Q3 2020 Southern Copper Corp Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience, ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Thousand 20, as well as answer any questions that you might have the information discussed on today's call may include forward looking statements regarding the company's adults and prospects, which are subject to risks and uncertainties actual results may differ materially and the company cautions should not place undue reliance on these forward looking statements.
Then 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 are expressed in full U.S. GAAP now I will pass the call on to Mr., how with Jacob.
Thank you very much you you would normally to everyone and welcome to southern copper.
Third quarter of 2020 results conference call.
Before we go into the details hope to cross border. Let me first express my best wishes for you aren't you loved ones. During these trying times in today's call. We will begin with an update on the measures that we have taken them to keep that going my team to be on the impact that they need to have happen. Our operations. We will then.
Reviewed the copper markets on southern Copper's key results for production sales operating cost financial results and French employees. Subsequently, we will open the session for questions.
[laughter] well, let's make sure we can do it too far to go with my team funded by BARDA repricing airports to safeguard the health and well being of our workforce their families. A nearby communities. Our company. It's operating in full compliance with emergency levels required by local regional.
National governments, and we have implemented rigorous hygiene commutation and safety protocols up all of our parts to it.
September Thirtyth of this year I work operations are 96% capacity usage about 97% of our labor is working in Mexico, and 67% of their workforce in Peru is working on the operation side or at home.
In July we opened up our promises to our most essential constructors, all of whom Muslim flying with very strict probables, including testing for Cobiz My team on board and held monitoring a mandatory corn team, we're forcing measures to limit our workforce exposure.
He sees by imposing troubled restrictions prohibit them great to face meeting.
Jim Wicklund from Washington.
Required appears to older health safety and social distancing admissions decreased by government support.
From the beginning of the pandemic silver and copper has work to implement strong prevention measures to prepare for help orbitz workers their families and their can mean for this purpose. The companies are cool and subsequent bleed.
You did a bunch of $14.6 million for the nations on general support for the publication something I'm missing.
Oh got budgets Nike, 5% has been already executed.
To date, we maintain a dialogue with the communities and local authorities to extreme can you fight against copied Nick.
To bolster responds to get funding we have donated 290000 medical I can supply and 213 bronchodilators for breeding support that hospitals in the communities, where we operate in Mexico. We have set up 49 confined Bates in company owned housing and so in order for people.
Report isolation or primary hospital care.
Do we have donated 18 temporary hospitals with a total capacity of 250 bids under project oxygen supply.
But also the company has made its 218000 liters of liquid oxygen to national hospitals Threed. The population infected with core with my team and good responsible party keeper I'm OK werent in the southern part of <unk>.
On top of these conditions.
Where did they been coordinating molecular testing laboratory too much to work and to me. These are no oxygen plants.
One in partner with that 720 cubic meters per day of capacity on another one for pool, That's Africa profit of 222 cubic meters.
They are seeking additional oxygen.
We have also been made its over 63600 keep [laughter] personal protection equipment medical stuff I'm 25000, personal hygiene kits for workers onto the population in our area for instance.
These donations include information imported population about hobbies 19 excess spread and symptoms. We got also donated screaming and personal protection equipment to members of the National Guard from Mexico and of the Peruvian Fortys on sorry.
Additionally, we're helping vulnerable individuals such as the elderly or disabled persons I'm pregnant woman, Michael maybe more than 45900 kids companion food and personal hygiene items.
In addition to the aforementioned airports, we have installed more than 300 and portable thing you need to be areas of the communities to ensure access to prevent these how what hand wash.
Moreover, conclude courage complaints would this be it's from mixtures. It companies offering 3442 sports <unk> workshops in line to the community.
The company sponsors 11 schools with 3677 students that since the beginning of the pandemic received 470048 483.
And courses so they can continue their education with quality.
Additionally, throughout our community care service, we offer free medical psychological unemployment counseling 24 hours a day.
Older initiatives include a special programs that benefit communities around us.
For the elderly people more than 313 community volunteers, who participated in the letter exchange program with messages Delever ambulatory. Please.
Moreover to develop urban Fork trucks, we have provided 2199 supply keep [noise].
So many people come to yourself, you fady, making more than 40000 face Mark.
Considering the current environment and the impact of the coordinate came from them. We believe that mining production on the embarrassment will play an important role in the recovery of both the Mexican and the Peruvian economy.
Such we will continue to develop our poor year consistent with our belief that southern copper's operations constitute our risk control generators or economic resources that provide well remunerated employment tax revenues to the countries in which we operate.
No wonder our focus on the copper market the core of our business.
In the third quarter of this year doesn't 20 alone don't wait till exchange copper price increase from an average of $2.63 per pound in the third quarter of 2018 to a price of two dollar from 96 cents or 12.5% higher price.
Hats off to be we're seeing prices at about $3.10 per pound, which reflects the impact of the cokemaking crisis on both the supply and demand for copper and the first of the combined liquidity provided by Synthroid Burns in developed economies at this point the copper price.
Thanks, Bryce seems to be driven by two important factors stick stations have lower supply coming from cheating a major producer due to labor negotiations and an increase in demand from China and older Asian economies in any scenario for economic recovery.
Considering the current market outlook for supply and demand we have a positive view of the long term evolution of the copper price.
Now, let me focus that southern copper's production for the past quarter and 2000 and print.
For copper it represented 82.2% of sales in the third quarter of 2012.
Overproduction Register a decrease of 2.3% with regard to the figure reported in the third quarter of last year.
As he pleaded up 246560 tons in the third quarter of 2012.
This was primarily due to a decrease in production or if I were proven mines, we work with which was in turn attributable to lower ore grades.
This effect was partially offset by higher production at our Mexican mines, particularly up whenever you start which increased its production by 2.3% due to higher ore grades.
In 2003, we expect to produce 996500 tons of copper in line with last year's production and slightly lower than our production.
[noise] for molybdenum you'd represented 5.6% of the Companys sees value in the first quarter of 2020 and its currently our second by problems.
Molybdenum prices averaged $7 I'm 57 cents per pound in the quarter.
And that's compared to $11.76 in the third quarter of 2000, Mickey D's represents.
<unk> of 35.6%.
Molybdenum production increased by 7.8% in the third quarter of this year.
Compared to the same period of 2018, principally due to significantly higher production at our Toquepala mine spoken filing treats its molybdenum production by 23.3% I know that additional production 1114 times were produced at the new molybdenum plant.
Okay partner.
Also the California production increased by 24.5% due to higher grades and recoveries due course, partially offset by lower production at our wouldn't have east online.
In 2020 respect to produce 29400 tons of molybdenum, which represent an increase of 9.5% over our 2018 production level 26900.
Silver represented 642% are from sees value in the third quarter of this year with an average price of $24 up from 59 cents per ounce in the quarter.
Up 44.8% from the third quarter of last year.
Subaru is currently our first byproduct. So so there's the first one malignant I missed the second one.
Silver production decreased by 1.3% in this past quarter.
Due to a decrease in production that book at Pilar.
I Wouldnt have Easter fundings.
We had a positive increasing production not the same martine mine, which increases its production by 10%.
But.
And also in <unk>, we have hired production might be like how do that.
That increase its silver production by 23.4%.
Refined sugar production decreased by 8.6% in the third quarter versus the third quarter of 2018.
In 2020 was picked up to Ustwenty 1.6 million ounces of silver.
An increase of 6.7% when compared to last year's production.
This is mainly attributable to the significant contribution.
By the supporting a bridge some marketing has increased its production in this year two up two were expecting to produce 2.9 million pounds.
Adam ounces of silver and some are team and that compares to 1.2 million ounces in 2019.
Regarding sooner, we believe that prices will be supportive.
Alright intensive industrial use of these metal on the fact that silver like gold is consider a value shelter in times of economic uncertainty.
Think represented 2.9% up from sees value the third quarter of 2020 with an average price of a dollar and six cents per pound in the quarter in line with the average price of the third quarter of 2009. So.
I think my introduction registered a slight decrease 0.4% quarter on quarter on situated at 17198 times. This was primarily due to the shutdown of our something really operation. The first quarter of this year due to a severe severe polluting facility.
We're currently evaluating different options to supply the concentrator at Sun to land.
These negative variances in sync production were mostly offset by a production increase a 1215 Toms studies have 63.5% increase.
At this time time somewhere being mine on an 11.4% increase in production at the sometime out about a month.
Financing production increased by 1.5% in the third quarter compared to the same for yourself.
[noise] forward financial results in the third quarter of 2020 saves were $2.1 billion, which represents an increase of $269.5 million over the saves reported in the third quarter of 2019.
This is a 14.5% increasing sales for.
For copper sales volume increased by 2.1% undervalued by 18.4% in any scenario of better pricing.
[noise] regarding our mainboard problems, we reported higher sales of silver.
Got increased by 50% due to slight increase in volume a much better prices.
Sinks sales rose by 8.7% due to an increasing volume of 7% inauguration prices. These.
These positive results were partially offset by lower sales of molybdenum.
That decreased by 23.5% due to drop in prices I say mention prices decreased by 35.6%, which wasn't term partially compensated by the better volume that we cap of 10.7%.
Our total operating cost and expenses increased by $39.4 million or 3.4% when compared to the third quarter of 2019.
<unk> cost increments has been purchased copper lower capitalized.
Leachable material workers participation and saves expenses East coast increments were partially offset by a decrease in the use of operations constructors diesel and fuel cost inventory consumption.
Operating on repair materials.
[noise] yeah adjusted the beat during the third quarter of 2020 was 1120 $5.9 million, which represented an increase of 24% with regard to the 907.7 million registered and.
The third quarter of last year there.
Adjusted EBITDA margin this past quarter, well situated up 62.9% versus 48.8% in the third quarter of 2015.
On a quarter on quarter basis, EBITDA was 46.2% higher than in the second quarter of 2000.
Operating cash cost per pound of copper before by product credits was a dollar and 36 cents per pound in the third quarter of 2012.
This represents an increase of 9.2 cents older Devalue reported in the second quarter of this year.
7.3% increase in operating cash cost is the result of an increase in cost per pound from production cost treatment and refining charges, an administrative expenses and was partially offset by an increase in the premium to refine copper seats.
Southern Coppers operating cash cost, including the benefit to fight for the crude was 64.5 cents per pound in the third quarter of 2012.
This cash cost was 2.5 cents lower than the cash cost of 67 cents reported in the second quarter of 2000.
Regarding by products, we had a total credit of $374.3 million or 71.1 cents per pound in the third quarter of 2012.
These figures represent 19.8% increase in compare with the credit of $321.5 million or 59.3 cents per pound that we had in the second quarter of 2012.
Great its costs increased for molybdenum zinc.
<unk> and support costs.
[noise] the third quarter of 2020 net income of $506 million for diluted earnings per share of 65 cents was 29.9% higher than the third quarter of 2008.
King.
The net income margin for this past quarter was 23.8% versus 21% in the spring same quarter of 2013. This.
This increase was mainly attributable to higher sales on a quarter on quarter basis, net income was 95% higher than the one in the second quarter of 2012.
Capital expenditures southern copper investment philosophy is not based on the outlook for copper prices, but on the quality of the assets that we operate on the deal flow.
12 years, our strong financial discipline Cups consistently low asked to make ongoing investments in our considerable I sort of portfolio.
The conditions generated by COVID-19 from them has prompted us to introduce new measures to reduce will their ability at our project execution level.
Sanitary measures include frequent probably making testing daily temperature checks mask for vision a mandatory use.
Social distancing at the Worksite I mean, the man camps, and an overly Victoria quarantine crude for our own and contractor personnel.
Locations, where infections are owned the rights song activities has been pushed back or scale down, particularly at construction sites, where personnel are required workflows.
Older Engineering procurement and construction activities are not personal intensive or social distancing can be applied are being executed at a normal pace at this point, we do not expect significant delays in project execution.
For the Peruvian projects, our current portfolio for approved projects totaled $2.8 billion EBITDA.
1.6 billion, which has already been invested mainly at the air pocket parlor concentrator.
<unk> expenses.
We include the upcoming Michuki, yes $2.5 billion.
Topics and those chunk of $2.6 billion of topics, our total investment programming to show what commitment of $7.9 billion.
For the tier muddy up probably you can get to keep our volume through southern copper cuts, we consistently working to promote their with four of the slide probably its population.
As part of these efforts we have implemented successful social programs Humidification hilker unproductive development to improve the quality of life that we.
[noise], we also promoted agriculture, and livestock Pvp seemed to tumble body and supported growth manufacturing fishing and tourism.
The third quarter of 2020, we received their results with a review of the social environment into tier muddy up revenue, which.
Which was conducted by global leader in the environmental social and governance assessments.
Evolution completed the following regarding that were probably.
The company has improved its community relations and the planned for water management system in place for the Tia Maria Brian It's aligned with international customers.
The company has aligned its corporate wide practices with the voluntary principal some security and human rights.
I moved to stake holder initiatives to promote principles to guys trucking companies in the process to provide security for their operations in America respect human right.
We're pleased and encouraged by these results, which reflects the positive impact of our Companys social programs in the Mds area of influence and indebted keep Harvey.
We reiterate our view that the new season of construction activities I cant Medea will generate significant economic opportunities for Thislife probing and every part.
Given the current truly an economic situation. It is crucial to move ahead on projects that will stimulate the sustainable growth cycle.
During the construction and operation Phase will make it a priority to hire local lever to feel that 9000 jobs.
That we expect to generate during the P.M.I.D.S. construction phase we're not breaking was picked the idea to directly employ 600 workers and indirectly provide jobs for another 4200 workers.
Additionally from day, one of our operations, we will generate significant contribution to revenue indebted to keep or we won't be our royalties and taxes.
We expect that program going to acknowledge the significant progress that project has made from the social front on the important contributions that Tia Maria will generate four peru's economy, and so consequently take the necessary steps to provide southern copper's with adequate support to initiate construction.
For the Mexican projects, particularly on whenever you stuff we have in sync.
The new think concentrate or for old whenever you start to see licked.
These forward. It is located between the facility and includes the development of a new concentrator to produce approximately 80000 tons of zinc and 20000 tons of copper per year.
We have completed the basic engineering study and the detailed engineering has reached 75% of companies.
In order to continue with the project the stronger preventive measures to combat called igniting has been put in place purchase orders have been placed for maybe require.
Some of which is currently being manufactured it probably cost all the necessary permits and the capital budget is $413 million, we expect to initiate operations in the third quarter of 2022.
Completed this new facility, we've doubled the company's cement production capacity and will provide 490 direct jobs and 1470 indirect jobs.
[laughter] excuse me excuse me.
For the build out is probably all seen Simona. This is a project that is [laughter].
Located sit keep six kilometers from our operational for that kind of you that these.
These free consists of an open pit mine operation with an annual production capacity.
35000 tons of copper in concentrate.
Our new 25 meter wide off road facility for mining trucks, it's under construction and will be used to transport the ore from that Pete fluid primary crushers I'd like how do you that copper concentrator.
Destroyed will significantly improve their old me now or great combining that point, 78%.
Expected or great from the loudest, we did both.
34% for great from that category.
If I could for P. lot is $859 million and we expect a break to begin production in the first half of 2022.
So now we also have a probably evening if you like.
This is a low capital intensive intensity copper Greenfield project that is strategically located that's approximately 45 kilometres from our win every summer.
Copper oxide mineralization contains estimated proven and probable reserves 225 million tonnes of ore with an average corporate rate of 28 point 28, 7%, which is a very good or great for leachable material win.
We anticipate that it be are we operate that's a conventional open pit mine with an annual production capacity of 36000 tons of copper cathodes.
Diesel Federation, we'd use highly cost efficient and environmentally friendly it's 60 w. picking on him.
The budget for it too loud is $310 million and we expect the project to start production in 2023, we've been inspected mine life 13 years. There are sold from spring into pets leaching process have confirmed adequate levels of copper recovery.
Were adding to our.
Probably its a good.
A discussion a lot of cool, which you separately you can buy Africa before.
A lot of course, our world class corporate deposits located in the central part of the Buck reporting at Peninsula.
Or reserves over 2.4 billion tones and ore grade of point, 40% to 6%.
And point 3 billion plus of Leach material with an all great 2.8.
88%.
And it also has to fight for all the goal, which has a point 11 grams of gold per tone with minimal.
These probably includes an open pit mine combining concentrator nissixty w. operations iron ore production is expected to see to it that's about 190000 tons of copper.
On 105000 tones owns this goal with an estimated capital budget of $2.9 billion.
The company has just started the baseline study I need to be reminded that the basic engineering analysis to request the environmental impact currently.
Currently in the final stage of Lannetts position gross trusses for Detroit.
[noise] regarding dividends as you know is the company policy to review the Companys cash position Specter cash flow generation from operations capital investment plan and other financial needs at each board meeting to determine the appropriate quarterly the accord.
Andy.
Announced to the market on a per worked and second the board of directors authorized a cash dividend of 50 cents per pound per share.
Of common stock payable on November 24.
To shareholders of record all at the close of business on November 11 this year.
Well, we didn't mind, ladies and gentlemen, thank you very much for joining us today, and we will like now to open up the forum for questions.
As a reminder, ladies and gentlemen task a question do you want me to press Star one on your telephone to withdraw your question press. The bounty please stand by while we compile the culinary roster.
Our first question comes from the line of Undressed spoken How's that from you via your line is now open.
Thank you very much just two quick questions from me number one until about a year. Obviously you mentioned, there's been some progress there in the third quarter.
Can you just talk a little bit about what are the next kind of milestones over the next three to six month or they need any dates we should be looking off so for any signposts then I'm kind of also how you're thinking about the political environment through the use of the developing comedy Oh, that's the first question.
Sorry could you just a quick clarify one second question on the by products Sorry did you say that cost before by products went off what do they go down I missed that.
[noise] certainly 10-Q under there okay on the Tia Maria well, we do have folded permits now.
So the next step will be to initiate the construction.
The basic nics.
The next step that where were expecting to to move on.
In terms of Oh for the political environment will truly to approaching the elections. They will be on April 11th of next year.
HM.
Obviously, a win win due to elections or decide to usefully that the that that makes a little bit harder to initiate a new projects now and we're certainly considering that a part of our current Oh good for the project regarding the.
By products well we.
We have for.
[music].
The press release, we indicated will.
We indicated that.
[noise] a reduction in our cash calls.
[noise] [noise].
When compared to the third quarter of 2019.
What's a 82 cents in the third quarter of 2019, and it's been 65 cents, that's a 21.7% deduction.
Year on year.
Quarter on quarter, we had a slight variance.
An increase.
That was the one that I mentioned in my in my report to today so beef.
Before by product credits would have one dollar and 36 cents per pound in this quarter this past quarter.
It was a little bit higher than the second quarter of 2020.
Cash cost by 9.2 cents.
I hope that this Uh huh.
To clarify so your your concern.
No. That's that's that's very clear just follow up though the reason for the slightly higher cost full byproduct sposato I'm sorry.
Yes. The reason is that that we have to.
In the second quarter, and particularly we have to slow down or were patients quite significantly.
In the third quarter, we are recuperating the pace.
Not only in terms of Oh flow of mine material, but also in some older operations for instance, certain maintenance is that were postponed to the second quarter were tactful ended in the third one. So that's why we had the slight increase in our cash costs are still very very good too.
Cash goals too by the way but.
Certainly hired before by protrudes ER.
Due to the increase in west from.
About 127 to 136 per pound before.
Okay. That's very clear. Thank you very much for taking my questions.
Oh look on them.
Thank you. Our next question comes from the line of Seattle. The Escobedo. Your line is now.
Thank you Oh two questions for me first one on the dividends.
Is there a chance that we see a higher dividend be out in the coming quarters or or maybe year, while you're doing you don't have a final decision on the growth projects I mean, the significant growth projects like Tim idea or eventually Hugo for for another one.
And then the second question is related to that as well so t. MIT I understand you know you guys are.
Doing a lot of things there the U.S.G. study, but just to understand if if this takes longer to become a reality would you consider going.
Going for a lot of coal first or this is not in the cards for you.
Thank you.
Okay obedience will ER the.
The board to increase the dividend from 40 cents that we announce.
Announcement in July.
To 50 cents this past Oh certainty second on and.
It's always a decided that at the board at the Board meeting what did they didn't pay.
We are we think that the company has had a very consistent Dr. Pepper off Oh for sending any any cash that is perceived as a excellent to assure holders.
So.
What the company has done to a four quarter quite a while and but.
Yeah. It's it's something that we will have to be decided timing on an ongoing basis by by the board members.
As you know conditions are much more favorable price.
Price wise in the products that we produce.
Holder, Dan Dan molybdenum molybdenum sadly, it's not a it's not keeping the price that he had last year, but that was about 12.
Dollars per pound now its a close to $8 per pound. This one third.
Well so by you lost but all the older prices so for a froglets dropped to half improved for copper very significantly silver and.
And gold, obviously, and we'll think remains pretty much the same but that's that's basically it. So so I think that that slowness that the company has to have some some the cash available. The board will consider if that should be pay us they didnt.
Indicates hope that Cambodia.
Will.
The pretax profit an evolution there that that requires certain certain task to be accomplish our current three P.M. I used the phrase that when our side has finished with all the all the all the permitting and we are we have been doing they're very strong and very successful actually.
Social work, India, India area of the project and we will are willing to move on with it for.
Total article will.
As I had mentioned it taps a catastrophe.
Initiating the Tcten shading.
It to work to get the environmental impact assessment were getting land that it's required for the project. So there are certain steps that we have to to comply with in order to move on with the project I don't see these two projects.
This or that I think that whenever they are mature to move on the company will will put the resources to do so.
That's that's good and just a follow up here in terms of a project there are more mature or less mature.
Beyond T I might you know, which ones are the ones that you see that are closer to.
You know to be more mature anyway, so it would be.
Adequate Mickey I wasn't what would be the order.
There.
Well the ones that were reporting for for our Mexican operations, if you lap the ladies and they think concentrators.
Concentrate or the new zinc concentrate or are the ones that are being developed right now so those should those three in Mexico and Tim idea okay. Besides those.
We have Ah the.
The Greenfield projects that are in Mexico on pay to indicator for.
Well thought through its it PCM idea.
And then we look at the break.
Completion those chunk as he said also probably that he said.
Well, we'll advance and Micciche I used to it where were moving forward with it.
Very nicely actually and so we think that that these disparate car are being developed but the proper pace and in Mexico. Another green to probably get theoretical which is the one day already come and gone.
Okay. Thank you at all.
You're welcome.
Thank you. Our next question comes the line of John Brandt from HSBC. Your line is now open.
Hi, Good morning, Raul Thanks for taking my questions I just wanted to clarify something you said at the beginning.
Did you say in Peru, there's about 65, 70% of the workers back actually working so I'm. Just wondering if you can clarify sort of what the other 30% are doing is this.
Is this going to have repercussions of and presumably it's it's you know.
Acting things like stripping and things like that so I'm just wondering will we see an impact on production from this in the next couple of years.
And then secondly, just wanted to ask you about the production versus sales volume.
Numbers I thought you said last during the call.
Call last quarter that de stocking was it was pretty much done, but it seems like inventory has come down again sales volumes were a bit higher than production again this quarter. So I'm just wondering if if you're now running at a normalized inventory level or should we expect.
Further improvement in working capital.
Thanks.
Sure. Thank you for your questions.
Well for the Peruvian workforce.
We have for.
Certain workers that for different reasons.
We Uh huh.
Having to ask them to come back to work, mainly because they're on on they have some restrictions or due to certain health conditions.
And that's a.
Little bit more significant in Peru, even the protocols that decided to reiterate these kind of to put in place then the Knicks. That's why we have so were operating week to let's say about 65, 65% of the workforce.
Diesel to these employees are being recalled to come back to work as we speak were really doing that the process. It's it's a relatively slow and where where were trying to catch up and having the most of our work force.
In our operations are in the next to Nick the few weeks the Peruvian workforce.
In the case of production versus sales yeah, well, we are we're expecting to to maintain a very close relationship between sales and production sometimes as it happened in the last in the past quarter and at the end of the second quarter, we couldn't ship older older material that we.
We have to really due to high fees at the airport and some modern conveniences, but that will obviously, we made an effort to to catch up on that and that's it's been reflected in our never say its volume. So this this past quarter.
So we are currently norm regarding inventories are and expect to maintain very close relationship between our production or with Saints.
Great and just a follow up on the labor side, we've seen some issues in Chile, with what strikes and issues that Mg.
I mean are you expecting any sort of.
I guess, if you could comment a little bit in your overall relationship with with the unions and.
Communities, both and.
Oh.
Certainly.
Well indicates of pay to ER, we had last year, we signed we signed labor country year, they were contract with our unions.
Most of them one of them at a slightly different the time lag, but we do have a contract with them.
Well, so we're going to see these that's a problem. There we don't believe that we will happen any inconvenience to some back in the case of the Mexican operations are they half a different arrangement for a discussion of salaries. So far we're not is seen any any.
And conveniences regarding the hourly workforce in Mexico as well.
So were in that regard, where where Ah okay I believe.
You may imagine Joan many people these quite concerned the difficulties that that both Mexico them through our pacing.
Due to the call we'd been nemec so.
They were disciplined I believe it's very very high are you able to countries.
Where we operate.
Great. Thanks Roe.
You're welcome.
Thank you. Our next question comes from the line of Dan <unk> from Morgan Stanley. Your line is now open.
Hello, and thank you for taking my question just wanted to ask.
How much do you still have to do on terms of stripping and how that will impact cost before by product going forward.
And in that sense, but if you could provide an updated guidance for upcoming years.
And also do you have any notion of.
How much.
Yeah, just packed so it will be affected.
Collingwood path to not the ability of prior peak in Mexico.
Hi, I'm, sorry, I couldn't get your second question James.
Yes, I think Congress.
UBS.
Currently a proposal for the for the upcoming.
How do you call it that but.
Not yet for next year.
Mining royalties will no longer be deductible from the income tax. So I was wondering if you already happened assessment of what's the impact on your tax bill that.
You mean on the Mexican.
Mexican or tax legislation.
Correct, yes.
[laughter].
Yeah, Yeah correct okay.
Okay. Okay, Let me first go into a well.
We reported a slight increase in our our cash cost before I close rates.
So far were expecting at cash cost of about 70 cents or this year.
It will have a.
It will be either the same or slightly higher it depends on how much.
Maintenance, we can catch up or are in decent fourth quarter.
For for this year.
Now for for 2021, where we're expecting to hair or where were certainly are catching up on maintenance expenditure.
Expenditures, so some that would require some more constructors. So work I never turned to view, it's that we should have a cash cost of.
About a dollar next year.
For four to dose him 20 to 98 cents and 94 cents in 2023.
I, let me mention that we will be we will be including the production of the new projects in Mexico, India to these two years it doesn't 22 or so.
The latter is operational really producing or about to a little bit more than 30000 tonnes per year 35000 tons.
And then in in.
In the 2000 and couldn't degree we will have it be lighter and they wouldn't have Easter sink operation that will certainly improve borrower I were production as well as their cost profile.
Regarding the second it proposing to Mexican Congress.
Well, we don't we don't want to speculate on this when this is a term decision by the Congress, who will provide an ideal to impaired but at this point, we don't think that it's a it's a it's a good idea to to mention.
The only impact because it's mainly is peculiar if at this point.
Okay. Thank you and could you maybe repeat the.
The cash flow and before include before deduction off by product.
For.
For for next year.
Well for now yes for this year and next year.
Okay for this year, we're expecting one dollar and 35 cents before credits.
And for next year when 64.
By the way where were we had this quarter where usefully.
Or doing a midyear review on on the outlook for the company. So it may vary a little bit when we report.
Our view of the of the operations in the next quarter in January.
Okay. Okay. Thank you.
You are welcome.
Thank you. Your next question comes from the line of meal, although still well from Larrain vial. Your line is now open.
Hi, good morning.
Thanks, Paul.
Got you my question.
So I have a first question regarding your growth projects.
I see in the Los Chancas Capex guidance that you have reduced it.
$20 million to $200 million.
What its expansion for that and then I have a follow up.
Sure and it gave sort of a chunk of that we have made ER through food.
A complete review and the pro you kind of as a consequence, we found that.
Literally well, basically where where where we have change.
The mining plan long term mining plan of the project as a consequence, we will be doing less stripping.
And that will have an impact on the on the topics of the Capex will probably because he would require less it would mean at the beginning of the investment as well as a pre stripping. So that those two components are are the main explanation for that.
The reduction in Capex.
Great. Thanks.
Okay and my second question is regarding your steady state.
Building all these project.
When Mexico on how.
Your sustaining capex what level should show didn't reach up to your all of these operations are up and running.
Well currently we have seen capital they tend to range well for.
$500 million per year.
Obviously, we and that's a concern to current production capacity.
So once we finish our projects and that will.
Mean that we will be producing.
Almost a two.
2 million to 1.8 million tons of copper.
That will be our capacity then we should do well.
We should have a obviously a much higher.
Maintenance Capex.
Well.
For a while it will not to press our our.
Our equipments or our expenditures because they will.
New Goodman, usually requires less maintenance for a while and then you do initiate a routine of the maintenance for now we believe that that should be at about 750 million tones or for affordable own wrong, but that's something that will be.
Reviewing this week as we move on into 2028 with where when we believe we will be operating the older products at full capacity.
Okay.
So on a per ton basis should it should stay relatively the same after the baby and.
Initially years.
Yeah, that's a fair assumption.
Okay and now now that you you said you you spent $500 million a year in capex.
I believe this year capex at the beginning of the year, well, that's going to be 1.1 billion right.
I know you have dumped I said, it to 800 million, but dose and the six.
100 million difference and with your sustaining capex.
What.
As your Nordics spending on growth budget.
No I mean, you are on those those 600, where.
Are there going.
Or where we're planning to go at the beginning of the.
We have rescheduling them.
Well this year, we have to if you want to mention that we had the initial budget that was much higher than what we expect to spend and were adjusting the current capex for 2000.
20 to about $650 million of those it has a mix of certain maintenance capex that we haven't been able to do so we are not going to spend the money that we expect for maintenance capex for the reasons I explained certain.
Capital related activities cannot be performed let's say for instance of technical visit to evaluate a an equipment in some other country well you may not being able to travel to that country, where the operation of equipment that you want to buy it. It's it's located.
So you have to postpone certain expenses are for four reasons for technical reasons as well as for sanitary reasons.
And so we have been reducing network topics are.
On on on an ongoing basis this year or at this point, we are not to the changing to debut on the pro you explored the topics for maintenance that we have to do or we are in either event postponing a little bit expenses. The money that we have not to spend.
Through 2020, it's being distributed in the following years doesn't want 21 unknown.
Okay, great. Thanks very much.
Okay, you're welcome.
Thank you. Our next question comes from the line of Gene Bernie from BBB. Your line is now open.
I have a sense all cookie my question and congrats.
You should pull back of the results maybe two quick ones for me.
Just one on getting them would you could you.
We can gain which cannot copy you well could do a approach a little bit to the microphone show.
Sure can you hear me EBITDA now.
Sure the better.
So can you give us.
Just two quick ones for me. This is one of them, what's seen oil prices up for a bit towards trading up.
To the first quarter, but full denim or maybe.
Maybe what's what's your view on that and the second one on the copper markets understand got you optimistic.
Maybe whats your pick as well on the dynamic, especially on the supply side.
Do you own a much capacity do you think he's currently pushing the limits you to you too crowded.
What's your take as well on the human side understand that Youve seen is based on the unit from the from China that can get an update on the other parts of the world Central it much.
Okay I got your second question on the first one I couldn't.
Copy you well, what you said, but let me focus on getting them will tackle your cycle.
Sure Okay.
Well so far.
We we are seeing a reduction in demand and.
And a reduction in supply. It this is a a a crisis the COVID-19 crisis economic crisis for copper.
It's it's a it's a different then it's a different situation than what we usually faced independent let me explain why.
Usually when you had a.
ER market.
[music].
Turmoil that reduce the economic growth worldwide, what we saw in the copper market was a reduction in demand, but supply remain basically intact. So adjustments in supply came after a while due to much lower prices than.
Are the ones that are sustainable long term.
So those lower prices.
Producers shutting down of a high cost operations on that how the market.
Move on towards economic equilibrium for report the Coppermark, that's say what's happening to.
2000, 2008 2009 recession.
Worldwide, we had lower demand than lower supply in this case due to the call would impact in north London operations of different copper producers, we have to vote supply and demand decrease up and now we are we are at a much lower.
Her level of demand and supply.
Our commercial team.
Has indicated that they're expecting where they believe that demand has decreased.
In 2020 by about 700000.
Tones.
And supply has decreased by about 350000 tones.
That's a that's up for 2020.
At the same time, we're seeing we're seeing Ah Ah.
Different events that are supporting copper prices I mentioned the liquidity is.
Available that that the different as central banks, particularly the the European Central Bank and the fed has provide to the markets that is certainly helping to maintain a economic activities on metal prices at the group level.
Also a concern from from the four different the actors that these market. These are what is happening in.
In Chiller were Oh labor talks are affecting about 50% of the worst.
Worse, the chilis, a supply I'd say in the next 12 months.
And that's on the supply side and on the demand, we're seeing a very strong recovery from China and older Asian economies.
That are demanding copper and we're expecting a.
A positive outlook for Ford D.
This coming year and that's why we have these positive view on the on the copper price.
That's what I have to comment on that could you mentioned.
Mentioned your second concern please Jim.
Yes, yes, sure, but just one quick question on.
Were not stopping you.
It appears that his line has disconnected.
Okay.
Let's move on he made or.
Reconnect and will take their coal whenever she is back.
Our next question comes from the line of Robert well Angele from JP Morgan. Your line is now open.
Hi, everyone I know.
You know I guess, we already discussed a lot. So I just wanted to.
From the numbers of your expectations for production.
Both copper in Mali into next year that you mentioned.
In your opening remarks, I'm not sure I got it right can you repeat please and that's all for me. Thanks certainly.
Good to keep talking to you at all.
For Cooper.
Were expecting and 996500 homes.
For molybdenum 29400 tones.
Perfect. Thank you very much.
You're welcome.
Thank you. Our next question comes from the line of Rodrigo Gazzola, Oh from GBM. Your line is now open.
Thank you Hello, Raul good to hear you. Thank you for your time.
They have just a quick clarification or who the love conquers Coughlin low hold up.
Youre expecting to have higher costs for.
For about 170 million.
Good to postpone Lincoln Road trip because.
With.
That that the matter will be spread out through the next three quarters.
So considering your your higher cost cuts the angels for next year.
The question is the good luck.
A big chunk of these additional costs were 20 cents why well by how much.
The first one.
Okay well.
We're ready comment on that and where we're following to a plan to catch up on all the maintenance and some other activities that we have to postpone do the pandemic.
A portion of that has been already absorbed but our operations and will be the case for for for now one and at least two quarters of next year editing time, where we're seeing the certain synergies that we're getting there by by Oh doing.
Finding out different ways to do what we are doing now.
And daddy's or there are some some saving opportunities so that or were foreseen for for the future and we will report on that when we have more clarity, but at this point. The plan is to do the maintenance that we have postponed and tried to be as.
As much as efficient as we can.
By addressing these are due to differing works in the next few quarters.
<unk>.
Okay. Thank you the rail and the next question.
Quick follow up regarding the Peruvian workforce.
Your little low fill the effects in terms of cost.
On production once all the war for workforce restaurants during the last few weeks they went through [noise].
Well they have been paid so we would never stopped paying them.
The Peruvian legislation in this case.
Asked them for ask for them to recuperate.
Recuperate did kind of hey, there has been no the would not not working.
So we're we're developing a plan so they can they can.
Pay back at that time.
That's a that's one thing the other one is that we have to occur in certain expenditures related to to this situation. We have to pay some extra labor time. It was a relatively speaking a small amount of $16 million, but you have to spend.
In our operations due to Colby Ur Cobots to 19 Oh.
LIBOR or production inconveniences. So most of it is possible for extra labor for the ones that could work out the premise yourself. There are big companies are the ones that are not working we will have to pay back the the salaries that he they'd have to receive from there are different ways.
They can do that and that's a follow into proven the station regarding this matter.
Thank you Hello.
Youre welcome good to hear for loop with hearing from year over year.
Hi, Joe.
Thank you. Our next question comes on the line of Robert.
Telethon am advisors. Your line is now open.
Hi, Thank you just one question on my side you.
If you could give us an update on Capex would these changes some payments, but do you expect for next year.
On Capex and how much of that is multi room. Thank you.
Yes.
Certainly.
[noise], let me.
Following a quick fix.
[noise] [noise] [noise] [noise], Okay for next year, where we are.
Picked him to spend $1.4 billion.
For 2000, and $20 billion to $1.8 billion.
2023.
$2.2 billion.
2020 for $2.9 million.
So basically we're rescheduling over expenses the ones that we are we are not exercising this year and a little bit to that that has some kind of a waterfall in terms of a couple of the rescheduling of expenditures for Capex.
Okay.
How much of that is been payments for next year on a one for 1.4 billion bond.
Well its a.
There are there are some expenses that.
For instance, all the equipment that that could be acquire will really we have a really put the purchase order. Some that some of that will be paid particularly for the new concentrator at whenever Easter will be paid this quarter about $70 million of that.
And then it's a it it varies depending on the different projects is not a.
Not a.
It's not the specific for four different projects and scale.
Okay. Thank you.
You're welcome.
Thank you.
At this time I'm showing no further questions I would like to turn the call back over to management for closing remarks.
Okay I have for.
The gentleman that a disconnect or email us he's quest to meet some though on the molybdenum market. He is syndicating why Molly molybdenum plant. If price is still only one that is going down well. That's a question that will sort of lower sales.
Actually it's it's.
There is a there is plenty of supply and that's why that's why this is Jim Rooney said question from BBB or.
It's basically a axis blinded market lived in and it's also related to certain industries that well wont be won't be favor by a current circumstances, such as airplane or manufacturing for instance, that's one of the consumer so for molybdenum <unk> indices dynasty.
We'll say alloys that they use for these.
[noise].
Yeah.
[noise] well ER with diesel we conclude our conference call for today.
We certainly appreciate your participation and hope to have you back with US when we report for the fourth quarter of this year and the full year 2020. Thank you very much and have a nice day today.
Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.
[music].