SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

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

For the Fiscal Year Ended December 31, 2003
Commission File Number 333-08430-03

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

MEXICAN CANANEA COMPANY(Translation of registrant's name into English)

United Mexican States(Jurisdiction of incorporation or organization) c/o 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: NoneSecurities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Guarantees of 8.25% Series A Guaranteed Senior Notes due 2008 and
9.25% Series B Guaranteed Senior Notes due 2028
issued by Minera México, S.A. de C.V

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201,798,896 Series A 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 18ý

The registrant is a subsidiary of Minera México, S.A. de C.V. The registrant is filing this form using the reduced disclosure format
provided for in Instruction I to Form 10-K. See Explanatory Note.



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TABLE OF CONTENTS

EXPLANATORY
NOTE

PRESENTATION
OF INFORMATION

FORWARD-LOOKING
STATEMENTS

|PART I   
|---------
|ITEM 1.  
|ITEM 2.  
|ITEM 3.  
|ITEM 4.  
|ITEM 5.  
|ITEM 6.  
|ITEM 7.  
|ITEM 8.  
|ITEM 9.  
|ITEM 10. 
|ITEM 11. 
|ITEM 12. 
|PART II  
|ITEM 13. 
|ITEM 14. 
|ITEM 15. 
|ITEM 16. 
|ITEM 16A.
|ITEM 16B.
|ITEM 16C.
|ITEM 16D.
|ITEM 16E.
|PART III 
|ITEM 17. 
|ITEM 18. 
|ITEM 19. 
|ANNEX F  

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EXPLANATORY NOTE

We are Mexicana de Cananea, S.A. de C.V. and are required to file an annual report ("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 are a guarantor of the 8.25% Series A
Guaranteed Senior Notes due 2008 (the "Series A Notes") and the 9.25% Series B Guaranteed Senior Notes due 2028 (the "Series B Notes" and together with the Series A Notes,
the "Notes") of Minera México, S.A. de C.V. ("Minera México"), which 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). Minera México owns 98.49% of our capital stock, and the balance was acquired by the
Mexican National Mine Workers Union in 1990 in connection with our privatization.

Minera
México has filed an annual report on Form 20-F for the year ended December 31, 2003.

We
have omitted certain information required by Form 20-F from this Annual Report on the basis of Instruction I to Form 10-K under the Exchange Act,
which permits a company wholly-owned by another company that is a reporting company under the Exchange Act to file an abbreviated annual report in accordance with the no-action letter
issued by the Staff of the Securities and Exchange Commission (the "Commission") on October 28, 1999.

Our
securities with respect to which there is a reporting obligation under Section 15(d) of the Exchange Act consist only of guarantees of the Notes of Minera
México and cannot be held or traded separately. We have accordingly omitted responses to Items 10 and 14, which call for information concerning the securities that is inapplicable to
the guarantees of the Notes. Information responsive to these Items can be found in the annual report on Form 20-F of Minera México.

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PRESENTATION OF INFORMATION

We are a corporation (sociedad anónima de capital variable) organized under the laws of the United Mexican States ("México") and
present our financial statements in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America. We are Mexicana de Cananea, S.A. de C.V. (and together
with our subsidiaries, the "Cananea Unit"). The Cananea Unit is a majority-owned indirect subsidiary of Minera México, S.A. de C.V. ("MM" or "the Company"). The Cananea Unit is also an
entity registered pursuant to Mexican law, through which the Company holds assets, incurs liabilities and conducts operations in Mexico. The Company's functional currency is the U.S. dollar, while the
Cananea Unit 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.

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

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.

FORWARD-LOOKING STATEMENTS

We may from time to time make forward-looking statements in our periodic reports to the Commission 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" and "project" and similar expressions, as they relate to our management or us 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 do not undertake any 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.

PART I

ITEM 1.    DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

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ITEM 3.    KEY INFORMATION

We have omitted portions of this item on the basis of Instruction I(2)(a) to Form 10-K. See Explanatory Note.

SELECTED OPERATING DATA

The following table presents selected production and other operating data for our subsidiaries and us. The data includes production sold to the other operating
units of the Cananea Unit.

|                                           |                  | Year ended December 31,
|------------------------------------------ | ---------------- | -----------------------
|
|
|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(2) production:                       |                  |                        
|                                           | Copper cathodes  |                        

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ITEM 4.    INFORMATION ON THE COMPANY

We have abbreviated our response to this item on the basis of Instruction I(2)(d) to Form 10-K. See Explanatory Note.

HISTORY AND DEVELOPMENT OF THE COMPANY

We are Mexicana de Cananea, S.A. de C.V. (and together with our subsidiaries, the "Cananea Unit"), a subsidiary of Minera México, a Mexican
corporation. Minera México owns 98.49% of our capital stock and the balance was acquired by the Mexican National Mine Workers Union in connection with our privatization in 1990. On
December 29, 1997, Minera México acquired approximately 15.35% of our capital stock previously owned by a minority investor. We were initially acquired by Mexicana de Cobre, S.A.
de C.V. from the Mexican government in 1990.

BUSINESS OVERVIEW

Introduction

The Cananea Unit operates a major open-pit copper mine in northwestern México at Cananea and is engaged primarily in the business of
exploring, mining and processing copper. The Cananea copper mine is one of the largest copper ore deposits in exploitation in the world. The Cananea Unit is

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engaged
in the production of copper concentrates and copper cathodes. It operates the Cananea mining complex, which includes an open-pit mine, a concentrator and two solvent extraction and
electrowinning ("SX-EW") plants.

For
the year ended December 31, 2003, the Cananea Unit accounted for 16.7% and 46.9% of Minera México's consolidated net sales and operating income, respectively,
and, as of December 31, 2003, the Cananea Unit accounted for 22.3% of Minera México's total assets.

Metals Prices

Our products are internationally traded commodities. Prices are established on the Commodity 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 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 certain metals have on occasion been subject to rapid short-term changes due to speculative activities. Copper prices have been in a general
downward trend since mid-1997.

The
following table sets forth high, low and average spot prices according to Comex in U.S. dollars for copper for the periods indicated:

|      |                   | High |      | Low  |      | Partial Average
|----- | ----------------- | ---- | ---- | ---- | ---- | ---------------
|
|1999  |                   | 0.85 |      | 0.61 |      | 0.72           
|2000  |                   | 0.93 |      | 0.74 |      | 0.84           
|2001  |                   | 0.87 |      | 0.60 |      | 0.73           
|2002: |                   |      |      |      |      |                
|      | First quarter     |      | 0.77 |      | 0.65 |                
|      | Second quarter    |      | 0.78 |      | 0.71 |                
|      | Third quarter     |      | 0.77 |      | 0.66 |                
|      | Fourth quarter    |      | 0.76 |      | 0.66 |                
|      | Year              |      | 0.78 |      | 0.65 |                
|2003: |                   |      |      |      |      |                
|      | First quarter     |      | 0.80 |      | 0.71 |                
|      | Second quarter    |      | 0.79 |      | 0.71 |                
|      | Third quarter     |      | 0.83 |      | 0.75 |                
|      | Fourth quarter    |      | 1.04 |      | 0.82 |                
|      | Year              |      | 1.04 |      | 0.71 |                
|2004: |                   |      |      |      |      |                
|      | First quarter     |      | 1.39 |      | 1.06 |                
|      | Second quarter(1) |      | 1.37 |      | 1.14 |                

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The
high level of copper prices resulted in higher net sales, higher operating income and higher net 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." If high prices continue, these effects will

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persist
and may be magnified. However, 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.

ORGANIZATIONAL STRUCTURE

The Cananea Unit is a part of the business conducted by Minera México through its subsidiaries. The Cananea Unit's extraction, concentrating and
SX-EW operations are essentially independent from Minera México and its other subsidiaries, but in other respects its business and
operations are integrated with Minera México and its other subsidiaries in significant ways. In particular: (a) the Cananea smelter was closed in 1999 following a strike that
began in late 1998, and most of the concentrates produced at Cananea are now smelted by Mexicana de Cobre, S.A. de C.V. ("Mexcobre" and together with its subsidiaries, the "Mexcobre Unit"), another
subsidiary of Minera México; (b) the Cananea Unit relies on services provided by Minera México and its other subsidiaries for sales and many administrative
functions; and (c) the finance and banking operations of Minera México and its subsidiaries, including the Cananea Unit, are managed jointly.

On
May 28, 2003, Grupo Minero, S.A. de C.V. ("Grupo Minero") and Minera México held extraordinary shareholders' meetings approving the merger of Grupo Minero with
and into Minera México. The merger between Grupo Minero and Minera México 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. 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.

PROPERTY, PLANT AND EQUIPMENT

Introduction

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.

Our
headquarters and sales office are in México City and we also have a domestic purchasing office in Hermosillo, Sonora.

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 orogen, extending from southern México 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

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pyrite-quartz
stage envelopes and closes the primary sequence. An extensive and pervasive feldspar destructive sericitic and argillic alteration events 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 average copper content of the ore mined in 2002 and 2003 was approximately 0.576% and was 0.565%, respectively. The stripping ratio (i.e., the ratio of waste materials plus leaching
ore to ore mined) in 2003 was approximately 2.73 to 1.0. 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 4.2 million cubic meters of pregnant leach solution in the old Cananea pit with
a concentration of approximately 1.0 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
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.

The
following table sets forth the capacity, production and utilization information for the Cananea Unit's mining, concentrating, smelting and refining facilities in 2003:

MEXICANA DE CANANEA, S.A. DE C.V.  MINES AND PLANTS CAPACITY UTILIZATION IN 2003

|Facility          |  | Product     |  | Capacity(1) |  | Production(1) |  | Capacity
Utilization |  
|----------------- |  | ----------- |  | ----------- |  | ------------- |  | -------------------- | -
|Mine/Concentrator |  | Milling ore |  | 29,200,000  |  | 20,316,000    |  | 70                   | %
|SX-EW Plant       |  | Cathodes    |  | 54,750      |  | 49,518        |  | 90                   | %

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Reserves

Minera México has estimates of ore reserves prepared with respect to each of its units as of January 1 of each year. The ore reserve
estimates set forth below have been prepared by us in conjunction with Minera México's engineering staff 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 uneconomic to
exploit and result in revision of reserve data from time to time. Reserve data are not indicative of future results of operations.

The
terms "dilution," "probable reserves," "proven reserves," "reserve," "total leaching recovery," "total metal recoverable," and "total mill recovery," which are used in the following
tables, are defined as follows:

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.

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.

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

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.

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The
following table sets forth estimated reserve data of the Cananea Unit as of January 1, 2004, prepared by our Department of Mining, Planning and Control under the supervision
of Minera México's Director of Mining, Planning and Control:

Ore Reserves  (estimated as of January 1, 2004)

|           |          | Ore                                                |           | Copper    |     
|---------- | -------- | -------------------------------------------------- | --------- | --------- | ----
|
|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) |           |          |     

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

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

We have abbreviated our response to this item on the basis of Instruction I(2)(a) to Form 10-K. See Explanatory Note.

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 accounting principles generally accepted in the United States of America. The Cananea Unit is a majority-owned, indirect subsidiary of Minera México, S.A de C.V. ("MM"
or "the Company"). It is also an entity registered pursuant to Mexican law, through which the Company holds assets, incurs liabilities and conducts operations in Mexico. The Cananea Unit comprises
substantially all the assets and liabilities of the Company associated with its mining operations in Mexico. The Company's functional currency is the U.S. dollar, while the Cananea Unit 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.



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 our December 31, 2002 consolidated financial statements, prepared in accordance with Mexican GAAP and accordingly expressed in thousands of Mexican
pesos of

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purchasing
power as of December 31, 2002, our management determined that our 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. 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.

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 15 to our audited consolidated financial statements.



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in México requires us to make
estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at 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.



We periodically re-evaluate 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

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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 the applicable metals market
prices and production costs. 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 life of our mines, which is approximately 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 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(per pound in U.S. Dollars, except for gold and silver, which are per ounce in U.S. Dollars)Copper

$
0.90

$
0.75096Molybdenum


4.60


3.701Zinc


0.50


0.37682Gold


350.00


314.82Silver


5.00


4.615Lead


0.24


0.21831


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

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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 its mining operations as incurred, net operating costs expenses would have increased by $39.9 million, $41.4 million and $79.8 million, for the
years ended December 31, 2003, 2002 and 2001, respectively.

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

Life-of-Mine
Stripping Ratio
for Mexcananea Unit2003

0.562002

0.562001

0.56


Leaching material:We capitalize the cost of materials with low copper content extracted during the mining process ("leaching
material"), which are accumulated in areas known as bings. The amortization of the capitalized costs is determined based on the individual depletion of the bings, 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 provable 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.

12

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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.

We
provide 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. Beginning in 1999, we adopted revised bulletin D-3, "Employee Benefits". Accordingly, we recorded 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.



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.

Beginning
in 2000, revenue from sales of copper concentrate is recorded in the month the product is delivered to customers based on prices as provided in the sales contracts. When the
price is subject to adjustment for changes in market prices between the time of shipment to customers and the settlement date, since we have substantially completed our obligations under the sales
contract and title has passed to the customer, revenue is recognized based on market prices prevailing at the shipment date, and the final price is determined within three months of shipment. Revenue
with respect to these sales is adjusted in the period of settlement to reflect final pricing and in periods prior to settlement to reflect any decline in market prices that may occur between shipment
and settlement.

RESULTS OF OPERATIONS FOR 2003 AND 2002

We reported an operating income of $47.1 million in 2003, compared to an operating income of $16.9 million in 2002. The increase in operating income
was primarily due to higher sales volumes of copper.

We
reported net income of $48.8 million in 2003, compared to net income of $99.4 million in 2002. The increase decrease in net income was primarily due to the decrease in
the deferred taxes.

Net sales

Net sales in 2003 were $239.1 million, 19.4% higher than net sales in 2002, which were $200.2 million. This increase was primarily due to higher
sales volumes of copper, which increased by 6,514.7 metric tons from 2002 to 2003.

Cost of sales

Cost of sales in 2003 was $141.8 million, 3.87% lower than in 2002, due primarily to decrease in stripping cost capitalized and maintenance materials
purchases. In 2002, cost of sales was

13

---



$147.5 million.
Cost of sales as a percentage of net sales decreased from 73.68% in 2002 to 59.31% in 2003.

Administrative expenses

Administrative expenses in 2003 were $7.5 million, 14.26% lower than in 2002, when they were $8.8 million. The main reason for this decrease was a
reduction in the amount charged by Servicios de Apoyo Administrativos, S.A. de C.V., our affiliate provider of administrative services.

Depreciation and amortization

Depreciation and amortization expense in 2003 was $42.7 million, 57.76% higher than in 2002, when it was $27.0 million. This increase was due
primarily to an increase in fixed assets as a result of our investments during the year.

Net financing cost

Net financing cost resulted in an income of $1.2 million in 2003, compared to an income of $7.2 million in 2002. The change from 2002 to 2003 was
due primarily to the 8.96% depreciation of the peso against the U.S. dollar.

Income taxes

Our tax returns and those of our subsidiaries are consolidated and filed at the level of Minera México. Each year we and each of our subsidiaries
pays to Minera México the amount of tax, if any, each subsidiary or we would have paid had they or we filed a separate tax return. In the event Minera México reduces its
consolidated tax liability through the use of tax loss carryforwards or other tax benefits with respect to us or any of our subsidiaries, Minera México is obligated to reimburse us or
such subsidiary for such tax benefit at the time such benefit would otherwise have reduced the tax payable by us or our subsidiary.

Through
2001, the income tax rate was 35%, with the obligation to pay this tax each year at a rate of 30% and the option of deferring payment of the remaining 5% until profits are
distributed. The new tax law enacted January 1, 2002, eliminated the option to defer the 5% portion of the income tax payment and reduces the 35% tax rate by one percentage point each year
until it reaches 32% in 2005. The deduction for employee statutory profit-sharing and the obligation to withhold taxes on dividends paid to individuals or foreign residents was also eliminated.

We
are subject to income tax and to an alternative minimum corporate tax known as asset tax, which is currently assessed at 1.8% on the net average balances 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.

Tax
at the effective tax rate was $(2.9) million in 2003, compared to $(75.3) million in 2002. The difference between the aggregate effective rate of income tax of 2003 and 2002 was
primarily due to the decline in our deferred taxes resulting from a decrease in the statutory income tax rate.

As
of December 31, 2003, we have tax loss carryforwards and recoverable assets taxes in the amounts of $206.3 million and $34.5 million, respectively, that we
believe do not have a high probability of being realized.

ITEM 6.    SENIOR MANAGEMENT AND EMPLOYEES

We have omitted this item on the basis of Instruction I(2)(c) to Form 10-K. See Explanatory Note.

14

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ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

We have omitted this item on the basis of Instruction I(2)(c) to Form 10-K. See Explanatory Note.

ITEM 8.    FINANCIAL INFORMATION

CONSOLIDATED
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION

Consolidated Financial Statements

See our Consolidated Financial Statements at Annex F (as restated).

Legal Proceedings

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

ITEM 9.    THE OFFER AND LISTING

The Notes are not traded on any organized market.

ITEM 10.    ADDITIONAL INFORMATION

We have omitted this item because the securities for which there is a reporting obligation under Section 15(d) of the Exchange Act consist exclusively of
guarantees of securities of Minera México, our parent company. See Explanatory Note.

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our
current business activities do not require the issuance of debt, so our market risk exposure is related mainly to foreign exchange and commodity price movements.

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.

Foreign Exchange Risk

Although all of our sales are priced and invoiced in U.S. dollars, a substantial portion of our cost of sales (approximately 71% in 2003) is denominated in pesos.
Accordingly, when inflation in México increases without a corresponding devaluation of the peso, as it did in 2001, 2002 and 2003, our operating income is negatively affected.
Nevertheless, when inflation in México is lower than the devaluation of the peso, our operating income is positively affected. We have significant liabilities and assets denominated in
U.S. dollars thereby exposing us to foreign exchange losses when the peso declines in value against the U.S. dollar.

Commodity Price Risk

Our exposure to commodity price fluctuations relates primarily to copper 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, silver. Such prices can fluctuate widely and are beyond our control. Since the metals we produce can
generally be sold at prevailing market prices,

15

---



our
results of operations are highly sensitive to such prices. See Item 4. "Information on the CompanyMetals Prices."

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 as of
December 31, 2003)Copper

1,922

$
4.4


ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

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

We have omitted this item because the securities for which there is a reporting obligation under Section 15(d) of the Exchange Act consist exclusively of
guarantees of securities of Minera México, our parent company. See Explanatory Note.

ITEM 15.    CONTROLS AND PROCEDURES

(a) As of the end of the period covered by this annual report, we carried out an evaluation under the supervision and with the participation of our management,
including our (i) President and General Director and (ii) Finance Director, of the effectiveness of our disclosure controls and procedures.

Based
upon and as of the date of our evaluation, our (i) President and General Director and (ii) Finance Director concluded that our disclosure controls and procedures were
effective to ensure that material information relating to us and our consolidated subsidiaries as required to be disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported as and when required; and

(b)
There have been no changes in our internal controls over financial reporting that occurred during the year ended December 31, 2003 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16.    [RESERVED]

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

At this time, the Cananea Unit does not have an audit committee. The board of directors of the Cananea Unit has determined that it does not have a financial
expert meeting the requirements of Item 16A.

16

---



ITEM 16B.    CODE OF ETHICS

The
Cananea Unit is not required to adopt a code of ethics, but is required to disclose whether or not it has done so, and if not, the reasons therefor. The Cananea Unit has not yet
adopted a code of ethics, pursuant to the Sarbanes-Oxley Act, applicable to its principal executive officer, principal financial officer, or principal accounting officer, because Mexican law does not
require Mexican companies to adopt a code of ethics.

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The
aggregate fees billed by PricewaterhouseCoopers S.C. ("PwC"), the Cananea Unit's independent auditor, for professional services in 2003 and to Galaz, Yamazaki, Ruiz Urqiza, S.C.
("Galaz") in 2002 were as follows:

2003

2002(in thousands of dollars)Audit fees(1)

150.4

471.1Tax fees(1)

12.5

63.9Total

162.9

535.0


---

The
Board will pre-approve all audit services and all permissible non-audit services (including the fees and terms thereof) to be performed for the Cananea Unit
by its independent auditors. From time to time, the Board may delegate its authority to pre-approve non-audit services to one or more Board members. Any such approvals shall be
reported to the full Board at the next meeting.

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

Not
applicable.

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 Consolidated Financial Statements are included in this Annual Report beginning at page 1 of Annex F and include:



17

---



ITEM 19.    EXHIBITS

|Exhibit Number |  | Document                                                                                                                       
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|12.1           |  | Certification of the President and General Director of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|12.2           |  | Certification of the Finance Director of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002              
|13.1           |  | Certification of the President and General Director of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|13.2           |  | Certification of the Finance Director of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.             

18

---





SIGNATURES

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.

| |  | MEXICANA DE CANANEA, S.A. DE C.V.
| |  | ---------------------------------
| |  | By:                              
| |  | By:                              

Dated: July 14, 2004

19

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ANNEX F        FINANCIAL STATEMENTS OF MEXICANA DE CANANEA, S.A. DE C.V. (AS RESTATED)

---



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

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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

---



INDEX TO EXHIBITS

|Exhibit |  |                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------
|12.1    |  | Certification of the President and General Director of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|12.2    |  | Certification of the Finance Director of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002              
|13.1    |  | Certification of the President and General Director of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|13.2    |  | Certification of the Finance Director of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.             

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