Q2 2020 Southern Copper Corp Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand by thank you for your patience.
[music].
Ladies and gentlemen, todays conference is scheduled to begin shortly police continues standby. Thank you for your patience.
[music].
This morning, we have southern copper Corporation Mr. at El <unk> Jacob.
Vice President Finance, Treasurer, and CFO, who will discuss the results of the company for the second quarter 2020.
Answer any questions that you might be.
The information discussed on today's call May include forward looking statements regarding the company's results.
Prospects, which are subject to risks and uncertainties actual results may differ materially and the company caution to not place undue reliance on these forward looking statements Southern Copper Corporation undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information.
Future events or otherwise all results or express and for U.S. GAAP now I will pass the call onto Mr. al Jacob.
Thank you very much Victor good morning, everyone and welcome to seldom Corporation second quarter 2020 results Conference call.
You should bring it would mean today's conference are Mr. Oscar when Easter All Scotland Sunday courtship Southern Copper's seal on board member.
Before we go into the details of the task Order, Let me first express my best wishes for you and your loved ones. During these trying times into each school will begin with an update on that fight against the <unk> my team to mimic and its impact on our operations. We will then review the copper market and southern Copper's gear.
So related to production sales operating cost uninsured result, an expansion projects after that we will open the session for questions.
We continue to fight the coldest, making pandemic by prioritizing airports to safeguard the scope and we'll be in the whole workforce their families a nearby communities where companies operating in total compliance with the emergency levels required by local regional national governments and we have.
Implement that rigorous hygiene sunny patient safety protocols, Oh, Oh were for two facilities.
At June Thirtyth about 83% of our workforce in Mexico, and 64% of their workforce in Peru are working not be operation spreads from.
Recently, we have open limited access to company premises door, most essential constructors, that's part of that protocol coal, but our constructors must comply with proper well be making testing clinical monitoring and a mandatory required team where imports multiple actions to limit workforce exposure.
Sure too busy season by imposing troubled restriction prohibiting face to face, making urgency for concerns Washington are required adherence to older health safety and social distancing mixtures degree by government North Korea.
From the beginning of the cold like Tim pandemic, Southern copper has been implementing strong prevention measures to protect the counterfeits workers there are permitted under communism.
It is brokers the company has approved a dart yourself $11.2 million for the nature of in general support.
[noise] 40 populations of through a Mexico to date. The majority of these budget has been executed and we're considering a second budget for this purpose to bolster response to the to mimic we have two major medical supplies and dozens of medical men do later for breeding support that hospitals in to come.
It is where we operate in Mexico. We have said 100 set up 135 confine beds and company young housing insulin auto when a workable and compete true to surpass temporary cemetery facilities for people per cent incent them sport Spiritthree disease, who require isolation were primary.
Hospital care impaired the company's amazing 25000 liters per week.
We could liquid oxygen to national hospitals to treat the population infected with corporate 19 into regions of RT keeper and they werent insolvent Bruce.
On top of this initiative, where donating a colbert, making molecular testing laboratory to them, Okay, where we can wait for the talking about region.
We're about to.
I don't need Oh axiom plan with the capacity of 720 cubic meters per day of medicinal oxygen.
We have also eliminated over 63000 items for personal protection equipment medical stuff I'm 25000, personal hygiene kids store workers onto their population in our area for influence diesel nations, including formation for pick up two people operation were about to cope with my team He said.
Spread some symptoms. We got also donated cleaning and personal protection equipment. The members of the National Guard Mexico.
Enough the Peruvian police and army.
Additionally, we were hoping Warner will indeed be will structure of the elderly or disabled persons Brooklyn woman by you know anything more than 43000 keep companion food and personal hygiene.
<unk> to the aforementioned <unk> Air Force, we have installed more than 200 portable things Mr. Deep area for the communities to ensure access to prevent the parent Washington.
Moreover to bolster compliance with you stay at home measures the company's offering over 2000 sports school drone encourage her workshops online additional Armstrong our community care services. We offer we made it go psychological unemployment come soon 24 hours a day.
Southern Copper's, making every year for to keep the pace of production a satisfactory levels why machine not compare to discourage cost. This is reflected in our.
Second quarter 2000 print the girl of course per pound of 67 cents net book like public traded.
These inducement parents quarter, we managed to maintain our production level by focusing on mineral production and prioritizing Hari mineral ore grade mine.
Operationally stripping, particularly as it grew in operations and major maintenance activities were temporarily postpone I will be addressed in the next nine months.
We believe that our strong financial position cost competitiveness on copper reserves would allow us to overcome these difficult times.
Considering the current environment or on the impact of the covert.
Making pandemic, we believed that mining production and investment we played an important role into recovery of both the Mexican improving economy as such we will continue to the rental what we're probably consistent with our belief that southern coppers operations constitute risk control generators economic resources.
The provider well remunerated employment tax revenues to accomplishing which we operate.
Let me now focus on the copper market decor Howard.
In the for second quarter of 2020, the London with of exchange copper price decrease from an average of two doors and 77 cents per pound in the second quarter of 2019 due to the Roseland 42 cents per pound. This is up 12.6% reduction.
In its Brian.
As of today were seeing prices driving higher than to borrow some 90 cents per pound, we refer which reflects the impact of the corporate 19 crisis on both the supply and demand for poker.
At this point the copper price seems to be driven basically by two factors stick stage himself the lack of supply EMIR, you're producing countries such as she lumped through you to copied Nike outbreaks and an increase in chinas demand and this scenario bullfighter economic recovery for this country [laughter] seemed.
Seems to pandemic, it's affecting both supply and demand at this point it is difficult to assist the long term effects of these crisis on the copper market balance and consequently on copper price.
Now, let's focus on southern coppers production for the past quarter.
[laughter] copper represented 82.3% of our assays in the second quarter this year.
Copper production Register a slight decrease of 1.3% compared to second quarter of 2000 My team. That's it bleeds up 243097 times in the second quarter of 2000 front.
This was primarily due to lower production or wouldn't have Easter until could follow mines because of lower for great.
This effect was partially offset by higher production aren't the only mine due to higher ore grades and recoveries as well as to higher production that the hiemstra after operations, receiving some murky Mike.
<unk> <unk>, we expect to produce 907 Pete.
970000, 100000 pounds of copper inline with last year's production and slightly lower than our production.
[laughter] for molybdenum eat represented 6% of the company's takes value in the second quarter of 2020 and is currently over first like broke molybdenum prices averaged eight door up from 24 cents per pound in the quarter compared to 12 or 13 cents in the second quarter opened.
Last year.
This is a 32.1% decrease.
Molybdenum production increased by 16.3 person in the past quarter compared to the same period of 2019 due to significantly higher production up I worked for could Palomar.
We produce 1237 Tonsil also you well molybdenum phone our new molybdenum plant. Okay partner. This is a 44.8% in treating do in these facility that will get Paula mine facility.
Formal with them.
Production also rose up horny with an increase of 25.2% due to higher grades and recoveries.
In 2020 respect to produce 28500 tones molybdenum, which represents an increase of 5.9% over last year's production level 26900 tons and an increase to our plans for dish.
Silver represented 5.6% of our sees value in the second quarter 2020.
We didn't average price of 16 point 54.
Seemed or up from 50 to 54 cents per ounce in the quarter up 11.4% from the second quarter of 2000, Mike.
Hundreds currently our second like problem.
Martin Silver production increased 13.5% into second quarter.
Harbor sort of higher production that insight.
After production resume at this summer teen mine.
In addition, there was higher production not be like how do you dark mine for sort of higher grade.
Well, it's hard for document to California mining <unk> due to higher grades and recoveries, we find seubert production increased by 27.5% the second quarter from.
The same quarter from this similar quarter of 2019 I've heard so the growth in all our pursuit.
In 2020, we expect to produce 22.7 million ounces of silver an increase of 11.7% when compared to 2019.
This is mainly attributable to lose significant contribution will be Sun Murphy mine on this on for a lot about our mine both operations had big seems to.
[noise] worrying festive season.
Regarding silver we believe that prices will be supported by the intensive industrial use of these metal.
And the fact that silver like goal, it's considered our value shelter in terms of economic uncertainty.
Think represented 2.7 per cent uphold saves value the second quarter 2020, with an average price of 89 cents per pound in the quarter a price decrease of 28.8% from 2000 from the second quarter of 2000.
Think mine production decreased by 11.5% quarter on quarter.
It was he played at 15706.
This was primarily due to lower production the charcas mine onto a shutdown of our something larger operation due to severe flooding.
We're confident about leaking different options to supply the concentrator sun to land.
These negative variances in sync production were partially offset by production increase of 2821 phones. This is an increase of 249% at this summer keep in mind.
Refined zinc production decreased by 13% into second quarter of 2012.
[noise] for our financial results in the second quarter off this year sales were $1.8 billion, which represented a decrease.
2.6 million with regard to assays reported during the second quarter of 2000, making this is a 1.8% reduction in revenues or since.
It seems volume for copper.
Increased 11% excuse me for.
[noise] it seems volume for copper increased by 11% and it's been who was up 1.4% in its scenario real work copper prices These case or.
Due to copper we got the you mentioned a reduction in sales value of 12.6%.
Regarding our main by proceeds were register higher sales of silver that increased by 44.2% due to higher volume.
And prices also higher sales for goals.
Increased by 69.4% due to higher volumes on prices. In contrast, we reported lower sales for molybdenum by 30.7% due to lower prices, partially of say, but partially offset by a higher volume.
Oh, 15.4%.
And also we had a decrease in say something by 36% due to both lower volumes price.
[laughter].
Our total operating cost and expenses increased by $103.8 million or 9.4% when compared to the second quarter of 2000 Mason.
[laughter].
The main cost increments are associated with purchase copper lower capitalized leachable material higher inventory consumption and other factors discussed increments were partially compensated by lower diesel fuel cost.
Repair materials on operations constructors.
Operating materials and supplies.
[noise] adjusted the beep done for the second quarter of 2020 was 770 million, which represented a decrease of 18.3% with regard to the 942.8 million dollar, but you certainly second quarter of 2019.
The adjusted to be done marching Oh, the second quarter, what situated at 43.1% versus 51.9% in the second quarter of 2000, making.
And our quarter on quarter basis. It did that was 7.1 person higher than in the first quarter of 2000.
Operating cash cost per pounds of copper before byproduct credits was $1.26 per pound in the second quarter of 2020.
This is 15.6 cents lower than the value for the first quarter of 2000 thing.
The 11% decreasing the operating cash cost instead, we're sort of lower cost per pound from suction decreased 13.1%.
I was partially offset by higher treatment and refining charges.
On the east of these expenses and lower.
Southern Copper's operating cash costs, including the benefits of byproduct credits less 67 cents per pound in the second quarter of 2000.
These cash cost was 9.4 cents lower tend to cash cost of 76.4 cents.
We happened to first quarter of 2020. This is at 12.3% reduction in Cashcall.
Quarter on quarter.
Regarding the bike products, we had a total credit of 321.5 million boards or 59.3 cents per pound in the second quarter of 2000 front.
These figures represent our 9.7 decrease when compared with the crazy or $340.2 million or 65.7 cents per pound the first quarter of 2000 front.
Total liquidity has increased from server by 27.2.
Goal for 60.4, but has decreased for molybdenum and think and so free cash.
[noise] net earnings.
Or net income attributable to actually see short holders in the second quarter of 2020 was $259.5 million. This is 14.5% of sales or diluted earnings per share 34 cents. These seeger compares with net income attributable to institutional holders.
For the second quarter of 2000, making a 402.4 million dollar. This is a 22.1% of save or diluted earnings per share 52 cents.
And our quarter on quarter basis, net income was 20.8% higher than the first quarter of 2000.
[noise] capital expenditures.
Southern Copper's investment philosophy is not based on the outlook for copper prices both on the quality of the assets that we operate and be though.
Throughout the years, our strong financial discipline, that's consistently allow us to make ongoing investments in our considerable assets portfolio.
In the second quarter. Both of these you will spend on their uncertain point $3 million on capital investments, which reflected a 37.2% decrease with regard to the same period in 2019 and represented a 43.7% of net income this quarter.
In the first half of the year, we spent $214.3 million on capital investments, which represented 45.2% of net.
As a consequence of global Colby 19 conditions your measures to reduce build their ability has been introducing our project execution practices.
He started measures include brucie drug tests.
They do temperate to shucks mask for vision and mandatory.
Social distances distancing on Worksite and becomes an acquired team groups for alone and constructs of personnel.
Locations, where infections are on the right.
Hi activity starts being pushed back or scaled down.
Particularly on construction sites, where personnel are required to workflows.
Oh older engineering procurement and construction activities that are not personal intensive or social distance. It's can be a fly are being executed at a normal.
At this point, we don't stick to significantly.
In project execution.
Our current portfolio for Peruvian Pearl units.
Total $2.8 billion off a coupon.
Which 1.6 billion cars being already in this.
Considering the upcoming Micciche Yang 2.5 billion dollar investment and a chunk of 2.8 billion dollar investment projects, our total investment program, who would increase to $8.1 billion.
40, M. idea as you know in July.
Eight of 2019 were granted the construction permit for our Nissixty W. copper greenfield projects to produce hundred 20000 tons a year with their capital budget of 1.4 began for US The government award that permit after completing the company compete on exhaustive review process of members.
Meant on social matters on determining that the company have complied with all regulatory requirements. After addressing all observational me.
The challenges surrounding the construction permits were overcome went on October thirtyth of 2019, the mining consist of to prove them into your energy amines brucie find the construction permits for the Cambodia.
For the Mexican Paul you Wouldnt have Easter think.
Concentrator insulin order.
As I say this facility located.
And we've seen that whenever you stepped facility and includes the development of a new concentrator to produce approximately 80000 tons of thing and 20000 tons of copper per year.
We have completed the basic engineering study and the detailed engineering analysis is underway.
Site preparation has begun and stronger preventive measures to combat coping 19 has been put in place.
Purchase orders has been please for me your equipment and saw me, so really being an effective.
It probably because all the necessary for.
The capital budget is 430 million and we expect to initiate operations in the third quarter 2022.
When completed these new facility, we've doubled the companies think production capacity.
We provide 490 direct jobs on 1407 in direct jobs.
The Buildout is probably baking soda, it's a located six kilometers from the like how do you that mine.
These probably consist of an open pit mine operation within our north production capacity of 35000 pounds of copper concentrate.
Our new Ptwenty five meter wipe off road facility for mining trucks is under construction.
We'll be used to transport the or from the beep two primary crushers I'd be like how do you got copper concentrator.
These probably it will significantly improve their old mineral for great combining the 0.73% to spec that ore grade from P. lobby, we did point, 34% or great average or rate for from lack of either.
Hey, bucket for PD $159 million and we expect the break to begin production during the first her well 2020.
Hey, the latter <unk>. So no there, it's a low capital intensity copper Greenfield project, which is.
Located about a 45 kilometers from Howard will not be summer.
It's copper oxide mineralization contains estimated proven and probable reserves of 355 million tonsil or within average copper grade.
Point 28, 7%.
Hey, Bill that we operate that's a conventional open pit mine and corporate capital we'd be produce.
You've seen highly cost efficient and environmentally friendly it's 60 W technology.
The bucket for it the latter it's $310 million, we expect the per week to start production.
In 2023.
Construction have did titled planned an experimental pants and and test are being performed.
Huh.
Well that to report on the first were sold from experimental caps on leaching process, that's confer adequate levels of copper recovery.
[noise] regarding Buda, then as you know statistic company policy to review at each board meeting the company cash position.
<unk> cash flow generation from operations capital investment plan and polar financial needs in order to determine the appropriate quarterly.
Accordingly, as announced in marketing on July 23.
The board of directors authorize a cash dividend of 40 cents per share of common stock payable on August 25 to shareholders of record at the close of business almost 12 of this year.
What would this mine ladies and gentlemen, thank you very much for joining us and we will like now to open up the forum for quest.
Thank you as you might ask the question you will need to press star one under telephone to withdraw your question press the pound key please send probably composite can a roster.
And our first question will come from line of the Jonathan Brandt from HSBC you may begin.
I am wondering grow congratulations on the results and thanks for taking my questions I first wanted to ask you about the project so.
You are saying that you don't expect material delay I'm just.
Wondering.
Why that is are you assuming there are things sort of getting back to normal now with a with the project work side are you expecting to make it up if you could help me sort of understand why there is more of a delay and the projects that would be a be helpful.
And then secondly, it would be great. If you could sort of touched upon.
What you're seeing from from your clients in terms of demand for copper or are you continuing to sell to sort of the traditional clients that you always do I are you seeing.
Are you seeing interest from sort of your non traditional clients given.
The potential for supply disruptions from from other parts of.
The supply chain.
Great. Thank you.
Okay. Jonathan Thank you very much for your questions on on the projects.
We have to as I mentioned.
We have to implemented several Ur cobot 19.
Come, but mischer set our operations and I thought were probably it's as well I explained in a few minutes ago and Ah, Yes, we can offer to tune situations here for forward. It probably makes certain activities are require or are there.
Form ins at that certainly no isolation, let me say for instance, if you have to too.
Operator, chabal or or do some the land to lend a works most likely the individual symbols in dues are no no can contact and particularly if we strip attacked I'd have to maintain social distance and usage.
The proper the proper equipment.
So.
Even though certain activities has being postponed or where we're still working on on old even all the engineering that we can perform.
On a safer when a safe mold and deal on operations that are that are.
[music].
Well keeping system distance and another coping, making the precautionary measures.
We expect to catch up basically were seen now.
Slide to de it's probably.
A couple months and we want to two touched on that.
Regarding our clients I like to remind our audience that our copper production. It's a it's had very high quality. We offer we guarantee for nines and that is 99.99% of our refined copper and now we're at concentrate saves are what you will.
Coal nowadays tuning concentrate which is a high quality concentrate so we haven't talked much a troubled with our clients maybe.
One more to requesting a a delay in the shipments that we do have a program, but nothing significant or two to two note that these point.
We're not seeing a changing the way that our were trained celebrate they are they're keeping our contract by the way. This is the same pattern that we observed a due prior crisis in 2008 2009.
The sense that due to quality off for copper make us that to be prefer.
On top of some older producer so that's I personally assumption.
Okay. That's it just just a follow up on the project question if.
Sort of coal that lingers for for longer and some of these restrictions that are currently in place.
Remain in place.
You could we potentially see sort of longer delays to some of the projects if things don't don't improve and sort of it at what point do.
Would you start the construction progress where you would sort of have to delay if I understand now with the engineering and things like that.
You're not sort of in close proximity to other people, but at what point of the constructions.
Have to start in order to meet these these timelines that you've laid out.
Well, we don't like to speculate on on on different a possibility for worsen isn't there in that scenario. The worst is to be said these what we have today.
What we're reporting who what we see now if the recent.
Yeah.
A more difficult environment to operate there would certainly have to maintain a set top priority the safety of our workforce and help folks that were workforce and our contractors as well that includes obviously the capital projects.
So.
I don't want to speculate on that.
What we're seeing now we set a conditions remain as they are now will be we'll be doing some work to catch up later on in the future on these projects I belief that the.
The legal to two months or so that we may have now for some of that probably you can some others were being William for work say explain.
They should or could be.
Recuperated overtime.
Great. Thanks Carl.
Thank you for your question.
Thank you and our next question is a will come from a line of Chicago has gone from Goldman Sachs. You may begin.
Chad will your line is open.
Our next question comes line of Timna Tanners from Bank of America, you May begin yeah, Hey, good morning, and thanks as always for all that great detail.
I wanted to drill down a little bit more on your cost commentary. So it's clearly I really impressive results as you point out.
Turning to drill down how much sticky and how much of that was due to.
Delays.
Suspension of stripping and maintenance.
Commentary you mentioned then it could take nine months.
Ticket to some of that catch so will it be like spread out over those nine months equally should we expect.
More.
With a lower cost than normal quarter should we expect higher cost than normal for three quarters. If you could just help understand what what to expect going forward on the cost side.
Certainly thank you for your question.
I see today, where we have for we'd have to prioritize to maintain our production levels.
Yes.
So store plans, we have two to do a very.
Our focus group at work in order to produce the mineral what's required to feed that were concentrators and plants that we can't I'm.
Not to the cost of that for for the future with the to postpone certain certain maintenances and certain.
Certain stripping, particularly of the prove integrations are we at least that DC to DC the catch up on the stripping will be spread through the nine months.
That I mentioned.
For for the year, we're expecting a cash calls before like pro trade so for dollar and 37 cents per pound.
Currently four to six months that we have had already it's a dollar and 34 cents. So it's a three cents of additional cost that we will incur it's about $170 million that should be a spread through timing. The next to next few months I'd hate to nine months a for the most countries.
Certain maintenances there were schedule for the past two months or treatment and we have been Oh, we program them. So.
That's proper for four depending on the condition of the Whitman.
For for this quarter and the next ones.
Okay, just to clarify that Dollarsthirty seven is that forecast a year from 34 year to date, that's across all operations not just.
The true impact.
For the Corporation Yep Yep, Okay, perfect. Thanks for that so generally.
Asking maybe a basic question, taking a step back it's been remarkable how little your operations seem to have been affected by covered 19.
Despite some of that pretty severe actions taken in Mexico. So do you think that you know that's that's sustainable as it is it possible that.
Not really any further locked down and you're able to continue to produce in both those geographies and then if while you're out if you could give us any update on Tia Maria that it's been a.
License is granted thank you.
Certainly.
Well.
In our mining operations or.
In some cases that sees the case of that there will be a mines and some of the Mexican operations as well.
Well, you tariff or the possibility of what we have had the possibility of isolating however operations.
Uh huh.
Most of that nature, where they are located in let me put US. An example, what happens with the token partner mine in Peru.
It's a 150 kilometers away from the nearest seeking.
So we agree on and we certainly appreciate that hope a forward unions on this ER, we agreed to Oh, how far as strict look down the fine as if you go out you can get back and do the acquired team and.
That was what we did.
And ER and we took a several measures to to control the when they do supply chain that we have to feed diesel operation and I'm, I'm and and provide to oldest services food et cetera, et cetera, et cetera that is required by our work.
For us.
And we have here, we have operated or through the look down with these characteristics and we haven't had any cases.
During the operation. So these facilities for quite a while that that's a little west to maintain a proper.
I prefer for their production environment.
By the way in the Peruvian operations, we do workers comp their families, leaving out the premises in a ton side nearby the mines.
And if it makes a recall facility.
Indication for Tim idea will we have expressive and several times that are that the company household permits that are required for initiating that production. If there are older construction of the project. We believed that this is this is a or the pandemic parents and make as much more clear.
For the local population of the importance of these project.
And we are expecting Oh, the national government to to work we pass the mode. There to move along with the probably in a time, where these cars. These kind of investment I would create about 9000.
Jobs Whiting construction.
We'll be a good the possibility of Oh for improving economic environment in Bowl do you slide broadens on data keep by region. We're expecting the first picking these case a to move on with the probably you got started.
At any time, we're ready for that we're one due to when Goldman concur with this view and then move forward with the price.
Okay. Thanks again.
You're welcome to <unk>.
Thank you.
Our next question comes the line of on but as walk from VBS you may begin.
Thank you very much just one question for me.
Just one clarification on your sales strategy.
The option strategy in the second.
First half as a whole I mean, we obviously saw sales volumes off.
More than production was obviously down a bit.
Purely just buying more concentrate from third party operators and something that on whats or did you do any restocking as well.
On site.
And maybe related to that if there wasn't any de stocking would you expect any restocking on your behalf in the second half of the and maybe for sales volumes to slow down a bit.
It's basically a second half sales.
Question. Thank you very much.
You're welcome under its well that is.
We have to at the end of the first quarter, we have to some inventory built that offer production process that was to finish it through the through the quarter and a we are at the very beginning of the pandemic have some difficulty seen in shipping so much.
Our production, but that was to create very quickly sold.
And we could to Delever, our where shipments to a scandal, so data little west to to sell these exits.
Inventory self a of production that we had.
Through the second quarter, that's that explains the difference in in say speeds have used to productions indicator of the concentrate purchases. We have for technical reasons were buying some concentrates that have certain characteristics that allow us to a mixed with our own concentrate to.
You saw were as smelting and refining facilities at a much higher capacity or almost at full capacity nowadays are because of the quality of the concentrates that we that we buy these concentrates mix very well with our own and that creates a certain.
Synergies had a little less to to reduce or then smelting and refining costs, which by the way our smelter.
Smelters have for a half for her kinda ER.
Rick working in cash cost cut the Peruvian operations.
Okay. That's very clear. Thank you very much for taking my question.
Thank you Andrew.
Thank you. Our next question comes from line of Gen. Steve's from Morgan Stanley.
You may begin.
Hello, Rome, and congrats on the results. Thank you could take the question.
Just.
I want to know if you're one point 37.
Cash cost guidance.
Include the impact off and improved sanitary standards and testing off your workforce.
And also if you could give us an updated.
Guidance for production cash cost and.
Capex for auto years.
Thanks.
Certainly thank you again.
Okay, Yes. He does it easier 37 includes all the old expenditures that we have had to.
I'd be operational inside the forward facilities seen in both Mexico went through in total.
We have to spend a perfect spent a little bit less than $12 million.
In these past this past quarter four for.
Sanitary standards et cetera, due to this includes or the news media.
Explained what I, what I mean these these money it's just for four for.
Purposes of maintaining proper working conditions would or.
We eat and for our workforce.
It does not include the donations that we're doing that are included in some into India administrative expenses.
For the for the company.
And into indicates Ofer cashcall some production guidance certainly.
[noise] for production I mentioned about ready, our our forecast for the year, Brian I'm repeating these now.
It's we're expecting to produce 997100 tons of copper.
For 2020.
Our production will be pretty much flat.
All the way to 2023 for 2020, if one were expecting to boost 986300 tons.
2018, it doesn't think you to 940 950000.
2023, where we will have the dude.
Beginning impact will be Latif wouldn't have Easter I think I knew plan first picking to increase our production to 1.066 million phones.
For 2024 were expecting to produce 1.104 million tones and this is basically did the result of having having.
That is wouldnt have used to think it'd be lab.
Uh huh partial production of the comedy.
Indicates ofer cash cost for this year I already mentioned that we're expecting and I know, we're all for the whole corporation cash cost before I, probably true they took a door or 37.
In credits were expecting 60 cents per per pound of corporate that's there do you guys said 77 cents per pound for the year.
A slightly higher than what were expecting now as you know cash cost is one of the most difficult things to predict because it has not only do the cost impact on several several supply such has a few power et cetera. They were I know, but also the.
PAREXEL on price prices on malware bike products or.
I mentioned the really.
I mean should really a silver price.
Never to silver price for for for the quarter of about 60 50 [noise].
[laughter] sensitive.
Sixtyv.
The important 54.
Per pounds donors per ounce, Oh, silver and that's you know now has over 20 years, it's much harder done that's even see so it will vary but that's how we're forecast at this point 0.77.
Centsper problem.
For the next to ER next few years, where were assuming or.
Assuming there and increasing our cash costs due to due to the price pick that were considering for the next to put in next year's and ER and uncertain.
Great experiences that we have in different operations overall, we will have for.
We're expecting that cash cost Oh for about.
93 cents for 2021.
96 cents for doesn't 22.
88 cents for 2023.
And 87 cents for 2000 and couldn't before.
Okay. Thank you and I'm just to be clear that you said 12 million per quarter spend on increased that there's definite testing.
No I'd say that so far $12 million.
I think that we'll be spending so far gifts that includes like or like a a one time there are expenditure for different items that are at inventory spring now, let's say medical supplies. We have for several medical supplies that are a disposal for.
Sure I were or are ready to do use for by our workforce and that will be consumed through the year.
Okay. That's so it's really let me let me I didn't hear.
The little bit on what your and your question.
The Cobiz 19 requires a big airport owner were side and now were workforce and everybody.
Two containing.
But we haven't had a major damage to any of our facilities or anything that the that requires a significant.
Spend detour, where basically focusing on having the proper medical supplies, the social distancing several measures to maintain social distance Sweden.
Yeah, that's being undertaken for instance, or the capacity of the shovels that the transport our personal mill has been reduced so do you have to spend a little bit more money renting some additional buses for instance.
Those are relatively speaking mine ore expenditures given the size of our operations.
Okay, So you're not not required to test your your workforce.
No we do we do on where including there.
Our testing in whether he just said.
Great.
Thank you so much from.
No.
Welcome.
Thank you.
Our next question comes the line glance Boer from Bloomberg Intelligence you may begin.
Hi, good afternoon drought I'm just its I guess, it's a follow up question from my side.
You've obviously given guidance on a full production for this year, but given the delays in maintenance and stripping at what point does that start to impact your production going forward. If for some reason you Conte.
You, calling achieve the the shade Joel that you would like.
So that's my first question in the second one is is I guess just to complete on the on the Capex guidance.
Following up from the last question you guys production and cash cost just if you could give us capex guidance as well that could be great. Thank you.
[noise] certainly grant.
Well.
We have been operating there were our facilities not at full capacity in the past quarter or for for a while then we are we're able to increase the capacity as we move only into having less restrictions generally speaking and.
Equal to Mexico and too.
We don't want to fine now the when this is going to impact our production delaying maintenance and under such.
Where were focusing on on the only scheduling them as we can we did proper workforce or in our facilities and the concert tours that in some cases performed diesel maintenances well for me real quick.
We're in the process, we expect to half by the end of this quarter I'm most of our workforce I do not do operations were ready so.
We are basically focusing on on being sure that.
How are we done where operating won't be a affected by a your major any major maintenance.
We were really lucky in the sense that we need to a significant maintenance of our smelter facilities in Peru last year.
We have to do a each two years ER and the your maintenance to this month or will it what's the skill.
For 2019, we per from it and diesel facility and the refineries are in good shape. The same happened in some of our operations in the mining side, Mexico, and and we are we focus quite a bit on having to all of our production line with proper.
Maintenance, which is preventive maintenance or in most of the cases and that is certainly a useful to.
Situations like this.
Topics.
Our current guidance it's are as follows.
For this year, we're reducing our our capex guidance from $1.1 billion to 800 million or.
Where we're expecting a reduction of about a little bit more than $300 million in capital expenditures in 2000 Trent.
That money will be reallocated to 2021, most of the of it for next year were expecting $1.7 billion capital expenditures for 2000 $20 billion to $2 billion for 2023 2.9 billion.
On dollars I'm for 2024 $2.7 billion piece is to half a the three projects that we have in Mexico. Whenever you still think the and it belongs to the pro you can be they'd be latifiyah. These three projects.
Up and running by by the end of 2023 and that Phuket proxy thing to tell some time before and.
Also to accommodate the tier muddy investment.
We should initiate the if not this year next one.
And then Micciche <unk> Pro you can do turn because please.
In this case it for me to Gamble Chancas, they will be a they will not being operation by 2024 will be and investing part of the of the projects.
Time.
Hi, Thanks very much.
Hello.
And our next question will come from a line of John Tumazos from John Tumazos.
You may begin.
Thank you.
Were earlier questions about here.
Yes.
I don't want to duplicate questionnaires might have stressed affirming me.
Turning stripping Ur cobot costs.
How much of the 67 cents cash costs simply was a decline in crude oil prices.
Weaker currencies.
Crude as back over $40.
That's an upward pressure.
[noise] Okay. Thank you very much for question John then.
[noise] comment on that.
[noise], we had for diesel fuel, we have savings so 38.5 million doldrums.
That's on the average price that we happen to second quarter.
We have to four or they were caused a reduction of about $10 million, mainly due to exchange rate that's for the second quarter.
What do you expect the you expect to.
No.
Exchange rates seems to be.
For a while where they are so we should be having some some savings on that regard.
On fuel, yes, there was a recovery we're still not back to where we were before the Cobiz 19, New crisis is initiated so we will be capturing a portion of diesel savings through the year.
Thank you.
Youre welcome.
Thank you. Our next question on console I know Chaz O'hara from Goldman Sachs you may begin.
Hi, Thanks for the question I'm, sorry, I think I had an issue was the telephone for I think what I would like to understand a little bit batteries.
Our volumes comparing two years were better.
Do you expect Oh.
Great. That's you know 14 talking either street, especially due to the contract that you operating capital in Mexico that Youre going to you all to beat your peers in terms of on well look at.
And the second question is you you see the supply globally.
Weaker back you know these groups.
Favorite when it comes off the main seems that now the 19, sorry expecting to either so tiki you know I'm more six months' 12 month use you see a on important difference on the supply demand stabilization. Thank you.
Sure.
Well I think there we have certain conditions in our operations out I know last week that very detail and I felt food fan or two to maintain or or to catch up on our production level. Once we had a that possibility.
You are as I mentioned before.
Certain some of our facilities are relatively isolated and the workers are performing a BBB very high.
Capital intensive industry you may have.
A facility that that it's a it's a huge where maybe 40 workers.
During the daily basis, and the are spread through.
A big area. So they have no contact to shirt on particularly if you if you stressed that they can't.
We laid that they used to with their federal workers that kind of scope us I think mentioned, we focus specifically on on on the prioritizing mineral production.
So you have heard this combination of two factors that has been that's been in our favor a I mentioned before.
So an example, they took could find our mine due to the fact that <unk>. It was constructed in 19 fix diesel for the past sensory and at that time, you you'd have to do you have to provide their housing facilities to the workforce a and their families.
And so what we have in some of our operations are little towns actually where you'd have to banking you can see a hospital market.
Churches Tetra Tech's it there so.
That plus a their mature.
There are actually to the power workforce, a low west to maintain operations, keeping social distance and operating at the very beginning of the pandemic with very little personnel basically maintaining contained in our operations have to at a lower than than do you sort of rate and then we.
As as conditions, where I understood by the turkeys, we could improve and increase our production operation and and by focusing on better areas of the mine, we were able to produce do copper that tests being reported.
Now regarding the due to supply and demand balance for these two currency situation. It's hard to say this is a and and useful.
A market circumstance, usually when do you have a.
Slowed down in war economy. The war economy, what do you have in the copper and older metals markets. He say a reduction in demand.
Not necessarily in supply and it may you are different. So these are covered 19 pandemic is that not only the man, but supply social affected.
So we have had a.
Supply a reduction seen in different countries are paid when she led to gather produce about 40% of the war supply of copper and as you know a boat to the country's kind of cat or in different operations at different levels depending on.
Each of the <unk> own each company a significant impact.
Or reduce impact depending on when the company on the on the production. That's a that's familiar difference to some other circumstances or a say as they say we talk about the 2008 2009 crisis that was basically.
A big drop in demand, what we saw at that time.
Supply was fine I mean, well.
Obviously after wanting to do that shutting down so for Oh certain premises high cost premises.
By different companies and that helped to balance the market, but in this case.
Got a process well, we are not seen that as of now because I.
I think they supply has been effect as well as demand.
Where are we going well I expect this applied to ER to or catch up eventually.
For now were seeing a different to.
Countries and companies.
Doubling we'd we'd supply issues due to cope with 19 outbreaks or hopefully that will that will cease and we'll see a recovery, but at this point is very hard to see too too.
Either.
Predictor confirmed where supply and demand balance will be in the future.
Thank you how just a final question.
No.
Concerts are suffering a lot.
Mexico, These one off and most affected.
And economies are factored in there for you all tax collection you all is also being affected.
Late last year the worried at all if your congressman scope for closing your friend mining utilization in Greece on on royalties and taxes or do you see these oh well pay show source of concern for the money the screen Mac school or do you feel that these could be now given the economic situation.
Proposed again or something all thought the deadline.
No at this point, we don't see anything related to that Nobody's talking about specific a new taxation for for mining companies for or.
Operations had Mexico ARPU.
Okay. That's clear thank you congrats for the result.
Thank you very much <unk>.
Thank you. Our next question will come from the line of alone. So a salazar from Scotiabank you may begin.
Handle that one in the morning.
On that one clarification East finally, you mentioned that product Sean let's look at full capacity, that's like because I see okay, but lot of it was up over 250000 tons is that so if you analyze that this more than a medium Ponce idea.
HM East that the split them now.
But nothing to see fishing and camping out because you didnt.
Some of that they will be unless seemed to be mode and.
Yeah.
As far away from Columbus, CP sports, that's not the case of Kinda now, which is very close to them.
No.
So what's the situation that you and what's a cohesive situation in kinda now we haven't cases, that's mine. If you can comment on lumbar also one unit volume you remember there was some at no cost that's going to take place decisive and usually close left and you guys said he okay. Okay. So.
That is starting to cellphone seven but I haven't had anything for issued upon a p. The no part this they're taking place. This stuff. If you can just a ill mention anything about the thank you.
Hold on effect leases.
<unk>.
Okay.
Well.
But we did beginning of the pandemic, we were not able to operate at full capacity, we were operating week to about 40% of the workforce in Mexico on and a similar number in improving.
So we were not reaching full capacity at that time, then we have been operating.
If you see I wonder how we're a concentrated or if there were no milling as much mineral as they could on a daily basis, but it was they were moving much higher ore grade.
Minerals, so that a little west to catch up on the production side.
When you at a higher ore grade you know you have for an only the benefit of that higher for great. But also the possibility offer recuperating a slightly higher percentage outflow copper for tone of minimal. So those two factors have helped us to too.
Producer that we'd have to reported a this past quarter.
Now regarding the kinda near as you will mention I phone, so kinda near the kind of near term colonies nearby or almost side by side, we did win of Easter.
Mine that we have Oh, we have to.
Uh huh.
About about 18 cases, so Colby I.
Do they kind of near.
It's a draft people to small number you can see there are the two sides of our workforce over there.
Yes.
Well, that's down 1% of our workforce and and so.
So far we haven't happened need.
And he may your or any de ceased to to regrets in this case.
That's basically it.
We haven't happened he any a any impact on what did you say about the strike.
I think that their workforce is tracking very soon I'm very mature way.
In our operations I say stress in different parts of these presentation.
Very good. Thank you so much if I was just one.
So if you argue sweat using high grade a or at the other beginning then I'll stay pandemic. It should we expect lower grades going forward what was at some point.
We have to mine certain parts of too.
Operations, where do you have a.
Well you half no. That's good old great touch we have mine before who have fun impacting cost and but where we're expecting to we'll see that were forecast for the year as I indicated before.
Okay. Thank you very much.
No.
And our next question. This line of Alex hacking from city you may begin.
Good morning role I, just two quick clarifications. If that's okay did you say that the target for copper production next year is 949000 tons did I hear that correctly.
[noise], how long affected [noise].
Hi, Thanks.
Yeah for this year, where were expecting 997001 comment I'm for next year is 986300, yes, 099 96, okay. Thank you 9.98 seeks 986.
[music].
Okay night Eightsix. Thank you.
And then the other clarification was just on the Capex.
Did you you said eight 800 million for this year.
Yes, that's correct.
But you only spent.
200, and less than 250 in the first half.
I guess why are we going to see such a huge ramp up in the second half a year.
Well one of the reasons for down three said, we will be we'll be doing ah it paying the bills that we have a food. This purchase orders are the first half of this year for say do when are these tech concentrate or are they p. Larissa.
Or some some of the expenditures that we have to do in order to initiate the mine operation or 50, ladies.
In the next to the next.
The year or so.
I'm told that that's basically it that's it's basically paying bills on purchase order said, we have put them, but first part of the year.
Okay, but I mean, I guess not the I mean, the total budget for those two projects combined is less than 600 million. So.
It seems aggressive, but but fair enough. Thank you.
Well, that's that's what the I. We're we're probably to team has a has indicated that they are they don't see them, they're expenditures going to the initial budget there was $1.1 billion.
We are expecting they handed me endorse that's what we're.
The information that we up from there.
Thanks, Rob a good day.
No look good.
Okay and our next question I know you worry mass flow.
Craig asset management may begin.
Yes, thanks for taking my call.
Good clarification, you've given the guidance for Cashcall, but he gave it or cashcall comfortably product do you mind, giving the cashcall guidance, but for the by product healthy as well, but it's all 37 for this year what about the.
Yes. Please.
Certainly you.
Well for next year, we're expecting a dollar and 53.
Oh for 2022 Doron 66.
And for 2023 154.
And for two doesn't than before 151.
$1.61 Okay.
Let me let me, let me comment you read any comment on that.
We're expecting and we're assuming that certain prices that were seeing a much more positive now.
We will change over time and come back towards the where that's that put us on them very conservative for pattern in certain cases, but we are operator, well were assumption so that base.
Well when you talk about the pricing in the prices for supplies raw materials this kind of stuff.
A recovery or let's say a recovery of the Mexican peso a recovery of the good again, so that will make or or a weaker dollar to put it differently, but we'll make a will make a local cost a little bit more expensive thing in U.S dollars or fuel oil coming back to where do we.
Sure. That's those are general assumptions, we on these case or rather beyond that on the on the more conservative side.
There to do all we're planning for the other years.
Okay understood. That's very helpful. Thank you very much.
Oh well.
Thank you now I'm not showing any further questions at this time.
[noise]. Thank you very much Victor well would be so we conclude our conference call for southern Copper's second quarter of 2020 results. We certainly appreciate your participation and hope to have to back with us when we report that.
Third quarter of this year. Thank you very much for nice.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].