Q1 2021 Southern Copper Corp Earnings Call
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This is the operator today's conference is scheduled to begin from materially.
So they can be placed on music hold.
Thank you for your patience.
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Good morning, and welcome to the Southern Copper Corporation first quarter 2021 for adults conference call.
This morning, we have the southern Copper Corporation, Mr. Raul Jacob <unk>, President of Finance Treasurer, and CFO, who will discuss the results of the company for the first quarter 2020 one as long as the answer any questions that you might have the IND.
[noise] formation discussed on today's call May include forward looking statements regarding the company's results and prospects, which are subject to risks and uncertainty.
For the results may differ materially and the company cautions 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 a result of new information future events or otherwise.
All of of adults are expressed and for U S. GAAP now I will pass the call went to Mr. Raul Jacob.
Thank you very much Jenny and good morning, everyone and welcome to Southern Copper's first quarter 2021 results conference call.
Of todays conference time of companion by Mr. Oscar von something for old share Southern copper CEO and board member.
Before we go into the details of the past quarter. Let me first express my best wishes for you and your loved ones. During these trying times.
In today's call, we will begin with an update of the measured because we have taken to keep COVID-19 of B. We will then review the copper markets and southern Copper's key results for production sales.
Operating cost.
Financial results and expansion projects subsequently, we will opt in decision for questions let.
Let me say for that seems the beginning of the pandemic southern copper has faced challenges would resilience innovation and solidarity the.
The new normal the day Berens has imposed from the war requires government companies and society to work together.
Protects citizens as we resumed growth generate value and few of economic recovery.
In this regard we believe that the vaccination of airports, which has been kind of reality by the state of Sonora, Mexico represent the positive development.
Through a few of these end of your 100% of the medical personnel of our operations has been vaccinated. Similarly, 98 per cent of the workers over the age of 60 in kind of NAV and 100% of those in Mechel. Saudi has also received a vaccine the.
Advance the vessel our personnel needed protection of the gains the COVID-19 virus provide peace of mind to workers and their families and the loss the company to begin normalizing operating levels at our installations. Our company is contributing to this therefore by providing logistical support during the.
The vaccination rollout.
Now, let us focus on the copper market the core of our business.
For copper in the first quarter of 2021, the London metal exchange copper price increase for an average of $2 56 per pound in the first quarter of 2020 up to $3 85 sales.
<unk> per pound that is of 54% increase.
In corporate pricing.
Today, we're seeing prices overt about at about 450.
Per pound, which both of positive outlook for the 2021 copper market. We believe the following factors are influencing the market at this point.
The the automobile the automobile industry global recovery work reflected in an increase in sales of 18, 9% in the first quarter of 2021.
The two trillion dollars infrastructure package announced by President Biden will significantly increase the demand for copper, which is a fundamental element of green energy facility.
The combined inventories of the London metal exchange the comex.
The warehouse in Shanghai, and bonded warehouses remain at relatively low levels, particularly given the number of days of consumption considered by this inventory.
The most important market intelligence houses for the copper market are expecting a market deficit. This year due to a significant recovery in demand, which should be between three 5% from $5 five per cent.
Now, let us look at southern copper production for the past quarter, and 2000 and for the past quarter.
Copper represented 83, 6% of our sales in the first quarter of the year.
Copper production Register a slight decrease of one five per cent compared to the first quarter of last year as he tweeted.
238402 tonnes in the first quarter of this year.
Westbury mildly attributable to lower production at our Peruvian mines.
And like how do you have the mine in Mexico.
This was driven by a decrease in for Greg.
However, it was partially offset by an increase in production in our operations.
The operations, which was the spurred by a recovery in production of 52, 8%.
Of additional production at the San Martin Mine.
Molybdenum represented six 7% of the company's sales value in the first quarter of 2021, and it's currently our first byproduct molybdenum prices average $11 for 19 cents per pound in the quarter.
Share to $9.56 in the first quarter of 2020. These represents a 17, 1% increase the molybdenum production increased slightly by <unk> two per cent in the first quarter of the year compared to the same period of 2020. This was mainly due.
Due to higher production at our Peruvian mines of increased production of molybdenum by about 10%.
Due to higher grades and recoveries.
And it was also partially offset by a decrease in production at our Buenavista mine due to lower grades.
For Silbert he'd represented five five per cent of our sales value in the first quarter of this year with an average price of 26 point of 29 per ounce of silver in the quarter.
55, 8% from the first quarter of last year.
Subaru is currently our second byproduct.
Mined silver production decreased by six 3% in the first quarter of this year.
After a production sale of win of Easter.
I'm talking about.
This was partially offset by higher production from the <unk> and cardiac operations, we fine tuned our production increased by 6% in the first quarter of this year, mainly due to higher production at our <unk> facility.
Zinc represented one 4% of all of our sales value in the first quarter of this year with an average price of $1.25 per pound in the quarter.
This is of 28, 9% increase in price from the same period of 2000 per se.
Zinc mine production decreased by 14, 5% quarter on quarter to situate at 16466 tonnes. This was primarily attributable to lower ore grades at the Santa Barbara operation and charcoal and charge offs.
And to the shutdown of our sand to land the operation in the first quarter of last year due to a severe for severe Florida.
We finally think production decreased by 35, 7% in the first quarter compared to the same periods of 2020 due to a fire at the facility.
<unk> has temporarily reduced the capacity of our San Luis Potosi zinc refinery.
For our financial results in the first quarter of 2021 sales were $2 $5 billion, which is $812 $8 million higher than the sales of for the first quarter of 2020, our sales increased by 47.
Three per cent in total copper sales volume decreased by four 5%, while the value increased by 55% due to a scenario of better prices as I say copper prices increased by 54% during the past quarter.
Regarding our main byproducts, we reported higher sales of molybdenum by 34, 6%, mainly due to better prices prices increased by 17, 1%.
For molybdenum and we have for open seats on the adjustment that complete the 34, 6% increase in the molybdenum sales.
For silver sales increased by 57, 6% also due to better prices in this case prices increased by 55, 8%.
These results were partially offset by a decrease in volume of three 3% and sales of zinc.
Due to lower volumes the.
Of refined zinc piece was partially offset by a higher higher zinc price.
Our total operating cost and expenses decreased by $5 $5 million or 5% when compared to the same period of 2020.
The main cost reductions were driven by of decreasing copper purchases from third party.
And an increase in capitalized <unk> material.
These cost reductions were partially offset by an increase in workers participation and uptick in energy cost due to a temporary gas shortage in the northern northern Mexico, and increasing the diesel and fuel cost.
Higher figures for inventory consumption of.
For the quarter.
We also had higher depreciation and other factors for remainder of value. Let me focus on the on the increasing due to temporary guest sort of shortly.
<unk> that we have in the first quarter that represented an increasing energy cost of about 36.
The $6 million.
As a consequence of the offer of the temporary use car T that we had in February of natural gas.
In the northern part of Mexico.
Our first quarter 'twenty, one of adjusted EBITDA was $1554 5 million voters.
Which represented an increase of 116, 3%.
Compared to the same period of 2020, where the adjusted the beat that was $718 $8 million the.
The EBITDA margin the first quarter of this year was 61, 4% and that compares with 41, 8% in the first quarter of last year from.
On a quarter on quarter basis, adjusted EBITDA was 24% higher than in the fourth quarter of 2020.
For the cash cost operating cash cost per pound of copper before byproduct trades was a dollar of 51 cents per pound in the first quarter of 2021.
This is seven 4% higher than the value for the fourth quarter of 2020 of these.
These five 2% increase in operating cash cost is the result of higher cost per pound from production cost and lower premiums, which were partially compensated by lower treatment and refining charges and administrative and lower administrative expenses.
The copper operating cash cost, including the benefit of byproduct trades was 73.9 cents per pound in the first quarter of this year. This cash cost was $6 seven higher than the cash cost of 67, two sales that we had in the fourth quarter of 2000.
That is of 10% increase in cash cost.
Regarding by products, we had a total credit of $393 7 million or $77.01 per pound in the first quarter of this year.
These figures or percent of 1% increase when compared to the credit.
<unk>.
$76.03 per pound in the fourth quarter of 2020.
Total credits have increased for molybdenum silver gold and sulfuric acid and decrease forcing.
Net income attributable to FCC share holders in the first quarter of this year was $763 $8 million that is 32% of our sales or diluted earnings per share of 99 cents.
Capital investments.
As you know southern Copper's investment philosophy is not based on the outlook for copper prices, but on the quality of the assets that we operate and develop.
Throughout the years, our strong financial discipline has consistently of Lois to make ongoing investments in our considerable assets portfolio.
The conditions generated by COVID-19 has led us to implement measures to reduce vulnerability of the per.
Project execution lift.
These measures, which are constantly under review include enforcing social distant rooms, strengthening sanitation, therefore, and requiring quarantine periods for personnel.
Some activities in the project execution stage, which are located ingredients in Peru, or Mexico, where new cases for inflation.
And patients are on the right has experienced the Lee.
Consequently, we expect some delays albi.
Minimal at this point.
We expect these delays in the execution of our investment projects. Nevertheless, two day delays primarily affect construction activities that require personnel to work in close physical proximity.
All of their engineering procurement and construction activity.
The interaction between personnel Ireland skill.
In the first quarter of 2021, we spent $232 $6 million of capital investments, which represented 130% increase with regard to the same period of 2020 and accounted for 35% of our net income.
For the Peruvian projects our portfolio, if we're approved projects in Peru totaled $2 8 billion dollar one.
One 6 billion of which has already been investing if.
If we include the up and coming Micciche guidance $2 5 billion dollar budget.
The Chang cost $2 $6 million of budget.
These two projects.
We will increase our total investment program in Peru.
To reflect our commitment of seven 9 billion.
For Tia Maria a project that is located in the Caribbean region of Arequipa, Southern copper has been consistently working to promote the welfare of the slight proteins population of.
As part of these Air Force, we have implemented successful social programs in education health care and productive development to improve the quality of life in the region.
We have also promoted agricultural and livestock activity in the Tambo Valley and supported growth in manufacturing fishing and tourism and stuff.
On January seven 2020. This is the past quarter. We May Europe is like proteins award of safety diploma to southern Southern copper in recognition of the company's efforts to assist the population of the slide during the COVID-19 pandemic.
File the corporate provided medical assistance per.
Of <unk> personal protection equipment and put stuff for the population in the area of influence of the Tia Maria price.
We reiterate our view that the initiation of construction activities of Tia Maria will generate significant economic opportunities for the slight problems and they will keep the REIT given the current Peruvian economic situation. It is crucial to move ahead on projects that will stimulate the sustainable growth cycle.
During the construction of operation Phase, we will make it a priority for higher local labor to fill the 9000 jobs of.
Which 3600, <unk> direct and <unk> thousand 400 are indirect.
The jobs that we expect to generate during the Tia Maria construction of phase.
When the operating we expect Tia Maria to direct include employ 600 workers and indirectly provide jobs for another 4200.
Additionally from day, one of our operations, we will generate significant contributions to revenues in there to keep our <unk> royalties and taxes.
We expect the Peruvian government to acknowledge the significant progress the company has made on the social front for this project.
And the important contributions the Tia Maria will generate for Peru's economy, and consequently take the necessary steps to provide southern copper with adequate support to initiate construction.
For our Mexican projects.
The England restart we have for a new concentrator to produce the zinc concentrate.
When the restates, our operation of the Sonora state the mix.
These pretty cost.
This project includes the development of a new concentrator to produce approximately 100000 tons of zinc and 20000 tons of copper per year.
We have completed the basic engineering study and the detailed engineering study is 89% complete.
In order to continue with the project the stronger preventive measures to combat COVID-19 has been put in place.
Purchase orders have been placed for mayor of equipment.
As part of this process. The mill manufacturing process has been completed and the respective elements are being cheap or are already at the project site.
The provision has all the necessary permits on the capital budget is for $413 million.
We expect to initiate operations in 2023.
When completed this new facility will double the company zinc production capacity and.
And provide 490, <unk> direct jobs and 1470 indirect jobs.
For the <unk> project also in the Sonora State of Mexico.
This of this is that for you the least located six kilometers from luxury that the it consists of an open pit mine operation with an annual production capacity of 35000 tonnes of copper in concentrate.
Our new 25 meter wide off road facility for mining trucks has been built and will be used to transport the ore from the pit to the pre.
I'm Mary Crushers of the luxury that copper concentrate these.
This project will significantly improve the overall mineral ore grade combining for 78% expected.
For from Pilati weed.
The point of 34% or from La Caridad.
The budget popularity of $159 million and we expect the project to begin production in the first quarter of next year.
The latter it's the low capital intensity copper Greenfield project, which is strategically located in Sonora, Mexico with about 45 kilometers from our Buenavista mine.
Its copper oxide mineralization contains estimated proven and probable reserves of 281 million tons of ore with an average copper grade of three 1%.
We anticipate that AP that will operate as a conventional open pit mine with the nano production capacity of 36000 tons of corporate capitals. This operation would use highly cost efficient and environmentally friendly Sx EW technology.
The budget for the pillar is $310 million.
We expect that project to start production in 2023, and the mine life is expected to be 13 years the.
The results from the experimental paths in the leaching process have confirm adequate levels of copper recovery. The company has started the protein basic engineering and size of six pieces collection.
For the logical approach there is located at the Baja California Peninsula.
This is a world class copper deposits.
<unk>, which is located at the center part of the Baja California afternoons at.
The cost or reserved for.
Over $2 4 billion pounds, we can all grateful for <unk> 42, 2%.
And to that we at <unk> 3 billion tons of Leach material, we can for great of point <unk>.
Eight 8% and as a byproduct of the mineral contains point 11 grams of gold per ton.
The project considers the construction of an open pit mine combining concentrate or on the Sx EW operations. The annual production is expected to situate at 190000 tonnes of copper and 105000 ounces of gold with an estimated capital budget.
Of $2 9 billion.
The company has 30 of the baseline standard and its reviewing the basic engineering and at least analysis to request the environmental impact pardon me.
We have had the call.
Responding mining concessions for several years now and during 2020, we finished acquiring all the land needed.
You may have noticed that we are we have add of new section to our press release, which tackles, the matters of the issues of the environmental social and government governance investments or ESG.
Southern copper is committed to improving its ESG record by adopting best practices and communicating to the investment community and the other stakeholders our progress in these matters.
In this regard the company sustainable development policies were recently updated.
These policies of applicable to the FCC any subsidiaries formalize the company's vision commitment and objective to promote sustainable development and generate share value for our stakeholders.
In 2020 and for the support the <unk>.
Second consecutive year Southern copper was listed on the on the.
S&P bulge in the at the.
The Dow Jones sustainability index of Mila.
<unk> <unk>.
Additionally, our score on S&P global annual sustainability assessments increased to 50 points. During the same period. This is these represent a five point increase over the 2019.
In Peru, Southern copper is coordinating with the Peruvian government and our main oxygen supplier.
The adapt which has already been dome, our elo the hockey and planning the number two in record time to produce 140 pounds per week of liquid oxygen for do you have done this work together with the Peruvian government and our main.
Oxygen, so for industrial oxy and supplier to adjust or to adapt.
And.
One of our two oxygen plants to produce liquid oxygen.
The planned number two.
Number one has already been.
Adapted in the past.
Being it has been producing oxygen, but given the needs of these two element by to fight the COVID-19 pandemic.
The company decided to move on with these with these for investment.
The production is being used to supply of hospital and medical facilities in <unk> central and southern regions, where medicinal oxygen is extremely ex care. The company has committed to the <unk> 2000 per tons of liquid oxygen, which is the equivalent of 194.
Allison for oxygen tanks of 10 cubic meters. Each as of March 31, we have the lever 1346 tons of liquid oxygen for 53 per cent of the committed the nation.
In addition to this effort in March we donated two mobile oxygen plants, each with the capacity of 100 and set.
Of 720 cubic meters per day of medical oxygen. These plants will be transported to towns that lack sufficient oxygen supplies to fight against COVID-19.
Last year 3667 students for.
From 11 indication of in centers of sponsored by the company in Mexico, and Peru were able to continue their school programs for modeling.
To cope with the global pandemic, the company's programs, which are develop under the community development model.
Migrated to <unk> platforms last year 4630 for online workshops were held consolidating of community of over 2000, 90000, I'm, sorry, 290000 users on social networks, which represent.
An increase of 63 per cent compared to 2019 and the first quarter of this year. We continued to rollout remote school programs to provide education to 3756 school age children alongside these efforts southern copper offer virtual workshop workshop.
To the community, which has being of producing more than 10 million times since the beginning of the per minute.
Last year was marked by a good performance in terms of educational safety since no fatalities, where register and Maxine rates and loss days in the mining division draw by 44% and 78% respectively.
This compared to 2019, we.
We need of Mexico obtained for the second consecutive year three of the six the extinctions or cash cost of the platform award by the mining Chamber of Mexico for Occupational Health and safety performance. The survey conducted by the mining chamber of Mexico, which determines the.
For recipients includes approximately 120 mining companies of different sizes that are group into the very diverse categories.
Such has opened an underground mining smelting and refining.
Regarding the dividends as you know it is the company policy to review the Companys cash position.
The cash flow generation from operations capital investment plan and other financial needs at each board meeting to determine the appropriate quarterly EBITDA.
Accordingly, with the announced to the market on April 2022 of the board of directors authorized a cash dividend of 70 cents per share of common stock payable on may 25 to shareholders of record at the close of.
Of business on May 11, 2021.
With this in mind, ladies and gentlemen, thank you very much for joining us and we will like now to open up the phone for questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key once again to ask the question. Please press Star and then one now.
And our first question comes from Timna Tanners from Bank of America. Your line is open.
Yeah, Hey, good day, everyone.
Hope Youre doing well I wanted to ask a little bit more about how to think about the upcoming quarter and in particular, if we look at the run rate in the first quarter for copper volumes are ahead of your annual guidance, but still very the LOE and Capex you are below your run rate. So just any.
Any update on how youre thinking about the progress for the year would be great. Thank you.
Well. Thank you very much for your question Timna.
Basically we're maintaining our forecast.
Even though we believe that the in production it may be a little bit higher than what we forecast at the beginning of the year. We mentioned that we're expecting to produce 943000 tonnes of copper at.
At this point the number looks more like 950000 tons, but.
We're still keeping our initial forecast.
To see how we evolved in that regard.
Through the year.
Regarding.
Our Capex, we're also maintaining our budget. Please keep in mind that we will be doing some.
Some of the catch up of work that we couldn't.
The we couldnt down through 2020.
And that will certainly will require some more activity in that regard. Our current forecast is the same that we have at the beginning of the year, which the.
Computers, one $4 billion.
Of capital expenditures for the here for 2021.
Okay. So of Capex can ramp up it sounds like and some catch up as the anthem tied in there.
That range, Yes, and let me let me comment on why why our Capex is relatively slower than the run rate that you would mentioned in your question. The reason for that is that's useful the you initiate the process of certain new projects at the beginning of the year. Once the budget has been approved and the.
And you are useful the catch up and a little bit more of how.
Here, our run rate the say the second half of the year. That's why we're relatively comfortable with maintaining our current capital budget for the year.
Okay, Thanks, and if I could one more on the cost side you know we've been hearing from many of the miners that the higher prices lead to higher cost, which makes a lot of sense and you talked a little bit about factors to think about from Q4 end of Q1, but if you could help US also talk to us about what to expect in coming quarters.
Freight cost are higher you know higher copper price is higher cost, but the other factors that we should be mindful of.
Any change in COVID-19 measures, maybe coming off for or other inflationary measures that you should follow.
Well, obviously, a few fuel prices are higher now than what we had last year at this time.
We had in the first quarter, we had the one time event.
Which is the.
The.
The car city and.
Much higher price for for gas natural gas.
That's already the castle really passed we're not seeing that.
We're not seeing the exchange rate of appreciations, both in Mexico, and Peru of.
At this point.
Is that the.
And the exchange rate that may impact on our cost at this point, we're not seeing that.
And obviously a higher prices that you mentioned may reflect in the future.
On the on.
Higher prices for certain materials, but at this point, we are not the older than for you as I mentioned.
We're not seeing anything.
Significant at this point.
Okay. Thank you very much.
Okay, Let me add something else to your question Tina.
We increased our cash cost before byproduct trades.
A little bit.
It was seven four turns from what we have for the <unk>.
Fourth quarter last year.
And that's basically because of because of the catch up the the companies doing in certain maintenance and stripping and some older <unk>.
Golf Stitch that were postponed at the beginning of 2020.
Our operations due to the COVID-19 pandemic at the beginning we were operating with about 40% of the workforce.
That is not the case now where the.
The very close to 90% in total work force the operation of the Corporation and average.
And that's basically.
What we're doing now we see two catching up the in certain maintenance and certain stripping and some older <unk>.
Works that.
We're part of 2020 and there've been zone now that explains the increase that you are seeing in cash cost before byproduct credits now we have a much more of.
Track piece of it.
Sure.
When <unk> coming from from the price of our by products as well of the price of copper, which is certainly helping our cash cost per year.
Thank you.
Our next question comes from Tiago Lassi Eggo from Bradesco <unk>. Your line is open.
Thank you gentlemen, two questions.
If you could talk a little bit more of about <unk>, our conversations completely stalled ahead of the election here and also.
What could be the timing for the other large projects in the <unk> and Lewis John cost.
Is there any way you can accelerate dose.
And what could be the.
The earliest startup times for for years for for those projects from the second question is just about the of regulatory risk in Mexico, How do you perceive that risk at this point any potential for higher royalties changes in concessions or any other regulatory risks there youre seeing or is this.
More and more on the flight side now thank you.
Let me let me start by the second part of your question of Ireland, We don't see a risk at this point on the regulatory front of you.
We do in all of the holdings has seen Mexico at the beginning of the current administration, where some concerns about the.
The well increasing in taxation or regulatory matters.
We don't we don't see that that has materialized, the specifically affecting our industry and we are comfortable with the it seems the yard now regarding the.
For for the large projects that we have.
Well for Tia Maria first of the worst at the beginning of your question.
We're working.
Actually in the very good way.
Both the civil Society.
The population and the authorities and that is reflected as I mentioned in the in recognition that the company has received from the major of the province of the Slide which is the area of award the project queues.
Due to the contribution of the company.
To fight the pandemic. That's the there was a recognition that we see for at the beginning of the year.
And I think it reflects the improvement that we.
Has been the.
The obtaining regarding Tia Maria.
On the case of the other projects.
They take.
The their time for <unk> where were the.
We're currently very close to signing.
In agreement with the local communities to initiate the exploration for for the project we need to comply also with the environmental.
The.
First environment of value that is true presented to the Peruvian authorities will really deep that will really percentage at that day.
In February of this year and we're expecting the approval the diesel takes about a little bit more than two months. So we're close to to the time, where we will get their feedback and hopefully the approval of this.
Of these environmental for.
First the environmental study.
We may accelerate the project a little bit if we can if we can.
We will do that but at this point of we are the holding to our current forecast for for.
For <unk> the case of <unk>, we're working currently on the final.
From the final.
Environmental impact assessment.
Good progress has been obtained in that regard so we're all day.
Relatively comfortable to how things are moving forward for growth.
Channel.
I think that I cohort of the treatment of the projects that we have already and we're not moving the the startup date for the two projects for the case of <unk>.
The M&A year.
It is expected to initiate production by 2024.
For the channel cost it will be in 2027 and <unk> next year 2028, if we see an opportunity for for moving faster with these projects will take it but the <unk>.
First we will be we'll be keen on getting the.
The best.
Project designed to have a very competitive operation, which we believe it is one of the key elements of the company.
The success in delivering good results to the investment community and obviously the or shareholders.
Thank you and just a quick follow up a lot of coal would be then after after those three range.
A lot of coal will be yes, a lot of COVID-19 suspected for 2000.
28, as well with the <unk>.
With the.
With me today I have.
Comment on the on the Mexican price, let me do that I saw that you referred to two in ones, but yes.
Oh, Yeah, sorry, yeah, Yeah port for.
For a radical it is expected to initiate production by 2028 as we reported the will really have all the necessary land.
Finish the process, we have all the while the concessions. So we can the mill one with Detroit.
Now with the much more the.
A much more comfortable.
<unk> that we were in the past for Pilates, we are expecting as I say to initiate it in 2000.
'twenty two.
And the and.
For for a day later in 2023.
Yes, and very final.
<unk>.
When you think about last chunk of for example, which is the first.
First project this considering <unk> to startup in.
In the future of the first Big project rate, which you mentioned 2027 startup what's holding you back from really accelerating that project. For example, with I understand you mentioned you know you guys are studying and making sure you have the best project, but it's six years from from here into 2027 right.
I would imagine that there is room for you guys. If you want to accelerate maybe a couple of years you could right or is there something really that would make this impossible to happen.
Certain work the task to be of Dawn in order to have the really the land where the plants and from other facilities will be the.
The Bill will take a while and that's why we are not.
Moving these are assumed as you will mentioned it looks like in an useful longer time paint train for term frame for that now there are certain things that we can do and depending also on how the industry is performing which is for instance, accelerating the delivery of key critical equipment that that could be.
Dawn or requesting the.
Two of built.
Built in and build the equipment and deliberate to ask for an advanced so we have for let's say the the meals for for the cash.
Concentrate or the.
Where the ready to install and that could save us some some lead time, but at this point that's the for the forecast that we have for us as I mentioned.
And we went we went to maintain it we will report if there is a series of.
The catch up in that regard the lowest to reduce the time as we move on with it.
Got it thank you.
Please keep in mind that the company has been very very careful in developing these these book the capital budgets not only in the fact that they have to be accurate the cost of wine capital cost lines that also in the timeline that they should follow so when we.
Right.
Project, we want to be.
Very very sure that we will complying with bold the timelines that we have for the project and the capital budget. That's why you see our track record you won't see that the company has failed.
With the the budgets for the projects that we have indicated of the construction time.
Alright, Thank you again.
Youre welcome Sir.
Thank you. Our next question comes from Carlos de Alba from Morgan Stanley. Your line is open.
Yes. Thank you.
I hope all of these fine with you and your families.
Question on well have some of the questions. So the first one if I may is on the on cash cost before by products.
Well you mentioned why it increased quarter on quarter. It was certainly better I think the then at least of I expected and maybe better than the guidance for the year. So could you could you maybe elaborate how sustainable this.
Level of cash cost are and if the any revisions to the do the guidance for the year interest of cash cost before by products.
Well, we expect to have for our cash cost.
We are now.
<unk>.
We think that.
The <unk>, where we're catching up with certain works and we had the.
And in respect of <unk> regarding the gas the prices hang in cost and availability in the first quarter, so that should be removed from the from from now on that.
The spike in gas prices.
And then for the rest of the year, let's say that we're going to we're going to focus to have before byproduct trades.
$1 50 in the order of 55.
And the boiler by products will certainly help given the better prices out there that we're seeing in that regard and the.
The stronger production that we're getting from from our molybdenum plant.
And also we expect to have a bidder zinc production for for the rest of the year as we are.
The recuperate, our our sink refinery and initiate the sales of the refined zinc for the rest of 2020 day one.
Yes, the one of my second question.
How do you see that recovery you expect the.
Yeah.
Refined zinc production.
Shipments.
Sales to recover already in the second quarter. After after the fire I mean, what is the program that you have made in operating the damaged the refinery.
The first the first part of the of the first quarter of during the first quarter. We have this fire that affected our our facilities.
Pretty much a repair most of the damage, but we couldnt.
We couldnt.
The the forms that the shapes that are required for for selling the refined zinc and thats, what we have been.
Working on the true this quarter, so we're expecting it to to initiate the production.
As you May recall car hurdles, we are alone in refining capacity at our <unk> operation. So we do have some.
I think concentrates that would be blue we process through the second quarter of the rest of the year and that will allow us to catch up on refined zinc sales for the rest of the for this year.
Alright, and then two more if I may just one on the.
On capital allocation.
I mean clearly the.
Quality of the quality of the assets of southern copper has.
And copper specifically are very good and the cash generation is impressive.
But again the company base.
The current dividends, but there is not a capital allocation in place of poly.
The policy of capitalization policy in place and we're seeing all the companies.
Of the mining companies incorporating the aluminum in iron ore.
<unk> developed recently kind of weak.
Ever expect the southern copper to maybe have a more formal.
Allocation policy for the excess cash flow generation that he has and the second question.
And then last question and I'll say it is.
Do you have any specific number.
For the company built on the analysis on how much copper demand could come from the U S infrastructure package. The you mentioned the.
Nicole Thank you very much growth.
Okay. Thank you for your questions Carlos.
<unk> capital allocation policy, well that is something that we may consider it but so far I think that the company tractor Corey it's quite clear of what we when we wanted to do we basically are developing projects that we would maintain the company characteristic of being a low cost.
Copper producer, probably the lowest cost of copper producers given the given the size of the company I mean, among our peers, we believe that where the the lowest cash cost of the.
Copper at this point.
Regarding the.
The.
Davidson.
Do you see the company is basically not hoarding cash.
Or the board has been the increasing our hour.
The quarterly dividend as we are moving towards a different price of the different part of the price cycle and as we have increased our production just us of reference for our audience about 10 years ago, we were producing less than 500000 tons of copper now we're producing.
The millions once we have doubled our capacity our goal is to go up to one 8 million tons of copper production in the next in this decade.
And by doing that we will we will keep our carpet characteristic of being a low cost producer.
And your last question.
Well, we have not we don't have a formal internal estimate to how much is the green revolution or the infrastructure package.
The are there is going to be the discount.
<unk> cost for for <unk>.
Infrastructure in the U S.
We don't have that information yet our commercial team is very positive about this.
And I've seen some studies that are.
The doing a forecast that would be.
The extremely favorable.
For for copper producers.
In the next few years each of these.
These materialize, but at this point, we don't have for formal est.
Estimate ourselves.
Thank you Rob.
Youre welcome.
Thank you. Our next question comes from Rod rank all the Salazar from an advisors. Your line is open.
Thank you my question has been answered thank you.
Thank you.
Our next question comes from Ivan Fernandes from Kenya. Your line is open.
Hi, Good morning. Thanks for your time I have a question about the political risk in Peru.
How youre seeing the candidate the <unk> and his proposals, particularly on the risks related to the nationalization of expropriation of mining operations or access to the taxation of mining operations or even potentially less government protection I guess protest that could affect operations.
If you could comment on kind of defense as you might have against that because it pushes forward of the kind of proposition.
Or even more useful would be true true to hear your views on what is actually likely to try to do if she wins, whether it's just okay.
Same thing reps for acre you really believe you would push for these kinds of things you would be very helpful to understand the risks of C for the company around the thank you.
Thank you for your question.
I think that at this point of we are the.
I wanted to comment on the proposals that the candidates both of them are doing regarding the mining industry in particularly particular.
Because we have seen that as the campaigns for.
See the the positions.
Not necessarily hold.
We have seen that in the past, we believe that once the the elected president.
First looking at the matters regarding to our industry.
He or she will see that we are where our partner for the Peruvian developing and one of the the.
Very strong locomotives that the current.
We could use to go out of the very heart recession. The COVID-19 has created in Peru. So at this point, we're not making any specific comment on that.
Once we have a definition, we will we will comment on the specific measures that will be the.
Announcer if any by the by the elected to pursue.
Okay I understand thank you for your time.
You're welcome.
Thank you. Our next question comes from Leopoldo Silva from Lorraine The Al Your line is open.
Thank you very much <unk>. Thanks for all the detail. So my question is regarding your smelters Smith smelter project.
<unk> could you please share with us some of the recent developments you have had on this project in Peru, and Panama and Mexico.
What stage are they currently.
Yes, we have we have for them.
<unk> indicated to the market we have for tools smelting projects one is in Peru under the one each in Mexico.
Let me comment on the on the Mexican first of we are expecting to initiate these investments.
Later on in this of this decade.
For now we're considering for considering.
The <unk> project to require certain burden valleys.
Or that are being developed but we don't have thesis.
It's a priority the spin.
Terrific priorities.
Expenditures for for the future.
Regarding the Peruvian projects, we do careful of the economics of extraordinary already.
We view there is a very interesting concentrate market of the northern part of Chile, and the southern part of Peru.
And as such we are considering also an investment for a new a new smelter.
For the future.
Now.
On the as I say on the on the economic side. It's we have for finished.
<unk> finished the review of the.
The.
The technology to use and the economic results of it and it's the <unk>.
It's very interesting very.
The.
Actually a very good investment for the company.
It has not been approved by the hour board, we need to to presented to the board for a form of the proven the approval and also we need to initiate all of the environmental permit for for the for this project.
We're considering some of them.
Investment for for this year, but it's related to our cogeneration.
For.
The power at the.
The <unk> smelter that we're considering this year and for for 2022 of known we will considering investing the.
The total budget for.
In the case of Mexico for for the smelter, where we're doing the technical studies this year and we will be.
We'll consider certain investments on the project for 2022.
There is also a very good and very interesting market for concentrates at the northern part of Mexico.
Not only because we are long in concentrates.
Concentrate in Mexico, as well as in Peru.
So I'd say there are good opportunities to capture value for for smelting in the.
Both Mexico and Peru.
Great.
And regarding your answer could you perhaps guidance through breaking down the strategic value of this investment on first.
Or meaning how much do you see the weight the.
The returns of the Standalone business and how does the feet with being the lowest the lowest cost producer.
And that's on the one hand and on the other of much definitely wait in the eyes of blindness.
The value of having smelting capacity in the side of the Pacific <unk>.
And also securing for three Kathy supply coming from the smelters.
Is there like a.
A heating.
The value of having the smelters on the side of the Pacific.
Well certainly there is there is always the possibility of saving all of the freight.
That will take the same fee income.
Traits from from the northern part of Chile in the southern part of Peru to China, and the same applies to Mexico.
They argue with.
Copper concentrates that could go to the smelter as well as a room of loan production that we have for from the win of Eastside operation at this point on the budget.
The.
The smelter in Mexico on.
An estimated budget of $864 million.
And for the Peruvian one it's a 111350 $7 million.
Those are the budgets. Please keep in mind that this could be used to break has not been approved by the hour board. So they are still under review technical studies and we don't have the specific go for them, but it's in our current.
Outlook for for the future.
Okay, Thanks, very much growth.
You're welcome.
Thank you our next question.
Comes from Andreas <unk> from UBS. Your line is open.
Thank you very much just two quick questions from me a follow up on a question on volumes last year. So one of the things we noticed obviously last year of out of Peru on a national level is the couple of production fell on the back of COVID-19, and all of the mining shutdowns and whatnot.
You didn't really the experience that you bucked the trend and you actually saw production volume up on a year on year basis can you just spend a little time talking about how you were able to grow your production in an otherwise somewhat pressured market them.
How do you how do you see yourself setting yourself apart from the guys that all of the producers that have been under pressure production wise.
That's the first question and I guess, the second question just a follow up on the Peruvian risk.
I get the point that you don't want to.
Comment on the current candidates, but if we talk about it like hypothetically.
What would it actually take if you wanted to start nationalizing mining assets in Peru, I mean, my understanding based on conversations over the past months instead of it would require a constitutional changes is that something you could confirm any basically the true on what would be required those of my two questions. Thank you very much.
Sure. Thank you very much for your questions Andrea.
Well on the on the well.
<unk>.
Please keep in mind that in 2020, we.
In 2019 in Maine, we initiated the production of the second.
Concentrator of docket pallet. So in 2019, we had.
Eight eight months of the production of the new facility.
Has the capacity of 100000 tons of copper per year.
And in 2020, we had that facility running at full speed through the whole year 12 months.
Now as I mentioned, a while ago.
At the beginning of the pandemic we cut.
Everything that we could in order to maintain Oh.
Only the concentrator <unk>.
For the smelter the refinery and the Sx EW operations.
The.
Moving forward in the case of Peru.
We were authorized given that our operations are isolated and we have no cases of COVID-19 at that point at the beginning of the pandemic. We had for quite a few months, we've been where we've been kind of for most of the year I would say we didn't have any outbreaks of COVID-19 insight.
The premises, where our workers and their families believe we had some cases of people that were not.
Staying of the premises, but leaving saying their houses in <unk>.
Or Tac.
So we managed to produce.
For the mineral that our concentrate or require we didn't do any stripping.
The any in the specific stripping works for toquepala very little just the necessary to extract the immuno and data of low loss to maintain our production level, while having no cases inside our premises.
And having that where our production to hold and as I say, we had the at the beginning of 2019 in May and the first the second quarter of 2019, we initiated production with the new concentrator of docket pattern.
And we had a full year of production and that's the that explains why we increase our production in 2020 of copper concentrate and copper contained in concentrate in this in this year last year.
Now.
Regarding your question on possible.
Extrapolations of the.
Of the mining operations well.
The candidates that express that have indicated recently that Keith.
During the more of changing taxation. Then then of change will remix for creation of of operation. So.
We actually don't think that this is going to be of material.
That will be.
Materialized, but the.
We will see as a.
As we have for.
The new President and this person takes the measures that he or she believes are the appropriate the appropriate one for the country.
That's very clear. Thank you very much for those answers I. Appreciate the hope you guys are all safe and stay safe. Thank you.
Thank you the same to you in there and all of the audience obviously.
Thank you. Our next question comes from Fernando of Bond from <unk>. Your line is open.
Hi, <unk> congrats on the results and still a very challenging environment.
My question as well as kind of puts.
What sets of cooling nature.
The Peruvian political situations whoever is in power continues to be.
Much of the headwind of mixed.
It has it has been over the last 12 months.
What can you do.
The two reallocate priorities in terms of investments and perhaps production from Peru to Mexico.
Or are the growth projects in Mexico.
Unrelated.
In terms of.
The Peruvian projects in particular of Tia Maria is there any way you can put the Mexican growth project.
The head of the Tia Maria Thank you.
Okay. Thank you for your question for contango.
Well we are.
We have for three projects that are being under developing Mexico. They have a budget of combined budget to of for a little bit north of $900 million. These projects.
Where we are okay, generally speaking, particularly the lettings.
Pretty much finish where we are looking into some details to initiate the production and we're expected to have at the there is a good possibility that we advanced a little bit the production for pillar that's the.
That's one of the the.
Comments that I think it's important to share now of LP ladder. Its moving forward. We're in a technical standard Isa part of the project. So that we can move on with no.
The problems subtle the.
One that were affected a little bit by the pandemic.
It's a the zinc concentrator at Buenavista.
We are expecting the.
The final.
Back to nature of people over 60 years in the area of awarded the project is and we expect that to be to be.
Starting point for coming back into operation that are of the zinc concentrate are meaning by the state of construction of the zinc concentrator will be will take some.
Some speed as we are.
As of the Mexican government the government finish.
The stupid in the charts of vaccine in kind of an error.
We reported on that when the.
The very promising.
TVT the conducted various on all of our government, which we certainly see as a very positive development.
The company is constantly looking into different opportunities.
To the.
The acquire assets.
That fit the company characteristic of being a low cost operation.
And we are looking basically on copper, which is the we believe it's a middle of the task of excellent.
For them.
An excellent and forecast for the next few years, so we're focusing on that.
Obviously, if the conditions are are better in some other countries that.
<unk> will be attractive for us to getting and there is a good project to developing there. We will certainly the first thing will be the asset management will have to carry this in detail and the.
Do you have a recommendation to our board which will.
At the end of the day the the wood.
We've taken the decision well for moving into these kind of the acquisitions or or some other activities in the.
Places, where we see opportunities.
Thank you.
And our next question comes from Alfonso Salazar from Scotiabank. Your line is open.
Thank you on that day.
And just the fault congratulations on all of the COVID-19 support initiatives of the company.
Couple of questions of the dog.
Growth is also could you could you.
I can't copy you well could you approach a little bit your microphone.
Can you hear me better now.
Much better thank you.
Excellent.
The right southeast regarding the growth beyond and begin the projects that just got announced and that's part of it you know what the.
The book upon that.
And when that lease back.
Let's leave aside the increase in grief for.
The rule because of the elections.
The battle side if possible.
The southern copper.
Increases capacity at the break from Das and for Hanmi.
I remember that you mentioned on the expansion of many years ago is that something that is feasible or not green and that's my first question from the second one is a lot of them.
Yeah the <unk>.
Many of reform in Mexico.
Connected right when you were talking about that for <unk>.
Let me be a little bit low.
What we thought the cadence of lots of.
Reforms in Mexico, the strategic nature, many of the natural resources like the energy reforms hydrocarbons for reform. So what you can see that the money in the industry would be excused.
How long is it.
Yes.
I Couldnt get your the final part of your second question of our funds flow.
It's just the.
Trying to understand what why do you think that.
All right.
Mind, you the reform is not likely to be matching the license in Mexico.
I got disconnected from you were talking about Capex.
Well.
Let me first to the answered your first question.
The increased capacity in Toquepala, I will say that we are where the optimal capacity level for for this operation Nowadays.
Keep in mind as we pretty much double the concentrating capacity of stockpiled ore in 2019 solely to have the fresh investment so we feel happy and comfortable with that.
In the case of Hanmi.
We have now lower.
The median rate on a daily basis for the California mine and the.
We're currently looking into into.
The possible expansion of the <unk> operation to put it at the same median level of the Peru of the Toquepala operation also in Peru.
That is a project that at the half.
That's been the resources has been assigned to to review. This expansion, we're looking into ways to increase our water recovery, which will be.
An important step in order to go along with the Kahane cohort expansion. So so with that we may increase our production capacity improve a little bit more.
Regarding the mining reform in Mexico will I think that we need to we need to see how how political circumstances evolve in Mexico as well.
But at this point and for what we have seen of true 2000 since the beginning of the New administration.
We haven't seen any specific.
Actually all of their debt.
Yes.
Yes. This is Oscar.
The mansion.
I mentioned that there was some of it some.
Okay. There was some reform.
Last year to the special mining tax.
Some changes where there was a reduction on the concessions for ease that could be granted to the special mining tax and also some of my judgment.
The government.
The to the well.
For the concessions and how is that special tax was paid so there was some reformed last year addressing some issues the.
The government felt the.
The mining industry wasn't.
Managing well with the with the special mining tax so there was some.
And it's sort of having the effect this year.
Increased.
Special mining tax.
Thank you for that the scandal.
Okay.
Thank you.
And our next question comes from James Brennan from BBVA. Your line is now open.
Alright.
Thank you for taking my question just a quick one on the USG.
The very interesting that you put the full page dedicated to the matter to ESG. If you did something we cannot announce what kind of every every quarter.
Maybe you can the deadlock metrics should we be using in the future of could communicate.
Are you considering.
Yes.
Maybe in the medium term depending on the demands of the project.
Using the rebounds of sustainable bonds to finance some flows from the specific project. Thank you very much.
I Couldnt get your question sorry.
Jim could you repeat it please.
Just on the <unk>.
Is that true you're using a true.
Page on the ESG the communique, so we'd like to know if you.
So something we can see now every quarter.
What kind of metrics you would be using the part of the community.
Are you analyzing the issuance of the dawn the assistant to do the.
The future of renal so simple bonded the future. Thanks.
Okay. Yes. Thank you for your questions. After you have seen we are we at.
Section of ESG at our press release, and we will keep it as we move on we believe that one of the the.
There are two things that we have been doing lately.
In the last few years actually.
One is well we did.
Analysis of what do we need to do in order to improve our ESG metrics for from for that for now on the future and that he says.
The corporate therefore that we are the wear.
Moving forward of wheat.
And we believe that part of this effort should be on the communications side to express and to show the different the progress that we're getting on this matter as we move on you will see the.
These.
The metrics as we as we report them in the next two in the next few quarters.
Now regarding the.
Green bonds are obviously.
Interesting.
The source of funds for the future and we will consider and then if we go to the capital market for US an option and that's the.
Part of what we're doing is is.
It's a <unk>.
Communicating what were doing and the.
And the patch.
Catching up in whatever we feel that there is an opportunity to improve on ESG metrics.
Metrics.
Medicare.
Hello.
Thank you and I am showing no further questions at this time I would now like to turn the conference back over to management for any closing remarks.
Thank you very much unit.
Well this will conclude our conference call for Southern Copper's first quarter 2021 results. We certainly appreciate your participation and hope you hope to have you back with us when we report.
The second quarter of this year.
You very much.
The state will all of you. Thank you very much the game.
Hello, Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and you may now disconnect everyone have a wonderful day.
[music].