Copper is one of the most important commercial metals on Earth. It's used more than every other metal except for iron and aluminum. Want to build a house, car, or plumbing system? You'll need copper. Not surprisingly, copper has been a big part of the recent commodity price rodeo, and prices are as high as they've been in well more than 10 years.

As the company with the second-largest copper reserves in the world, Southern Peru Copper (NYSE:PCU) has made the most of this boom time. While all sorts of metals companies have been doing well (such as BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP), US Steel (NYSE:X), and POSCO (NYSE:PKX), Southern Peru has done even better than most.

Revenue was up more than 150% for the fourth quarter, and net income nearly quintupled. Yeah, I said "quintupled."

Copper production rose by nearly 5% in the fourth quarter, with silver and molybdenum production also rising 8% and 40%, respectively. What's more, the company realized considerably higher prices for its output, since average copper prices were 50% higher in the quarter than in the prior year (while silver prices were 37% higher and molybdenum prices were more than 300% higher).

Moving along, the company nearly quadrupled its free cash flow from last year, finishing 2004 with $545 million, and almost half of that amount was generated in the fourth quarter of the year.

That's the good news. Now for the bad news.

Southern Peru expects to produce about 8% less copper in 2005, in large part because of a decline in the quality of ore from the company's Cuajone mine. What's more, the Peruvian government wants to initiate a royalty tax ranging from 1% to 3% on copper producers. Producers are fighting it, and a Peruvian court ruling is due shortly, but it would take a small bite out of Southern Peru's earnings if it stays in effect.

Metal prices are another great unknown in the equation. Although copper is currently trading at a price above the average level seen in the fourth quarter, the futures market looks to be expecting a steady price decline through 2005.

Now, futures markets are notoriously volatile. Just because the price for December 2005 copper is $1.40/lb today, that doesn't mean the price can't be much higher (or lower) by the time December actually rolls around. But it's a risk that investors must keep in mind.

In any event, the lower level of anticipated production and the possibility of higher taxes does suggest to this Fool that Southern Peru might be a little more dependent upon favorable pricing than is your run-of-the-mill copper miner.

Admittedly, valuation on Southern Peru looks appealing. The company has a high dividend yield (though the number you'll see on financial information websites is boosted by a special dividend paid earlier in March), strong return on assets, and very modest debt. While getting into the commodities game today is riskier than it was even six months ago, investors who want a high level of exposure to future metal prices (good or bad) should take a look at Southern Peru.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).