/interest
rate swaps) are unable to pay when they owe funds as a result of protection agreements with them. To minimize the risk of such losses, the Company only uses highly rated financial institutions that
meet certain requirements. The Company also periodically reviews the creditworthiness of these institutions to ensure that they are maintaining their ratings. The Company does not anticipate that any
of the financial institutions will default on their obligations.

The
Company's three largest customers accounted for 44%, 16% and 8% of total sales in 2003, 41%, 26% and 14% of total sales in 2002 and 74%, 19% and 3% of total sales in 2001,
respectively.

The
table below represents the rollforward of the allowance for doubtful accounts:

|                             |  | Balance at
beginning
of period |    | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | -- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 31 |           | $ |           |  | $                       
|                             |  |                                |    |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 27 |           | $ |           |  | $                       
|                             |  |                                |    |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 27 |           | $ |           |  | $                       
|                             |  |                                |    |           |   |            |  |                         

o.Estimates

The
accounting policies followed by the Company require that management make certain estimates and use certain assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Although these estimates are based on management's best knowledge of current circumstances, actual results may differ.

p.Impact of New Accounting Standards

Effective
January 1, 2003, the Company adopted SFAS No. 143 "Accounting for Asset Retirement Obligations". This statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred. The liability is measured at fair value and is adjusted to its present value in subsequent periods as accretion expense
is recorded. The corresponding asset retirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over the asset's useful life. The
adoption of SFAS No. 143 did not have a material effect on the Company's financial statements. The Company did not have any significant legal obligations for asset retirements as of
December 31, 2003 and 2002. In addition, the Company has instituted extensive environmental conservation programs at its mining facilities. Company's environmental programs and other
regulations applicable to concessions and properties include water recovery systems to conserve water and minimize contamination of nearby streams, revegetation programs to stabilize the surfaces of
the tailings dams and the implementation of scrubbing technology in the mines to reduce dust emissions. Company's management does not believe that continued compliance with the Environmental Law or
Mexican state environmental laws will have a material adverse effect on its business, properties, results of operations or financial condition.

Effective
January 1, 2003, the Company implemented SFAS No. 145 "Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections", under which
gains and losses from extinguishment of debt are classified as extraordinary items only if they meet criteria outlined in Accounting Principles Statement No. 30. There were no effects on the
Company's financial statements as a result of the implementation of SFAS No. 145.

F-12

---



Effective
January 1, 2003, the Company adopted SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability Recognition for Certain Employees'
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The adoption of SFAS No. 146 did not have a material effect on the Company's
financial statements as a result of the implementation of SFAS No. 145.

Effective
January 1, 2003, the Company adopted FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, the Company must disclose and may be required to recognize a liability for the fair value of the obligation it
assumes under that guarantee. The initial recognition and measurement requirement of FIN 45 is effective for guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did
not have a material effect on the Company's financial statements.

Effective
January 1, 2003, the Company adopted SFAS No. 148 "Accounting for Stock-Based CompensationTransition and Disclosure". SFAS No. 148 does not
alter the provisions of SFAS No. 123, nor does it require stock-based compensation to be measured under the fair-value approach under SFAS No. 123. The Company uses the
disclosure only provisions of SFAS No. 123. The adoption of SFAS No. 148 did not have a material effect on the Company's financial statements.

In
January 2003, the FASB issued FASB interpretation No. 46 "Consolidation of Variable Interest Entities" ("FIN 46"). In December 2003, FIN 46 was replaced by FASB
Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46(R)"). FIN 46(R) clarifies the application of Accounting Research Statement
No. 51, "Consolidated Financial Statements", to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity
at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46(R) requires an enterprise to consolidate a variable interest entity if
that enterprise will absorb a majority of the entity's expected losses, is entitled to receive a majority of the entity's expected residual returns or both. For investments in variable interest
entities formed after December 31, 2003, the Company will be required to apply FIN 46(R) as of January 1, 2004. For investments in variable interest entities formed on or before
December 31, 2003, the Company will be required to apply FIN 46(R) in the first annual period beginning after December 15,
2004. The Company does not expect the adoption of FIN 46(R) to have a material impact on its financial statements.

In
April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This statement amends and clarifies financial
accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Company adopted the provisions of SFAS No. 149 in 2003, which did not have a material effect on the
Company's financial statements.

In
May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes
standards of how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective July 1, 2003. The Company adopted the provisions of SFAS No. 150 in 2003, which did not have a material effect on the Company's financial statements.

F-13

---



NOTE 4INVENTORIES:

December 31,2003

2002Materials and supplies

$
31,285

$
28,866Finished goods metals


1,669


1,115Work-in-process


73


55Merchandise in transit and advance to supplies


3,955


6,90836,982


36,944Allowance for obsolescence


(5,136
)

(4,368
)$
31,846

$
32,576


The
table below represents the rollforward of the allowance for obsolescence:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 4,561 |           | $ | 269        |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 4,802 |           | $ | 3          |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 4,368 |           | $ | 1,021      |  | $                       
|                             |  |                                |       |           |   |            |  |                         

NOTE 5PROPERTY, PLANT AND EQUIPMENT:

December 31,2003

2002Land

$
587

$
921Mine development


8,882


10,875Building and leasehold improvements


172,393


169,774Infrastructure


40,536


40,290Automobiles and trucks


5,972


6,070Mobile equipment


142,452


146,468Processing equipment


370,594


364,239741,416


738,637Accumulated depreciation


(264,040
)

(250,521
)477,376


488,116Construction-in-progress


7,461


28,329$
484,837

$
516,445


The
average annual depreciation and amortization rates are as follows:

December 31,2003

2002Buildings and improvements

2.88
%
2.50
%Infrastructure

3.03
%
3.03
%Automobiles and trucks

6.77
%
7.62
%Mobile equipment

5.81
%
4.59
%Processing equipment

3.94
%
3.56
%


F-14

---



NOTE 6OTHER ASSETS:

|                                                                                                                            |  | December 31, |        
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------
|
|Stripping costs and leachable materialNet of accumulated amortization and depletion of $28,041 in 2003 and $10,477 in 2002 |  | $            | 154,978
|                                                                                                                            |  |              |        
|Intangible asset arising from employee benefits                                                                             |  |              | 223    
|Investment in shares of associated and other unconsolidated companies                                                       |  |              | 97     
|Other                                                                                                                       |  |              | 27     
|                                                                                                                            |  |              |        
|                                                                                                                            |  |              | 347    
|Accumulated amortization                                                                                                    |  |              |        
|                                                                                                                            |  |              |        
|                                                                                                                            |  |              | 347    
|                                                                                                                            |  |              |        
|                                                                                                                            |  | $            | 155,325
|                                                                                                                            |  |              |        

The
Company's estimated annual amortization over each of the next five years is approximately $23,300.

The
Company spent $584 in 2001, $178 in 2002 and $247 in 2003 on exploration programs, wich were recognized as operating expenses in those years.

NOTE 7EMPLOYEE BENEFIT OBLIGATIONS:

The liabilities from seniority premiums payable at retirement are recorded based on external actuarial calculations using the projected unit credit method. The
Company uses a December 31, measurement date for its plan.

The
seniority premium liability under SFAS No. 87 "Employers' Accounting for Pensions", is as follows:

|                                                      |  | December 31, |       
|----------------------------------------------------- |  | ------------ | ------
|
|
|Actuarial present value of benefit obligation:        |  |              |       
|Vested benefit obligation                             |  | $            | 7,172 
|Non-vested benefit obligation                         |  |              | 4,485 
|                                                      |  |              |       
|Accumulated benefit obligation                        |  |              | 11,657
|Excess of projected benefit obligation over           |  |              |       
|Accumulated benefit obligation                        |  |              | 638   
|                                                      |  |              |       
|Projected benefit obligation                          |  |              | 12,295
|Projected benefit obligation in excess of plan assets |  |              |       
|Unrecognized prior service cost                       |  |              |       
|Unrecognized net actuarial loss                       |  |              | (2,885
|Unrecognized transition obligation                    |  |              | (223  
|Additional minimum liability                          |  |              | 5,224 
|Fair value of plan assets at beginning of the year    |  |              | (2,728
|                                                      |  |              |       
|Net pension liability                                 |  | $            | 11,683
|                                                      |  |              |       

F-15

---



Additional disclosures required by SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits", an Amendment to
FASB Statements No. 87, 88 and 106, are as follows:

|                                                  |  | December 31, |       
|------------------------------------------------- |  | ------------ | ------
|
|
|Change in benefit obligation:                     |  |              |       
|Projected benefit obligation at beginning of year |  | $            | 11,629
|Service cost                                      |  |              | 682   
|Interest cost                                     |  |              | 597   
|Actuarial (loss) gainNet                         |  |              | 1,389 
|Acquisition                                       |  |              |       
|Benefits paid                                     |  |              | (1,047
|Settlements                                       |  |              |       
|Inflation adjustment                              |  |              | (955  
|                                                  |  |              |       
|Projected benefit obligations at end of year      |  | $            | 12,295
|                                                  |  |              |       

The
assumptions used to determine the pension obligation and seniority premiums as of year-end and net costs in the ensuring year were:

Weighted-average assumptions

|                                                 |  | 2003 |   | 2002 |   | 2001 |  
|------------------------------------------------ |  | ---- | - | ---- | - | ---- | -
|Weighted average discount rate                   |  | 10   | % | 10   | % | 13   | %
|Expected long-term rate of return on plan assets |  | 12   | % | 12   | % | 15   | %
|Rate of increase in future compensation level    |  | 6    | % | 6    | % | 10   | %

Components of net periodic benefit cost

The components of net periodic pension and seniority premium plan cost as of December 31, consist of the following:

|                                      |  | 2003 |       | 2002 |   | 2001 
|------------------------------------- |  | ---- | ----- | ---- | - | -----
|Service cost                          |  | $    | 1,099 |      | $ | 763  
|Interest cost                         |  |      | 2,741 |      |   | 756  
|Amortization of transition assetsNet |  |      | 1,621 |      |   | 328  
|Recognized net actuarial loss         |  |      | 33    |      |   |      
|                                      |  |      |       |      |   |      
|Total net periodic benefit cost       |  | $    | 5,494 |      | $ | 1,847
|                                      |  |      |       |      |   |      

F-16

---



Insured
other benefit cost trend rates have a significant effect on the amount reported of the other benefit plan. One percentage-point change in assumed other benefits cost trend rates
would have the following effects:

Percentage
point increase

Percentage
point decreaseEffect on total service and interest cost components

$
3,185

$
2,492Effect on the post-retirement benefit obligation

$
51,405

$
41,309


NOTE 8STOCKHOLDERS' EQUITY:

At December 31, 2003, the Company's capital stock amounted to $513,917, represented by 201,798,896 shares, Class "A", of which 171,005,065
correspond to the fixed portion and 30,793,831 shares to the variable portion.

Dividends
paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Any excess over this account is subject to a tax equivalent to 49.25% and 47.06%, depending
on whether paid in 2004 and 2005, respectively. The tax is payable by the Company and may be credited against its income tax in the same year or the following two years. Dividends paid are not subject
to tax withholding. In the event of a capital reduction, any excess of stockholders' equity over capital contributions, the latter restated in accordance with the provisions of the Income Tax Law, is
accorded the same tax treatment as dividends.

NOTE 9SEGMENT INFORMATION:

Based on the information reviewed by the Company's executive committee, the Company has concluded that its operations are within one reportable segment.
Accordingly, only the financial information with respect to the principal business of producing copper has been presented.

Sales
prices of almost all of the Company's products are determined by international market quotations in U.S. dollars. The Company made direct sales in the following countries:

|                |  | Year ended December 31,
|--------------- |  | -----------------------
|
|United States   |  | $                      
|Germany         |  |                        
|Japan           |  |                        
|China           |  |                        
|Mexico          |  |                        
|                |  |                        
|Total worldwide |  | $                      
|                |  |                        

F-17

---



NOTE 10BALANCES AND TRANSACTIONS WITH RELATED PARTIES:

a.     Balances
receivable and payable with affiliated companies and related parties are shown below:

December 31,2003

2002Accounts receivable:Industrial Minera México, S. A. de C. V.

$
87

$
1,715Grupo Minero México, S. A. de C. V.





1,504Asarco, Inc.


1,210


1,146Servicios de Apoyo Administrativo, S. A. de C. V.





367Minera Mexico Internacional, Inc.


7,117


351Minerales Metálicos del Norte, S. A.





17Southern Peru Copper Corporation





2MM


44


2,788$
8,458

$
7,890Accounts payable:Mexicana de Cobre, S. A. de C. V.

$
54,377

$
41,570Ferrocarril Mexicano, S. A. de C. V.


691


2,568México Transportes Aéreos, S. A. de C. V.





2,500Western Copper Supplies, Inc.


62


62Infraestructura y Transportes México, S. A. de C. V.


2,039Servicios de Apoyo Administrativos, S. A. de C. V.


349Other$
57,518

$
46,700


b.     The
main transactions carried out with affiliated companies and related parties were as follows:

Year ended December 31,2003

2002

2001Revenues:Sales

$
108,415

$
112,684

$
115,504Other services

$
420

$
544

$
516Expenses:Purchases

$
17,537

$


$
Transportation services

$
3,059

$
3,615

$
3,132Interest

$
3,163

$


$
4,154Other services

$
12,128

$
15,732

$
9,149Purchase of fixed assets

$


$
31,220

$
19,044


The
Company lends to and borrows among affiliates from time to time to fund acquisitions and for other corporate purposes. These financing transactions bear interest at market rates.

F-18

---



NOTE 11INCOME TAX, ASSET TAX AND EMPLOYEES' STATUTORY PROFIT SHARING:

In accordance with Mexican tax law, the Company is subject to asset tax and income tax, which take into consideration the taxable and deductible effects of
inflation. Through December 31, 2001, the Mexican income tax rate was 35%, with the obligation to pay 30% currently and the option of deferring the remaining 5% until profits are eventually
distributed. The new tax law enacted January 1, 2002, eliminated the option to defer the portion of the income tax payment and reduces the 35% income tax rate by one percentage point each year
until it reaches 32% in 2005. The deduction of the employees' statutory profit sharing amount and the obligation to withhold taxes on dividends paid to individuals and foreign residents was also
eliminated.

Asset
tax is calculated by applying 1.8% to the Company's asset position, as defined in the law, and is payable only to the extent that it exceeds the income tax payable for the same
period. If in any year asset tax exceeds the income tax payable, the asset tax payment for such excess may be reduced by the amount by which the income tax exceeded asset tax in the three preceding
years and any required payment of asset tax is creditable against the excess of the income tax over asset tax of the following 10 years.

a.     Taxable
incomeThe principal items which affect the determination of taxable income of Mexican companies are the differences between purchases and cost of
sales, recognition of the effects of inflation on depreciation and on monetary assets and liabilities through the inflationary component, which differ for book and tax purposes.

MM
and its subsidiaries obtained authorization to file a consolidated income and asset tax return. Thus, the Company prepares a consolidated income tax return, including all of
its subsidiaries. Additionally, the Company's subsidiaries file individual income tax returns. The Mexican Income Tax Law limits the tax consolidation to 60% of the parent's equity interest.

The
Company calculates employees' statutory profit sharing using the guidelines established in the Income Tax Law. The provision for employees' statutory profit sharing is included in
cost of sales.

b.     The
components of the provision for income tax, deferred income tax and asset tax are summarized below:

Year ended December 31,2003

2002

2001Current:Income taxAsset tax

$
5,922Deferred:Income tax


(8,838
)
$
(75,297
)
$
98,205$
(2,916
)
$
(75,297
)
$
98,205


The
employees' statutory profit sharing expense was as follows:

Year ended December 31,2003

2002

2001Deferred

$
1,361

$
2,206

$
5,315


F-19

---



Income
tax expense for the years ended December 31, 2003, 2002 and 2001 differs from the Mexican Statutory income tax rate as follows:

2003

2002

2001Income (loss) before income taxes

$
15,600

$
8,438

$
(5,412
)Increase (decrease) due to:Inflationary tax componentNet


1,097


1,938


1,270Non-deductible items


5,876


2,432


2,524Other


(34,351
)

(15,125
)

14,963(11,778
)

(2,317
)

13,345Valuation allowance for tax loss carryforward and recoverable asset tax


8,862


(72,980
)

84,860Tax at effective tax rate

$
(2,916
)
$
(75,297
)
$
98,205


The
deferred income tax effect from the reduction in the 2002 income tax rates related to the gradual reduction of the income tax rates explained above, resulted in the recalculation of
the deferred income tax liability recorded as of December 31, 2001. The various rates applicable beginning in 2003 were applied to the temporary differences based on their estimated reversal
date.

c.     At
December 31, 2003 and 2002, the main items comprising the (asset) liability balance of deferred income tax and employees' statutory profit sharing were as
follows:

|                              |  | 2003 |         | 2002 |  
|----------------------------- |  | ---- | ------- | ---- | -
|
|Current:                      |  |      |         |      |  
|Inventories                   |  | $    | 9,204   |      | $
|Exchange (loss) gain          |  |      |         |      |  
|Non-deductible reserves       |  |      | (8,489  | )    |  
|                              |  |      |         |      |  
|                              |  |      | 715     |      |  
|Long-term:                    |  |      |         |      |  
|Property, plant and equipment |  |      | 15,442  |      |  
|Tax loss carryforwards        |  |      | (57,672 | )    |  
|Recoverable asset tax         |  |      | (14,257 | )    |  
|Deferred charges              |  |      | 46,687  |      |  
|                              |  |      |         |      |  
|                              |  |      | (9,800  | )    |  
|Valuation allowance           |  |      |         |      |  
|                              |  |      |         |      |  
|                              |  |      | (9,800  | )    |  
|                              |  |      |         |      |  
|                              |  | $    | (9,085  | )    | $
|                              |  |      |         |      |  

F-20

---



d.     Tax
loss carryforwards and recoverable asset tax paid for which the deferred income tax asset and prepaid income tax, respectively, have been recognized can be recovered
subject to certain conditions. Restated amounts as of December 31, 2003 and expiration dates are as follows:

Year of expiration

Tax loss
carryforwards

Recoverable
asset tax2004

$
31,280

$
5,8592005


283


11,5662006


332


2,3792007


27,063


22008


61,798


3982009


84,775


6,0152010


407


2,3812011


1622012


1242013


99


5,857$
206,323

$
34,457


NOTE 12FINANCIAL INSTRUMENTS:

Concentration of risk

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents,
short-term investments and trade accounts receivable.

The
Company invests or maintains available cash with various leading banks principally in Mexico and the U.S. or in commercial paper of highly-rated companies. As part of its cash
management process, the Company regularly monitors the relative credit standing of these institutions and, by policy, limits the amount of credit exposure to any one institution. In the normal course
of its activities, the Company grants credit to its customers. Although the accounts receivable resulting from these transactions are not guaranteed, the Company has not had any significant portfolio
recovery problems.

NOTE 13CONTINGENCIES AND COMMITMENTS:

The Company is involved in various legal proceedings derived from its normal operations. The Company does not expect that any of these proceedings will have a
material adverse effect on its financial condition or results of operations.

NOTE 14SUBSEQUENT EVENTS:

On February 3, 2004, GMEXICO, the largest stockholder of Southern Peru Copper Corporation (SPCC), presented a proposal regarding the possible sale to SPCC
of all the shares of GMEXICO's subsidiary, MM, representing approximately 99% of MM's outstanding shares, in return for the issuance of additional shares of SPCC. MM holds substantially all of
GMEXICO's Mexican mining assets.

SPCC
has formed a Special Committee of Disinterested Directors, comprised of members of its Board, to evaluate the proposal. There is no assurance that this transaction will be
consummated.

F-21

---



NOTE 15RESTATEMENT OF PREVIOUSLY REPORTED U.S. GAAP FINANCIAL INFORMATION RESULTING FROM COMPANY'S DETERMINATION TO ADOPT U.S. DOLLAR AS FUNCTIONAL CURRENCY FOR
2003:

Under U.S. GAAP, a definition of the functional currency is required, which may differ from the reporting currency. The Company's management has determined the
U.S. dollar as its functional currency in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, as mentioned in Note 2b.

Subsequent
to the issuance of the Company's December 31, 2002, consolidated financial statements, prepared in accordance with Mexican GAAP and accordingly expressed in thousands
of Mexican pesos of purchasing power as of December 31, 2002, the Company's management determined that its reconciliation of net income (loss) and stockholders' equity from Mexican GAAP to U.S.
GAAP were not prepared assuming that the U.S. dollar was the functional currency, but rather reflected the Mexican peso as the functional currency. Therefore, the reconciliation of net income (loss)
and stockholders' equity to U.S. GAAP as of and for the years ended December 31, 2002 and 2001, have been restated to give effect to the identification of the U.S. dollar as the functional
currency.

Under
U.S. GAAP, with the U.S. dollar as the functional currency, the effects of inflation recognized under Mexican GAAP must be eliminated in the reconciliation to U.S. GAAP.

Accordingly,
the restated amounts shown below have been remeasured into U.S. dollars and translated back into the reporting currency, the Mexican peso, by applying the procedures
specified in SFAS No. 52.

The
objective of the remeasurement process is to produce the same results that would have been reported if the accounting records had been kept in U.S. dollars. Accordingly, the
comprehensive effects of inflation are removed from the Mexican peso-denominated financial statements. Monetary assets and liabilities are remeasured at the balance sheet date (current)
exchange rate. Non-monetary assets are recorded at their historical exchange rate at the time of purchase. Prior transactions in currencies other than the U.S. dollar are remeasured at the
exchange rates in effect when the transactions occurred. Revenues and expenses are remeasured on a monthly basis at the average rates of exchange in effect during the period, except for consumption of
non-monetary assets, which are remeasured at the rates of exchange in effect when the respective assets were acquired. Translation gains and losses on monetary assets and liabilities
arising from the remeasurement are included in the determination of net loss in the period such gains and losses arise.

The
amounts obtained from the remeasurement process referred to above are translated back into Mexican pesos following the provisions of SFAS No. 52. Assets and liabilities are
translated at the current selling exchange rate of Mexican pesos of 10.31 and 9.14 per U.S. dollar as of December 31, 2002 and 2001, respectively. Revenues, expenses, gains and losses reported
in the income statement are translated at the exchange rate existing at the time of each transaction or, if appropriate, at the weighted average exchange rate during the period. Translation effects of
exchange rate changes are included in other comprehensive income as a cumulative translation adjustment in stockholders' equity.

F-22

---



The
effect of the restatement is shown in the table below:

Year ended
December 31,
2002

Year ended
December 31,
2001(Ps in thousands, except per share data)U.S. GAAP net income (loss) as previously reported

Ps
23,603

Ps
(1,044,757
)Impact of restatement for change in functional currency


936,530


(16,754
)U.S. GAAP net income (loss) as restated

Ps
960,133

Ps
(1,061,511
)Basic and diluted earnings (loss) per share under U.S. GAAP, as previously reported

Ps
.12

Ps
(5.18
)Basic and diluted earnings (loss) per share under U.S. GAAP, as restated

Ps
4.76

Ps
(5.26
)


December 31,
2002

December 31,
2001U.S. GAAP stockholders' equity as previously reported

Ps
6,591,548

Ps
5,733,306Impact of restatement for change in functional currency


(563,830
)

(814,076
)U.S. GAAP stockholders' equity as restated

Ps
6,027,718

Ps
4,919,230


F-23

---



ANNEX F-3    FINANCIAL STATEMENTS OF INDUSTRIAL MINERA MÉXICO, S.A. DE C.V.

---



INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES
(Subsidiary of Grupo Minero México, S. A. de C. V.)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2003 AND 2002

---



INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES
(Subsidiary of Grupo Minero México, S. A. de C. V.)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2003 AND 2002

INDEX

|Contents                                                  |  | Page       
|--------------------------------------------------------- |  | -----------
|Reports of Independent Registered Public Accounting Firms |  | F-1 and F-2
|Consolidated Financial Statements:                        |  |            
|Balance Sheets                                            |  | F-3        
|Statements of Operations                                  |  | F-4        
|Statements of Changes in Stockholders' Equity             |  | F-5        
|Statements of Cash Flows                                  |  | F-6        
|Notes to Consolidated Financial Statements                |  | F-7 to F-21

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mexico
City, April 16, 2004

To
the Board of Directors and Stockholders of
Industrial Minera México, S. A. de C. V.

We
have audited the accompanying consolidated balance sheets of Industrial Minera México, S. A. de C. V. and Subsidiaries ("the Company") as of December 31, 2003,
and the related consolidated statements of income, of changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United Stated of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Industrial Minera México, S. A.
de C. V. and Subsidiaries as of December 31, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted
in the United States of America.

/s/
PricewaterhouseCoopers

Ruben
Rivera R.
Mexico City, Mexico

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Stockholders of
Industrial Minera México, S. A. de C. V.:

We
have audited the accompanying consolidated balance sheet of Industrial Minera México, S. A. de C. V. (a Mexican corporation) and subsidiaries (the "Company") as of
December 31, 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2002 and 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002, and the results of
its operations and its cash flows for the years ended December 31, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.

/s/
Galaz, Yamazaki, Ruiz Urquiza, S. C.
A member firm of Deloitte Touche Tohmatsu

C.P.C.
Jorge I. Peralta Álvarez
Mexico City, Mexico
July 2, 2004

F-2

---





INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Grupo Minero México, S. A. de C. V.)        CONSOLIDATED BALANCE SHEETS        (US$ in thousands)

|                                                                                                 |  | December 31, |        
|------------------------------------------------------------------------------------------------ |  | ------------ | -------
|
|ASSETS                                                                                           |  |              |        
|CURRENT ASSETS:                                                                                  |  |              |        
|Cash                                                                                             |  | $            | 2,388  
|Cash retained in collateral accounts                                                             |  |              |        
|Trade receivablesNet of allowance for doubtful accounts of $3,349 in 2003 and $4,104 in 2002    |  |              | 22,469 
|Recoverable taxes                                                                                |  |              | 10,023 
|Due from affiliated companies (Note 10)                                                          |  |              | 47,803 
|Other                                                                                            |  |              | 4,535  
|InventoriesNet (Note 4)                                                                         |  |              | 88,199 
|Prepaid expenses and other                                                                       |  |              | 4,327  
|                                                                                                 |  |              |        
|Total current assets                                                                             |  |              | 179,744
|PROPERTY, PLANT AND EQUIPMENTNet (Note 5)                                                       |  |              | 218,879
|OTHER ASSETSNet (Note 6)                                                                        |  |              | 2,172  
|                                                                                                 |  |              |        
|                                                                                                 |  | $            | 400,795
|                                                                                                 |  |              |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                             |  |              |        
|CURRENT LIABILITIES:                                                                             |  |              |        
|Trade accounts payable                                                                           |  | $            | 7,909  
|Other accrued liabilities                                                                        |  |              | 17,541 
|Due to affiliated companies (Note 10)                                                            |  |              | 30,945 
|Income asset taxes payable and employees' statutory profit sharing                               |  |              | 13     
|Deferred income taxes and employees' statutory profit sharing (Note 11)                          |  |              | 25,808 
|                                                                                                 |  |              |        
|Total current liabilities                                                                        |  |              | 82,216 
|Due to affiliatesMinera México, S. A. de C. V.                                                  |  |              |        
|Labor liabilities (Note 7)                                                                       |  |              | 69     
|Deferred income taxes and employees' statutory profit sharing (Note 11)                          |  |              | 14,075 
|                                                                                                 |  |              |        
|Total liabilities                                                                                |  |              | 96,360 
|                                                                                                 |  |              |        
|CONTINGENCIES AND COMMITMENTS (Note 13)                                                          |  |              |        
|MINORITY INTEREST                                                                                |  |              | (376   
|                                                                                                 |  |              |        
|STOCKHOLDERS' EQUITY (Note 8):                                                                   |  |              |        
|Common stock (15,741,000 shares authorized and shares outstanding at December 31, 2003 and 2002) |  |              | 355,714
|Accumulated other comprehensive income (loss)                                                    |  |              |        
|Accumulated deficit                                                                              |  |              | (50,903
|                                                                                                 |  |              |        
|Total stockholders' equity                                                                       |  |              | 304,811
|                                                                                                 |  |              |        
|                                                                                                 |  | $            | 400,795
|                                                                                                 |  |              |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-3

---





INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        (US$ in thousands, except per share data)

|                                                                                  |  | Year ended December 31, |           
|--------------------------------------------------------------------------------- |  | ----------------------- | ----------
|
|Net sales                                                                         |  | $                       | 216,206   
|Costs and operating expenses:                                                     |  |                         |           
|Cost of sales (exclusive of depreciation, amortization and depletion shown below) |  |                         | 176,207   
|Administrative expenses                                                           |  |                         | 9,250     
|Depreciation and amortization                                                     |  |                         | 17,657    
|                                                                                  |  |                         |           
|Income (loss) from operations                                                     |  |                         | 13,092    
|                                                                                  |  |                         |           
|Interest expense                                                                  |  |                         | 1,620     
|Interest income                                                                   |  |                         | (2,137    
|Remeasurement loss (gain)Net                                                     |  |                         | 2,890     
|OtherNet                                                                         |  |                         | (2,107    
|                                                                                  |  |                         |           
|                                                                                  |  |                         | 266       
|                                                                                  |  |                         |           
|Income (loss) before income taxes and minority interest                           |  |                         | 12,826    
|Provision (benefit) for income taxes                                              |  |                         | 6,865     
|Minority interest                                                                 |  |                         | (30       
|                                                                                  |  |                         |           
|Consolidated net income (loss)                                                    |  | $                       | 5,991     
|                                                                                  |  |                         |           
|Income (loss) per share                                                           |  | $                       | 0.04      
|                                                                                  |  |                         |           
|Weighted average number of shares outstanding                                     |  |                         | 15,741,000
|                                                                                  |  |                         |           

The
accompanying notes are an integral part of these consolidated financial statements.

F-4

---





INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
    (US$ in thousands)

|                                                      |  | Outstanding
shares |  | Common
stock |         | Accumulated
other
comprehensive
income
(loss) |   | Accumulated
deficit |   | Total
stockholders'
equity |        
|----------------------------------------------------- |  | ------------------ |  | ------------ | ------- | --------------------------------------------- | - | ------------------- | - | -------------------------- | -------
|Balances at December 31, 2000                         |  | 15,741,000         |  | $            | 355,714 |                                               |   |                     |   | $                          | (56,557
|Comprehensive result:                                 |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Net loss for the year                                 |  |                    |  |              |         |                                               |   |                     |   |                            | (17,142
|                                                      |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Balances at December 31, 2001                         |  | 15,741,000         |  |              | 355,714 |                                               |   |                     |   |                            | (73,699
|Comprehensive result:                                 |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Net income for the year                               |  |                    |  |              |         |                                               |   |                     |   |                            | 16,805 
|Additional liability for employee benefit obligations |  |                    |  |              |         |                                               | $ | (5,498              | ) |                            |        
|                                                      |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Total comprehensive result                            |  |                    |  |              |         |                                               |   |                     |   |                            |        
|                                                      |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Balances at December 31, 2002                         |  | 15,741,000         |  |              | 355,714 |                                               |   | (5,498              | ) |                            | (56,894
|Comprehensive result:                                 |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Net loss for the year                                 |  |                    |  |              |         |                                               |   |                     |   |                            | 5,991  
|Additional liability for employee benefit obligations |  |                    |  |              |         |                                               |   | 5,498               |   |                            |        
|                                                      |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Total comprehensive result                            |  |                    |  |              |         |                                               |   |                     |   |                            |        
|                                                      |  |                    |  |              |         |                                               |   |                     |   |                            |        
|Balances at December 31, 2003                         |  | 15,741,000         |  | $            | 355,714 |                                               | $ |                    |   | $                          | (50,903
|                                                      |  |                    |  |              |         |                                               |   |                     |   |                            |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-5

---





INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (US$ in thousands)

|                                                                                               |  | Year ended December 31, |        
|---------------------------------------------------------------------------------------------- |  | ----------------------- | -------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |  |                         |        
|Net (loss) income for the year                                                                 |  | $                       | 5,991  
|Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |  |                         |        
|Depreciation, amortization and depletion                                                       |  |                         | 17,657 
|Cost of sale of property and equipment                                                         |  |                         | 5,267  
|Deferred income taxes                                                                          |  |                         | 3,827  
|Deferred employees' profit sharing                                                             |  |                         | 890    
|Minority interest                                                                              |  |                         | (30    
|Employee benefit liabilities                                                                   |  |                         | 1,207  
|Remeasurement loss (gain)                                                                      |  |                         | 2,890  
|Allowance for doubtful accounts                                                                |  |                         |        
|Reserve for obsolescence of materials                                                          |  |                         |        
|CHANGES IN OPERATING ASSETS AND LIABILITIES:                                                   |  |                         |        
|Trade receivables                                                                              |  |                         | (1,984 
|Other accounts receivable                                                                      |  |                         | 30,208 
|Inventories                                                                                    |  |                         | (7,503 
|Other assets                                                                                   |  |                         | (1,143 
|Accounts payable and accrued liabilities                                                       |  |                         | (55,966
|                                                                                               |  |                         |        
|Net cash (used in) provided by operating activities                                            |  |                         | 1,311  
|                                                                                               |  |                         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |  |                         |        
|Acquisition of property and equipment                                                          |  |                         | (5,675 
|Proceeds from the sale of fixed assets                                                         |  |                         | 3,314  
|Other assets                                                                                   |  |                         |        
|                                                                                               |  |                         |        
|Net cash used in investing activities                                                          |  |                         | (2,361 
|                                                                                               |  |                         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |  |                         |        
|Cash restricted as collateral accounts                                                         |  |                         | 755    
|                                                                                               |  |                         |        
|Net cash provided by (used in) financing activities                                            |  |                         | 755    
|                                                                                               |  |                         |        
|Effect of exchange rate changes on cash and cash equivalents                                   |  |                         | (642   
|                                                                                               |  |                         |        
|(Decrease) increase in cash and cash equivalents                                               |  |                         | (937   
|Cash and cash equivalents at beginning of the year                                             |  |                         | 3,325  
|                                                                                               |  |                         |        
|Cash and cash equivalents at end of the year                                                   |  | $                       | 2,388  
|                                                                                               |  |                         |        
|SUPPLEMENTAL CASH FLOW OF INFORMATION:                                                         |  |                         |        
|Cash paid during the period for:                                                               |  |                         |        
|Income taxes                                                                                   |  | $                       | 3,332  
|                                                                                               |  |                         |        
|Supplemental schedule of non-cash investing and financing activities:                          |  |                         |        
|Additional liability for employee benefit obligations                                          |  | $                       | (5,498 
|                                                                                               |  |                         |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-6

---





INDUSTRIAL MINERA MÉXICO, S. A. DE C. V. AND SUBSIDIARIES  (Subsidiary of Grupo Minero México, S. A. de C. V.)        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31,
2003, 2002 AND 2001        (US$ in thousands)

NOTE 1DESCRIPTION OF BUSINESS AND SIGNIFICANT EVENTS:

The operating companies that comprise Industrial Minera México, S. A. de C. V. (IMMSA) and subsidiaries (collectively, Company) are in the
metallurgical mining industry. They engage in the exploration, mining and processing of metallic and nonmetallic minerals as well as the mining of coal and the refinement of copper, zinc, gold and
silver. The majority of the Company's sales market is in the United States and Mexico. The Company is a 98.91%-owned indirect subsidiary of Grupo México, S. A. de C. V. (GMEXICO),
through its holding company Minera México, S. A. de C. V. (MM).

NOTE 2BASIS OF PRESENTATION:

a.Consolidation of financial statements

The
consolidated financial statements as of December 31, 2003 and 2002 include the financial statements of IMMSA and those of its subsidiaries that consolidate the financial
statements of their subsidiaries:

Company

Ownership percentage
as of December 31, 2003 (%)Minerales y Minas Mexicanas, S. A. de C. V.

66.74Compañía de Terrenos e Inversiones de San Luis Potosí, S. C. por A., S. A.

99.29


The
consolidated financial statements include the accounts of the Company and its subsidiaries, all under the same management. All significant intercompany balances and transactions have
been eliminated in consolidation.

IMMSA
is a majority-owned indirect subsidiary of GMEXICO.

b.Foreign exchange effect and basis of presentation and remeasurement into U.S. dollars

The
Company's functional currency is the U.S. dollar. IMMSA maintains its books in Mexican pesos. Foreign currency assets and liabilities are remeasured into U.S. dollars at current
exchange rates except for inventory, property, plant and equipment and other assets which are remeasured at historical exchange rates. Revenues and expenses are generally translated at average
exchange rates in effect during the period, except for those expenses related to balance sheet amounts that are remeasured at historical exchange rates. The most significant difference between Mexican
GAAP and U.S. GAAP, as they relate to the Company, is that Mexican GAAP recognizes the comprehensive effects of inflation on financial statements. The accompanying financial statements have been
remeasured from Mexican pesos into U.S. dollars by applying the procedures specified in Statement of Financial Accounting Standards ("SFAS") No. 52 "Foreign Currency Translation".

F-7

---



Relevant
exchange rates used in the preparation of the financial statements were as follows (Mexican pesos per one U.S. dollar):

2003

2002

2001Exchange rate at December 31

PS
11.2360

PS
10.3125

PS
9.1692Weighted average exchange rate for the year ended

PS
10.7869

PS
9.6589

PS
9.3387


c.Reclassifications

Certain
amounts in the financial statements as of and for the years ended December 31, 2002 and 2001 have been reclassified in order to conform to the presentation of the
consolidated financial statements as of and for the year ended December 31, 2003.

NOTE 3SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies of the Company are summarized as follows:

a.Cash and cash equivalents

Cash
and cash equivalents are primarily short-term investment funds, variable income securities and bank deposits with original maturities of three months or less and are
valued at market.

b.Inventories

Metal
inventories are stated at the lower of average cost or market value. Costs incurred in the production of metal inventories exclude general and administrative costs.

Materials
and supplies are stated at the lower of average cost or market value. Supplies are valued at average cost less an allowance for obsolescence.

Work-in-process
inventories represent materials that are in the process of being converted into a saleable product. Conversion processes vary depending on the
nature of the copper ore and the specific mining operation. For sulfide ores, processing includes milling and concentrating and the results from the production of copper and molybdenum concentrates.
Molybdenum in-process inventory includes the cost of molybdenum concentrates and the costs incurred to convert those concentrates into various high-purity molybdenum chemicals
or metallurgical products.

Finished
goods include saleable products (e.g., copper concentrates, copper anodes, copper cathodes, copper rod, high-purity molybdenum chemicals and other metallurgical
products).

c.Impairment of long-lived assets

Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are
determined to be impaired when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The Company measures an
impairment loss as the difference between the carrying value of the asset and its fair value. No impairment charges were recorded during the years ended December 31, 2003, 2002 and 2001.

d.Property, Plant and Equipment

Property,
plant and equipment are carried at cost. Additions, improvements and expenditures for repairs and maintenance that significantly add to the productive capacity or life of an
asset are capitalized; other expenditures for repairs and maintenance are expensed as incurred.

The
principal depreciation method used for mining, smelting and refining operations is the straight-line method applied on a group basis.

F-8

---



Upon
disposal of assets depreciated on a group basis, cost less salvage is charged to accumulated depreciation.

Values
for mining properties represent mainly acquisition costs. Depletion of mines is computed on the basis of an overall unit rate applied to the pounds of principal products sold from
mine production.

Mine
exploration costs to maintain production of operating mines are charged to operations as incurred. Mine development expenditures at new mines, and major development expenditures at
operating mines outside existing pit limits that are expected to benefit future production beyond a minimum of one year, are capitalized and amortized using the straight-line method.

e.Other assets



f.Environmental remediation costs

In
accordance with Statement of Position 96-1 (SOP 96-1) "Environmental Remediation Liabilities", the Company accrues the costs associated with environmental
remediation obligations when such costs are probable and determinable and generally not later than upon completion of the remediation feasibility study. Such accruals are adjusted as new information
develops or circumstances change and recorded at gross amount net of estimated land. Recoveries of environmental remediation costs from other parties are recorded as assets when the recovery is deemed
probable.

g.Comprehensive result

Comprehensive
result is defined as the change in equity of a business enterprise during a period arising from transactions and other events and circumstances involving
non-owner sources. For the years ended December 31, 2003, 2002 and 2001, comprehensive result was composed of net income (loss) and the change in the additional minimum pension
liability.

h.Employee benefit obligations

The
Company records the liabilities for seniority premiums, pensions and retirement payments similar to pensions as accrued, using actuarial calculations based on the projected unit
credit method and real interest rates. Accordingly, the liability is being accrued which at present value will cover the obligation for benefits projected to the estimated retirement date of the
Company's employees. Indemnity payments are charged to results in the period in which they become payable.

The
Company records the liability for postretirement medical benefits based on actuarial calculations under the projected unit credit method.

When
there is a significant reduction in personnel due to the restructuring of the labor force or the closing of a plant, the corresponding indemnity costs, net of the corresponding
reduction in the projected benefit obligation and the related items to be amortized, are charged to income.

F-9

---



i.Income tax, asset tax and employees' statutory profit sharing

The
Company recognizes deferred income tax and employees' statutory profit sharing assets and liabilities for the future tax consequences of all temporary differences between the
financial statement carrying amounts of assets and liabilities and their respective income tax or employees' statutory profit sharing bases, measured using enacted rates. The effects of changes in the
statutory rates are accounted for in the period that includes the enactment date. Deferred income tax assets are also recognized for the estimated future effects of tax loss carryforwards and asset
tax credit carryforwards. Deferred income tax and employees' statutory profit sharing assets are reduced a valuation allowance for those estimates amounts, wich in the opinion of management, will more
likely than not will not be realized.

j.Foreign currency balances and transactions

Monetary
assets and liabilities denominated in foreign currency are translated into U.S. dollars at the applicable exchange rate in effect at the balance sheet date. Revenues and
expenses are translated at average rates in effect for the period. Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date. Exchange fluctuations
are recorded in income in the consolidated statements of operations.

k.Revenue recognition

The
Company sells its products pursuant to sales contracts entered into with its customers. Revenue for all the Company's products is recognized when title and risk of loss pass to the
customer and when collectibility is reasonably assured. The passing of title and risk of loss to the customer is based on terms of the sales contract, generally upon shipment of product. Product
pricing is based upon quoted commodity prices plus applicable premiums or prevailing market prices.

Certain
of our sales agreements provide for provisional pricing based on either the New York Commodity Exchange or the London Metal Exchange (as specified in the contract) when shipped.
At
December 31, 2003, the difference between the spot rate at that date and the provisional price for outstanding contracts was not significant.

Amounts
billed to customers for shipping and handling are classified as net sales. Amounts incurred for shipping and handling are included in cost of sales.

l.Income (loss) per share

Basic
income (loss) per share is calculated by dividing consolidated net income (loss) by the weighted average number of common shares outstanding during the year. The options awarded to
employees do not have a material effect on the determination of basic loss per share.

m.Hedging activities

Derivative
instruments may be used to manage exposure to market risk from changes in commodity prices (metal and energy products), interest rates or the value of the Company's assets and
liabilities. Derivative financial instruments are recognized as either assets or liabilities in the balance sheet. To qualify for hedge accounting, derivative instruments must be designated as a hedge
in writing at acquisition or inception of the hedge. In addition, such instruments must be periodically evaluated and deemed to be "highly effective" at reducing the risk associated with the exposure
being hedged. Any ineffectiveness of the hedge is reported in current earnings. Unrealized gains or losses of derivative financial instruments that fail to qualify for hedge accounting are recognized
in earnings.

The
Company does not maintain or issue financial instruments for speculative purposes. Generally, the Company's derivative instruments are not designated in hedging relationships for
accounting purposes. Decisions with respect to each transaction and to the overall hedging policies are made by an Executive Risk Committee. The objective of the committee, which is currently
comprised of the

F-10

---



Chairman
of the Board of Directors, the Chief Financial Officer and the Assistant Director of Risk Management, is to ensure that the risks and benefits have been appropriately assessed.

The
Company enters into swap and option transactions or a combination of both to reduce or eliminate the risk of purchase or sales price fluctuations. For instance, for the purpose of
reducing the risk of fluctuations in metal prices, the Company may purchase put options or create synthetic put options to reduce or eliminate the risk of metal price declines below the option strike
price on a portion of its anticipated future sales.

The
Company did not enter into transactions with derivative financial instruments during 2003, 2002 or 2001.

n.Concentration of credit risk

Financial
instruments that potentially subject the Company to a concentration of credit risk consist principally of accounts receivable. Management believes this risk is minimal as the
Company routinely performs credit evaluations on its customers.

The
Company is exposed to credit loss in cases where the financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and currency/interest
rate swaps) are unable to pay when they owe funds as a result of protection agreements with them. To minimize the risk of such losses, the Company only uses highly rated financial institutions that
meet certain requirements. The Company also periodically reviews the creditworthiness of these institutions to ensure that they are maintaining their ratings. The Company does not anticipate that any
of the financial institutions will default on their obligations.

The
three largest customers accounted for 32%, 9% and 7% of total sales in 2003, 30%, 12% and 9% of total sales in 2002 and 27%, 7% and 6% of total sales in 2001, respectively.

The
table below represents the rollforward of the allowance for doubtful accounts:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 3,309 |           | $ | 795        |  | $                       
|Year ended December 31, 2002 |  | $                              | 4,104 |           | $ |           |  | $                       
|Year ended December 31, 2003 |  | $                              | 4,104 |           | $ |           |  | $                       

o.Estimates

The
accounting policies followed by the Company require that management make certain estimates and use certain assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Although these estimates are based on management's best knowledge of current circumstances, actual results may differ.

p.Impact of New Accounting Standards

Effective
January 1, 2003, the Company adopted SFAS No. 143 "Accounting for Asset Retirement Obligations". This statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred. The liability is measured at fair value and is adjusted to its present value in subsequent periods as accretion expense
is recorded. The corresponding asset retirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over the asset's useful life. The
adoption of SFAS No. 143 did not have a material effect on the Company's financial statements. The Company did not have any significant legal obligations for asset retirements as of
December 31, 2003 and 2002. In addition, the Company has instituted extensive environmental conservation programs at its mining facilities. Company's environmental programs and other
regulations applicable to concessions and properties include water recovery systems to conserve

F-11

---



water
and minimize contamination of nearby streams, revegetation programs to stabilize the surfaces of the tailings dams and the implementation of scrubbing technology in the mines to reduce dust
emissions. Company's management does not believe that continued compliance with the Environmental Law or Mexican state environmental laws will have a material adverse effect on its business,
properties, results of operations or financial condition.

Effective
January 1, 2003, the Company implemented SFAS No. 145 "Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections", under which
gains and losses from extinguishment of debt are classified as extraordinary items only if they meet criteria outlined in Accounting Principles Statement No. 30. There were no effects on the
Company's financial statements as a result of the implementation of SFAS No. 145.

Effective
January 1, 2003, the Company adopted SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability Recognition for Certain Employees'
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The adoption of SFAS No. 146 did not have a material effect on the Company's
financial statements.

Effective
January 1, 2003, the Company adopted FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, the Company must disclose and may be required to recognize a liability for the fair value of the obligation it
assumes under that guarantee. The initial recognition and measurement requirement of FIN 45 is effective for guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did
not have a material effect on the Company's financial statements.

Effective
January 1, 2003, the Company adopted SFAS No. 148 "Accounting for Stock-Based CompensationTransition and Disclosure". SFAS No. 148 does not
alter the provisions of SFAS No. 123, nor does it require stock-based compensation to be measured under the fair-value approach under SFAS No. 123. The Company uses the
disclosure only provisions of SFAS No. 123. The adoption of SFAS No. 148 did not have a material effect on the Company's financial statements.

In
January 2003, the FASB issued FASB interpretation No. 46 "Consolidation of Variable Interest Entities" ("FIN 46"). In December 2003, FIN 46 was replaced by FASB
Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46 (R)") FIN 46 (R) clarifies the application of Accounting Research Statement
No. 51 "Consolidated Financial Statements", to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at
risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 (R) requires an enterprise to consolidate a variable interest entity
if that enterprise will absorb a majority of the entity's expected losses, is entitled to receive a majority of the entity's expected residual returns or both. For investments in variable interest
entities formed after December 31, 2003, the Company will be required to apply FIN 46 (R) as of January 1, 2004. For investments in variable interest entities formed on or before
December 31, 2003, the Company will be required to apply FIN 46 (R) in the first annual period beginning after December 15, 2004. The Company does not expect the adoption of FIN
46 (R) to have a material impact on its financial statements.

In
April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This statement amends and clarifies financial
accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under
SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. The Company adopted the provisions of SFAS No. 149 in 2003, which did not have a material effect on the
Company's financial statements.

F-12

---



In
May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes
standards of how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is
effective July 1, 2003. The Company adopted the provisions of SFAS No. 150 in 2003, which did not have a material effect on the Company's financial statements.

NOTE 4INVENTORIES:

|                           |  | December 31, |       
|-------------------------- |  | ------------ | ------
|
|Materials and supplies     |  | $            | 24,144
|Finished goods metals      |  |              | 64,959
|Work-in-process            |  |              | 826   
|                           |  |              |       
|                           |  |              | 89,929
|Allowance for obsolescence |  |              | (1,730
|                           |  |              |       
|                           |  | $            | 88,199
|                           |  |              |       

The
table below represents the rollforward of the allowance for obsolescence:

|                             |  | Balance at
beginning
of period |       | Additions |   | Deductions |  | Balance
at end
of period
|---------------------------- |  | ------------------------------ | ----- | --------- | - | ---------- |  | ------------------------
|Year ended December 31, 2001 |  | $                              | 1,592 |           | $ |           |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2002 |  | $                              | 1,592 |           | $ | 138        |  | $                       
|                             |  |                                |       |           |   |            |  |                         
|Year ended December 31, 2003 |  | $                              | 1,730 |           | $ |           |  | $                       
|                             |  |                                |       |           |   |            |  |                         

F-13

---



NOTE 5PROPERTY, PLANT AND EQUIPMENT:

|                                       |  | December 31, |         
|-------------------------------------- |  | ------------ | --------
|
|Land                                   |  | $            | 26,081  
|Mine development                       |  |              | 7,783   
|Building and leasehold improvements    |  |              | 237,103 
|Automobiles and trucks                 |  |              | 9,673   
|Mobile equipment                       |  |              | 291,135 
|Processing equipment                   |  |              | 73,345  
|                                       |  |              |         
|                                       |  |              | 645,120 
|Accumulated depreciation and depletion |  |              | (432,439
|                                       |  |              |         
|                                       |  |              | 212,681 
|Construction-in-progress               |  |              | 6,198   
|                                       |  |              |         
|                                       |  | $            | 218,879 
|                                       |  |              |         

The
average annual depreciation and amortization rates are as follows:

December 31,2003

2002Buildings and improvements

2.53
%
2.69
%Infrastructure

2.50
%
3.03
%Automobiles and trucks

7.70
%
6.55
%Mobile equipment

4.65
%
5.43
%Processing equipment

3.54
%
3.63
%


During
2001, the operations of the Santa Eulalia mining unit in the State of Chihuahua, Velardeña, in the State of Durango, the Monterrey plant in the State of Nuevo
León, and Rosario in the State of Sinaloa, were interrupted due to low mineral grades and high operating costs, which prevented the Company from conducting profitable operations at such
locations. At December 31, 2003 and 2002, the net carrying value of these plants was $20,079.

NOTE 6OTHER ASSETS:

|                                                                      |  | December 31, |      
|--------------------------------------------------------------------- |  | ------------ | -----
|
|Investment in shares of associated and other unconsolidated companies |  | $            | 689  
|Other                                                                 |  |              | 1,621
|                                                                      |  |              |      
|                                                                      |  |              | 2,310
|Accumulated amortization                                              |  |              | (138 
|                                                                      |  |              |      
|                                                                      |  | $            | 2,172
|                                                                      |  |              |      

The
Company's estimated annual amortization over each of the next five years is approximately $240.

The
Company spent $5,900 in 2001, $3,600 in 2002 and $4,600 in 2003 on exploration programs which were recognized as operating expenses in those years.

F-14

---



NOTE 7EMPLOYEE BENEFIT OBLIGATIONS:

The liabilities from seniority premiums payable at retirement are recorded based on external actuarial calculations using the projected unit credit method. The
Company uses a December 31, measurement date for its plans.

The
seniority premium liability under SFAS No. 87 "Employers' Accounting for Pensions", is as follows:

|                                                                           |  | Pension benefits |       
|-------------------------------------------------------------------------- |  | ---------------- | ------
|
|
|Actuarial present value of benefit obligation:                             |  |                  |       
|Vested benefit obligation                                                  |  | $                | 2,849 
|Non-vested benefit obligation                                              |  |                  | 4,140 
|                                                                           |  |                  |       
|Accumulated benefit obligation                                             |  |                  | 6,989 
|Excess of projected benefit obligation over accumulated benefit obligation |  |                  | 1,477 
|                                                                           |  |                  |       
|Projected benefit obligation                                               |  |                  | 8,466 
|Plan assets                                                                |  |                  | (6,082
|                                                                           |  |                  |       
|Projected benefit obligation in excess of plan assets                      |  |                  | 2,384 
|Unrecognized prior service cost                                            |  |                  |       
|Unrecognized net actuarial loss                                            |  |                  | (3,314
|Unrecognized transition obligation                                         |  |                  | 999   
|Additional minimum liability                                               |  |                  |       
|Intangible assets                                                          |  |                  |       
|                                                                           |  |                  |       
|Net pension liability                                                      |  | $                | 69    
|                                                                           |  |                  |       

Additional
disclosures required by SFAS No. 132 "Employers' Disclosures about Pensions Other Postretirement Benefits", an Amendment to FASB Statements No. 87, 88 and 106,
are as follows:

|                                                  |  | Pension benefits |       
|------------------------------------------------- |  | ---------------- | ------
|
|
|Change in benefit obligation:                     |  |                  |       
|Projected benefit obligation at beginning of year |  | $                | (9,302
|Service cost                                      |  |                  | (646  
|Interest cost                                     |  |                  | (696  
|Inflation adjustment                              |  |                  | 765   
|Actuarial (loss) gainNet                         |  |                  | 1,413 
|                                                  |  |                  |       
|Projected benefit obligation at end of year       |  | $                | (8,466
|                                                  |  |                  |       
|Change in plan assets:                            |  |                  |       
|Fair value of plan assets at beginning of year    |  | $                | 4,068 
|Actuarial return on plan assets                   |  |                  | 2,014 
|                                                  |  |                  |       
|Fair value of plan assets at end of year          |  | $                | 6,082 
|                                                  |  |                  |       

F-15

---



The
assumptions used to determine the pension obligation and seniority premiums as of year-end and net costs in the ensuring year were:

Weighted-average assumptions

2003

2002

2001Weighted average discount rate

10%

10%

13%Expected long-term rate of return on plan assets

12%

12%

15%Rate of increase in future compensation level

6%

6%

10%


Components of net periodic benefit cost

The components of net periodic pension and seniority premium plan cost as of December 31, consist of the following:

|                                        |  | 2003 |       | 2002 |   | 2001  |  
|--------------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|Service cost                            |  | $    | 646   |      | $ | 702   |  
|Interest cost                           |  |      | 696   |      |   | 853   |  
|Expected return on plan assets          |  |      | (344  | )    |   | (527  | )
|Amortization of transition assets  Net |  |      | (125  | )    |   | (136  | )
|Recognized net actuarial loss           |  |      | 334   |      |   | 377   |  
|                                        |  |      |       |      |   |       |  
|Total net periodic benefit cost         |  | $    | 1,207 |      | $ | 1,269 |  
|                                        |  |      |       |      |   |       |  

Insured
other benefit cost trend rates have a significant effect on the amount reported of the other benefit plan.

The
Company's policy for determining asset mix-targets incluyes periodic consultation with recognized third party investment consultants. The expected long-term
rate or return on plan assets is updated periodically, taking into consideration assets allocations, historical returns and the current economic environment. The fair value of plan assets is impacted
by general market conditions. If actual returns on plan assets vary from the expected returns, actual results could differ.

These
plans accounted for approximately 30 percent of benefit obligations. The following table represents the asset mix of the investment portfolio at December 31:

2003

2002Asset category:Equity securities

87%

69%Treasury bills

13%

31%100%

100%


The
amount of contributions that the Company expects to be paid to the plan during 2004 is not material.

NOTE 8STOCKHOLDERS' EQUITY:

At December 31, 2003, the Company's capital stock, was represented by 15,741,000 Class I common, no-par value, Series "A" shares
amounting to $355,714.

F-16

---



Dividends
paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Any excess over this account is subject to a tax equivalent to 49.25% and 47.06%, depending
on whether paid in 2004 and 2005, respectively. The tax is payable by the Company and may be credited against its income tax in the same year or the following two years. Dividends paid are not subject
to tax withholding. In the event of a capital reduction, any excess of stockholders' equity over capital contributions, the latter restated in accordance with the provisions of the Income Tax Law, is
accorded the same tax treatment as dividends.

F-17

---



NOTE 9SEGMENT INFORMATION:

Based on the information reviewed by the Company's executive committee, the Company has concluded that its operations are within one reportable segment.
Accordingly, only the financial information with respect to the principal business of producing copper has been presented.

The
prices of almost all of the Company's products are determined by international market quotations in U.S. dollars. The Company made direct sales in the following countries:

|                         |  | Year ended December 31,
|------------------------ |  | -----------------------
|
|United States            |  | $                      
|Switzerland              |  |                        
|Belgium                  |  |                        
|Guatemala                |  |                        
|Peru                     |  |                        
|Mexico                   |  |                        
|                         |  |                        
|Total previous countries |  |                        
|Other countries          |  |                        
|                         |  |                        
|Total worldwide          |  | $                      
|                         |  |                        

NOTE 10BALANCES AND TRANSACTIONS WITH RELATED PARTIES:

a.     Balances
receivable and payable with affiliated companies and related parties are shown below:

|                                                                             |  | December 31,
|---------------------------------------------------------------------------- |  | ------------
|
|Accounts receivable:                                                         |  |             
|Minera México Internacional, Inc.                                            |  | $           
|Grupo México, S. A. de C. V.                                                 |  |             
|Servicios de Apoyo Administrativo, S. A. de C. V.                            |  |             
|Minera México, S. A. de C. V. (Formerly Grupo Minero México, S. A. de C. V.) |  |             
|Minerales Metálicos del Norte, S. A.                                         |  |             
|Other                                                                        |  |             
|                                                                             |  |             
|                                                                             |  | $           
|                                                                             |  |             
|Accounts payable:                                                            |  |             
|Mexicana de Cobre, S. A. de C. V.                                            |  | $           
|Asarco, Inc.                                                                 |  |             
|Mexicana de Cananea, S. A. de C. V.                                          |  |             
|Líneas Ferroviarias Mexicanas, S. A. de C. V.                                |  |             
|Minerales Metálicos del Norte, S. A.                                         |  |             
|Other                                                                        |  |             
|                                                                             |  |             
|                                                                             |  | $           
|                                                                             |  |             

F-17

---



b.     The
main transactions carried out with affiliated companies and related parties were as follows:

|                        |  | Year ended December 31,
|----------------------- |  | -----------------------
|
|Revenues:               |  |                        
|Sales                   |  | $                      
|                        |  |                        
|Interest                |  | $                      
|                        |  |                        
|Other                   |  | $                      
|                        |  |                        
|Expenses:               |  |                        
|Interest                |  | $                      
|                        |  |                        
|Administrative services |  | $                      
|                        |  |                        

The
Company lends to and borrows among affiliates from time to time to fund acquisitions and for other corporate purposes. These financing transactions bear interest at market rates.

NOTE 11INCOME TAX, ASSET TAX AND EMPLOYEES' STATUTORY PROFIT SHARING:

In accordance with Mexican tax law, the Company is subject to asset tax and income tax, which take into consideration the taxable and deductible effects of
inflation. Through December 31, 2001, the Mexican income tax rate was 35%, with the obligation to pay 30% currently and the option of deferring the remaining 5% until profits are eventually
distributed. The new tax law enacted January 1, 2002, eliminated the option to defer the portion of the income tax payment and reduces the 35% income tax rate by one percentage point each year
until it reaches 32% in 2005. The deduction of the employees' statutory profit sharing amount and the obligation to withhold taxes on dividends paid to individuals and foreign residents was also
eliminated.

Asset
tax is calculated by applying 1.8% to the Company's asset position, as defined in the law, and is payable only to the extent that it exceeds the income tax payable for the same
period. If in any year asset tax exceeds the income tax payable, the asset tax payment for such excess may be reduced by the amount by which the income tax exceeded asset tax in the three preceding
years and any required payment of asset tax is creditable against the excess of the income tax over asset tax of the following 10 years.

a.     Taxable
incomeThe principal items which affect the determination of taxable income of Mexican companies are the differences between purchases and cost of
sales, recognition of the effects of inflation on depreciation and on monetary assets and liabilities through the inflationary component, which differ for book and tax purposes.

MM
and its subsidiaries obtained authorization to file a consolidated income and asset tax return. Thus, the Company prepares a consolidated income tax return, including all of
its subsidiaries. Additionally, the Company's subsidiaries file individual income tax returns. The Mexican Income Tax Law limits the tax consolidation to 60% of the parent's equity interest.

The
Company calculates employees' statutory profit sharing using the guidelines established in the Income Tax Law. The provision for employees' statutory profit sharing is included in
cost of sales.

F-18

---



b.     The
components of the provision for income tax, deferred income tax and asset tax are summarized below:

Year ended December 31,2003

2002

2001Current:Income tax

$
3,015

$
3,137

$
3,517Asset tax


233,038


3,137


3,517Deferred:Income tax


3,827


(10,334
)

(10,313
)$
6,865

$
(7,197
)
$
(6,796
)


The
employees' profit sharing expense was as follows:

Year ended December 31,2003

2002

2001Current

$
29

$
81

$
999Deferred


890


(2,807
)

(873
)$
919

$
(2,726
)
$
126


Income
tax expense for the years ended December 31, 2003, 2002 and 2001 differs from the Mexican Statutory income tax rate as follows:

|                                                        |  | 2003 |       | 2002 |   | 2001   |  
|------------------------------------------------------- |  | ---- | ----- | ---- | - | ------ | -
|Income (loss) before income taxes and minority interest |  | $    | 4,361 |      | $ | 3,325  |  
|Increase (decrease) due to:                             |  |      |       |      |   |        |  
|Inflationary tax componentNet                          |  |      | (402  | )    |   | (924   | )
|Change in statutory tax rate                            |  |      |       |      |   | (7,345 | )
|Change in valuation assumptions                         |  |      |       |      |   | (7,421 | )
|Non-deductible items                                    |  |      | 408   |      |   | 5,168  |  
|Tax loss carryforward                                   |  |      | 205   |      |   |        |  
|Other                                                   |  |      | 2,293 |      |   |        |  
|                                                        |  |      |       |      |   |        |  
|Tax at effective tax rate                               |  | $    | 6,865 |      | $ | (7,197 | )
|                                                        |  |      |       |      |   |        |  

The
deferred income tax effect from the reduction in the 2002 income tax rates, related to the gradual reduction of the income tax rates explained above, resulted in the recalculation of
the deferred income tax liability recorded as of December 31, 2001. The various rates applicable beginning in 2003 were applied to the temporary differences based on their estimated reversal
date.

F-19

---



c.     At
December 31, 2003 and 2002, the main items comprising the (asset) liability balance of deferred income tax and employees' statutory profit sharing were as
follows:

|                              |  | 2003 |        | 2002 |  
|----------------------------- |  | ---- | ------ | ---- | -
|
|Current:                      |  |      |        |      |  
|Inventories                   |  | $    | 22,483 |      | $
|Exchange (loss) gain          |  |      |        |      |  
|Non-deductible reserves       |  |      | (2,677 | )    |  
|                              |  |      |        |      |  
|                              |  |      | 19,806 |      |  
|                              |  |      |        |      |  
|Long-term:                    |  |      |        |      |  
|Property, plant and equipment |  |      | 8,668  |      |  
|Tax loss carryforwards        |  |      |        |      |  
|Recoverable asset tax         |  |      | (3,152 | )    |  
|Deferred charges              |  |      | 2,278  |      |  
|                              |  |      |        |      |  
|                              |  |      | 7,794  |      |  
|                              |  |      |        |      |  
|Valuation allowance           |  |      | 2,964  |      |  
|                              |  |      |        |      |  
|                              |  |      | 10,758 |      |  
|                              |  |      |        |      |  
|                              |  | $    | 30,564 |      | $
|                              |  |      |        |      |  

d.     Tax
loss carryforwards and recoverable asset tax paid for which the deferred income tax asset and prepaid income tax, respectively, have been recognized can be recovered
subject to certain conditions. Restated amounts as of December 31, 2003 and expiration dates are as follows:

Year of expiration

Tax loss
carryforwards

Recoverable
asset tax2012

$
376

$
1872013





2,965$
376

$
3,152


NOTE 12FINANCIAL INSTRUMENTS:

Concentration of risk

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents,
short-term investments and trade accounts receivable.

The
Company invests or maintains available cash with various leading banks principally in Mexico and the U.S. or in commercial paper of highly-rated companies. As part of its cash
management process, the Company regularly monitors the relative credit standing of these institutions and, by policy, limits the amount of credit exposure to any one institution. In the normal course
of its activities, the Company grants credit to its customers. Although the accounts receivable resulting from these transactions are not guaranteed, the Company has not had any significant portfolio
recovery problems.

F-20

---



NOTE 13CONTINGENCIES AND COMMITMENTS:

The Company is involved in various legal proceedings derived from its normal operations. The Company does not expect that any of these proceedings will have a
material adverse effect in its financial condition or results of operations.

NOTE 14SUBSEQUENT EVENTS:

On February 3, 2004, GMEXICO, the largest stockholder of Southern Peru Copper Corporation (SPCC), presented a proposal regarding the possible sale to SPCC
of all the shares of GMEXICO's subsidiary, MM, representing approximately 99% of MM's outstanding shares, in return for the issuance of additional shares of SPCC. MM holds substantially all of
GMEXICO's Mexican mining assets.

SPCC
has formed a Special Committee of Disinterested Directors, comprised of members of its Board, to evaluate the proposal. There is no assurance that this transaction will be
consummated.

F-21

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INDEX TO EXHIBITS

|Exhibit |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4(a     | ) | Merger Agreement, dated May 28, 2003, among Minera México and Grupo Minero México (Translation from Spanish into English).(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4(b     | ) | Common Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Minera México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre, S.A. de C.V.,
Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad Civil por
Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., Bank of America N.A., as administrative agent to the bank holders, HSBC Bank USA, as shared payment agent and collateral agent, HSBC
Bank, USA, as SEN collateral agent, The Bank of New York, as trustee for Grupo Mexico Export Master Trust No. 1, as SEN Trustee. (2)
|4(c     | ) | Amended and Restated Trust Indenture, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., as issuer of the Borrower Notes, The Bank of New York, as trustee of Grupo Mexico Export Master Trust No. 1, as issuer of the Secured Notes
and HSBC Bank USA, as SEN collateral agent. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4(d     | ) | SEN Security Agreement, dated as of April 29, 2003, among Grupo Minero México, S.A. de C.V., as borrower, The Bank of New York, as trustee of Grupo México Export Master Trust No. 1, as SEN Trustee, Minera México, S.A. de C.V.,
Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre, S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y
Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad Civil por Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., as
guarantors and HSBC Bank USA, as SEN collateral agent. (4)                                                                                       
|4(e     | ) | U.S. Security Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Minera México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de Cobre, S.A. de
C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad
Civil por Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., HSBC Bank USA, as shared payment agent and collateral agent, and HSBC Bank, USA, acting in its individual
capacity. (5)                                                                                                                                           
|4(f     | ) | Mexican Security Trust Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cobre, S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea,
S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Americas Mining Corporation, Minera México, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí, Sociedad Civil por
Acciones S.A. and México Compañía Inmobiliaria, S.A., collectively, as grantors, and GE Capital Bank, S.A., Institucion de Banca Múltiple and Capital Grupo Financiero, as trustees. (6)                                                                                                                                                                     
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|4(g | ) | Amended and Restated Credit Agreement, dated April 29, 2003, among Grupo Minero México, S.A. de C.V., Minera México, S.A. de C.V., Industrial Minera México, S.A. de C.V., Minera México Internacional, Inc., Mexicana de
Cobre, S.A. de C.V., Minerales Metálicos del Norte, S.A., Mexicana de Cananea, S.A. de C.V., Mexicana del Arco, S.A. de C.V., Minerales y Minas Mexicanas, S.A. de C.V., Compañía de Terrenos e Inversiones de San Luis Potosí,
 Sociedad Civil por Acciones S.A., México Compañía Inmobiliaria, S.A., Proyecciones Urbanisticas S. de R.L. C.V., certain financial institutions as Bank Holders, and Bank of America N.A., as administrative agent. (7)
|--- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4(h | ) | Credit Agreement dated February 6, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales Metálicos del
Norte, S.A. and Minerales y Minas Mexicanas, S.A. de C.V. (as guarantors), Bank of America, N.A. (as lender) and the Export-Import Bank of the United States in relation to a credit of U.S. $21,445,054 to finance the purchase of foreign capital
goods. (8)                                                                                                                                                                                 
|4(i | ) | Facility Agreement dated February 6, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales Metálicos del
Norte, S.A. and Minerales y Minas Mexicanas, S.A. de C.V. (as guarantors), Bank of America, N.A. (as lender) and the Export-Import Bank of the United States in relation to a facility of U.S.$49,878,640 to finance the purchase of foreign capital goods,
 equipment and spare parts. (9)                                                                                                                                                  
|4(j | ) | Down Payment Financing Agreement dated February 6, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales
Metálicos del Norte, S.A. and Minerales y Minas Mexicanas, S.A. de C.V. (as guarantors), Bank of America, N.A. (as lender) in relation to a loan of U.S.$11 million to refinance the down payment portion of the purchase price paid for certain
capital goods, equipment and replacements. (10)                                                                                                                                             
|4(k | ) | Line of Credit Agreement dated August 10, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de Cananea, S.A. de C.V., Minerales Metálicos
del Norte, S.A. (as guarantors) and Banco Nacional de Comercio Exterior, S.N.C. in relation to a facility of U.S.$50 million to finance working capital needs (Translation from Spanish into English). (11)                                                                                                                                                                                                                                 
|4(l | ) | Credit Agreement dated August 30, 2001, among Grupo Minero México, S.A. de C.V. (as borrower), Grupo México S.A. de C.V. (parent guarantor), Mexicana de Cobre S.A. de C.V., Industrial Minera México, S.A. de C.V., Mexicana de
Cananea, S.A. de C.V., Minerales Metálicos del Norte, S.A., Minera México Internacional, Inc. (as subsidiary guarantors), the lending institutions that become parties to the agreement, and the Bank of Nova Scotia as administrative agent
and sole lead manager in relation to a credit of U.S.$100 million to refinance previous indebtedness and finance capital expenditures and working capital needs. (12)                               
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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|8    |  | List of Subsidiaries.                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------
|12.1 |  | Certification of Chief Executive Officer of Minera México, S.A. de C.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|12.2 |  | Certification of Chief Financial Officer of Minera México, S.A. de C.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|13.1 |  | Certification of Chief Executive Officer of Minera México, S.A. de C.V., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|13.2 |  | Certification of Chief Financial Officer of Minera México, S.A. de C.V., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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