Q2 2023 Southern Copper Corporation Earnings Call
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Good morning, and welcome to southern copper corporations second quarter 2023 results conference call with US. This morning, we have southern Copper Corporation, Mr. Jong Woo, Jacob Vice President Finance, Treasurer, and CFO , who will discuss the results of the company for the second quarter two.
1023, as well as answer any questions that you may have the information discussed on today's call may include forward looking statements regarding the company's results and prospects, which are subject to risks and uncertainties actual results may differ materially and the company cautions not to place undue reliance.
These forward looking statements.
Southern Copper Corporation undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise.
All results are expressed in full U S. GAAP now I'll pass the call to Mr. Zhao with Ya Com.
Thank you very much Carmen good morning, everyone and welcome to Southern Coppers second quarter of 2023 results Conference call.
At week Conference I'm joined by Mr. Oscar von Sriracha, CEO of southern copper and board member as well as Mr. Leonardo Country also a fellow board member.
In today's call, we will begin with an update on our view of the copper market and then review southern Copper's key results related to production sales.
Operating costs financial results.
Some projects and easy.
After this we will open the session for questions.
Now, let us focus on the copper market.
In the second quarter of this year, the London metal exchange copper price decreased 11% from an average of $4.32 per pound in the second quarter of 2022.
<unk> 85 cents per pound.
Close in average for the second quarter.
This reflects concerns about the impact of a slowdown of the Chinese economy.
Possible recession in Europe , and a soft landing or minor recession in the U S.
Current prices for copper.
<unk> thousand $90 per pound.
Right.
Reflecting a less optimistic market than that seen in the last few quarters at this point, we see the following factors affecting the copper market.
A reduction in global inflation, which may portend, the end of the interest rate hike cycle led by the pet and the ECB.
Recovery of mining production apparel, who had a 19% growth for the period January to May of this year.
This is reducing the uncertainty on current production.
Chile is still lagging with a 5% reduction in copper production for the same period.
Investments for future growth are still affected by expectations of economic changes in Chile, and social unrest in Peru.
These two countries as you know represent about 40% of the global supply.
The most relevant marketing Kelly in houses for the copper market are now expecting a market in surplus of about 100000 tons for this year.
This assumes a growth in demand of about 1%. This year and also about the same level for this play.
Hello, corporate inventories, it's another factor affecting the corn market.
At the closing of March 31st or as of March 31st the D said that some of the London metal exchange, the Comex exchange, Shanghai warehouse and the bonded warehouses in China.
Up to 411000 tonnes of copper in inventories that number has dropped to about 235000 tonnes. This 42% reduction in inventories represent the largest deep since 2005.
It is important to emphasize that corporate plays a leading role in the global shift to clean energy.
Which correlates positively with our assertion that the underlying demand for copper will be stronger in the long term.
Now, let's look at southern Copper's production for the past quarter.
<unk> represented 78% of our sales in the second quarter of 2023.
Production registered an increase of 9% in the second quarter.
In a quarter on quarter terms to stand and 227533 times or corner you were sold reflects.
The increase in production in Peru.
Even by high recoveries the returned to full capacity full operating capacity of the mine are higher ore grades have took a pod.
So the return up the quantity of food full speed and higher ore grades and mineral production that talk about the drivers of the growth of 20% in Peruvian production production at our Mexican operations increased 3% in a quarter on quarter terms.
For 2023, we expect to produce 932000 tons of copper.
An increase of 4% over the 2022 final print this growth will fall as we get Peruvian production back on track and will be complemented with new production at our Mexican operations through our Pilates, and Buena Vista zinc concentrate or projects.
Molybdenum represented 11% of the company's sales.
In the second quarter of this year and is currently our first by product.
Molybdenum prices averaged $20.80 per pound in the quarter compared to $18 30 in the second quarter of last year.
This represents an increase of 14%.
Lithium production increased by 2% in the second quarter compared to the same period of 2022.
It was mainly driven by an increase in production at the core horny carry that in Buena Vista mines due to higher ore grade at our Mexico operations and the Cojones returned to full operating capacity.
These results were partially offset.
Lower production at Toquepala mine.
In 2023, we expect to produce 24200 tons of molybdenum, which represents a decrease of 8% over our 2022 production levels.
Silver represented 4% of our sales value in the second quarter of 2023.
Average price of $24.26 per ounce in the quarter, which reflected an increase of 7% silver is currently our second byproduct.
Mine silver production increased 8% in the second quarter versus the same period of 2022 after production rose at all our operations.
Refined silver production fell by 31% quarter on quarter.
This was mainly driven by a drop in production with our in stock and Luckily that unions.
In 2023, we expect to produce 20 20 million 21 million ounces of silver an increase of 8% compared to 2022 and 6% higher than the 19 million ounces produced in 2021.
Zinc represented 3% of our sales value in the second quarter of 2023 with an average price of $1 15 per pound in the quarter, which represent a 35% decrease with regard to the second quarter of 2022 fever zinc is currently our third.
Byproduct.
Zinc mine production increased 14% quarter on quarter and totaled 17223 times. This was driven primarily by an increase in production at the Santa Barbara and charter cost mine.
Refined zinc production increased by 10% in the second quarter vis vis the second the second quarter of last year.
For 2023, we expect to produce 108000 tons of zinc, which represents an increase of 80% over our 2022 production level.
This growth will be driven by the production startup of the Buenavista zinc concentrate are.
And by the recovery in some mines were better ore grades area has been identified for 2024 and known we expect to produce over 200000 tons of zinc per year.
Financial results.
For the second quarter of 2023 since were $2 3 billion. This is.
Almost the same that we sold in the second quarter of 2022.
Copper sales volume increased by 12% while value decreased 1% in a scenario of prices lower by 11%.
Regarding our main byproducts, we reported higher sales of molybdenum that grew 28% due to better prices.
Zinc sales in turn were down 22% due mainly to due to lower prices, because we had a volume increase of 13% in silver.
In <unk> excuse me on zinc sales.
<unk> sales were down due to a decrease in volume, which was partially offset by better price.
Our total operating cost and expenses.
Agreed by 98 million or 7% when compared to the second quarter of last year.
The main cost reductions were reported for workers' participation purchased copper among other factors.
These cost reductions were partially offset by offset by higher cost for repair materials operating materials inventory consumption.
Labor cost and operation contractors and services.
Should be noted that year to date will register unit cost reductions for granting media explosives empowered.
Yes.
Our second quarter of 2023, EBITDA was 1000 $115 million.
Would represent an increase of 9% with regard to the 1000 31 million registered in the second quarter of last year.
The EBITDA margin in the second quarter stood at 48% versus 44% in the second quarter of 2022.
EBITDA in the six months of this year, whereas 2680 $3 million. This is 1% lower than the same.
And the EBITDA for the six months of 2020.
The EBITDA margin in the six months of this year stood at 53%, which was the same as 2022 Mark.
Operating cash cost per pound of copper before by product credits was $2 19 per pound in the second quarter of this year.
That is 10% higher than the value for the first quarter of this year, which was $2 nine trains.
Even though copper production volumes increased 2% between the second quarter and the first quarter.
5%, increasing operating cash cost is attributable to higher cost per pound from production cost treatment and refining charges and two lower premiums.
Regarding our by products, we had a total credit.
Oh $517 million or $1.07 per pound in the second quarter of 2020. These.
These figures represent a 20% decrease when compared to a credit of $631 million or dollar and 33 cents per pound that we had in the first quarter of 2023.
Byproduct volumes increased four sink, 14% for silver, 9%, but decreased for molybdenum by 2%.
Prices have decreased for molybdenum, 35% for think 19% an increase for seubert by 8%.
As a consequence total credits have decreased for all the all of our byproducts.
Southern copper operating cash cost, including the benefit of byproduct credits was $1.12 per pound in the second quarter of this year. These.
This cash cost was 36% higher than the cash cost cash cost of 76.
For Easter in the first quarter of 2023 and as you have.
<unk>.
Yeah.
Mainly we had.
We got the <unk>, increasing in cash cost, 5%, increasing operating cash costs, but a significant reduction in byproduct trade and that's basically that explains the main change that we have and the cash cost.
2023, net income was 547.
Which represented 27 increase with regard to the $432 million.
Registered in the second quarter of 2022.
The net income margin of the second quarter stood at 24% versus 19% in the second quarter of 2022.
This increase was mainly the result of a sale.
7% reduction in operating costs, which was mainly attributable to a decrease in lower third party copper concentrate.
On a year on year basis, net income was 12% higher than in 2022 for similar reasons.
Acc's second quarter of 2023 net income fell below the $813 million reported in the first quarter of 2023.
This dynamic reflects significant differences in copper prices in the period over period comparison.
In the second quarter of 2023, corporate sales dropped $365 million due to lower price.
That alone represented an adjustment of $213 million.
Volume decreased 4% volume of sales.
Our sales volume I should say decreased by 4% and that's another $92 million.
And we had an adjustment an accounting adjustment on open sales for 104000 tonnes of corporate debt.
It represents about 59 million.
For the second half of this year, we have a very positive view on the company sales volumes.
And we are expecting that.
Looking at our current operation plants, the ramping up of the new zinc concentrate are and whenever Easter and the Polaris project, we're expecting to produce 481300 tons of copper.
11004 hundred tons of molybdenum.
76000 tons of zinc.
And $10 9 million ounces of silver.
And the uptick in production, where copper zinc silver in the second half of the year short should support our sales through this period.
Yeah.
Cash from operations.
Cash flow from operating activities in the six months of this year with 1980 $2 million.
Which represents an increase of 75% over the 1000 131 million posted in the six months of last year.
Cash flow in the first half.
What's the effect of last year was affected by a significant reduction in working capital with Westwood.
Loss attributable to the quality mine stoppage.
Our current capital investment program for this decade exceed $15 billion and includes investment in the Buenavista zinc <unk> AP ladder and electrical projects in Mexico, I mean, the Tia Maria the tankers and <unk> projects in Peru.
This capital forecast includes several infrastructure investments, including key investments to bolster the competitiveness of <unk>.
<unk>.
Since.
There is a short description of our main capital project in <unk> in FCC's press release, I'm going to update new developments for each of them.
For the Mexican projects in the case of the Buenavista.
Zinc concentrate are in Sonora.
This is a project that is located within the <unk> deposit.
As you know we have built a new concentrator.
This facility has a production capacity of 100000 tons of zinc and 20000 tons of copper per year.
The capital budget of the project is $416 million.
Most of which has already been invested.
Progress is 98% and we have initiated vacuum testing at the plant and expect to initiate operations in August of this year.
For the pre feed studies also in Sonora.
The budget for <unk> is $176 million of which $131 million has been invested Polaris is currently operating and delivering corporate minero two facilities of data cardiac operation.
In the case of <unk>.
The results from the experimental paths in the leaching process have confirm adequate levels of copper recovery base.
Basic engineering study has been completed and the company continues to develop the project and engage in onsite environmental activities.
Project Engineering is being developed by top tier engineering and technology firms. We expect production to begin in 2025 and mine life is estimated at 13 years.
A lot of corn, which is a project in Baja California. The company has completed the environmental baseline study for the mine concentrator and industrial facilities and will proceed to submit the environmental impact.
Statements or manifest assumed impact from Intel.
To the secretary of environment and natural resources semi map.
To their respective environmental impact impairments. The company is currently preparing studies for the Port power pipelines town sites and auxiliary.
For the Peruvian projects.
For Tia Maria.
Other corporate has been consistently working to promote the wafer of the population of the slide problems as part of these efforts we have implemented successful social program indication healthcare and productive development to improve the quality of life in the region.
Also promoted agriculture, and livestock activities and the Tambo Valley has supported growth in manufacturing fishing and tourism in play.
The Los <unk> project in there I.
I believe Mark reunion, Peru.
As of June 30 of this year part of the project land continued to be occupied by illegal miners about 75 of them.
Those persons irregularly registered their stakes in the integrated we see of mining formalization or name.
No not scream for.
The company requested under 30 subsequently order that the aforementioned miners be excluded from rainfall and be qualified as illegal miners.
<unk> has also filed criminal complaints and also legal remedies.
To physically expand illegal miners from the project and confiscated illegal mine ore.
The third project, because we have comparable with a <unk> project in the America region.
In 2023 in accordance with our social agreements with the <unk> community.
The company has hired unskilled labor and is paying for the use of surface land.
We're also supporting social programs in both communities. In addition, we continue exploration activities from this project and currently we have installed 10 drilling platforms.
Excuse me please.
Okay.
For environmental social and governance or ESG investments.
Copper is committed to improving its ESG recur by adopting best practices and informing the investor the investment community and other stakeholders about our progress in these matters.
For risk prevention and management of risk by the second quarter of the year all of southern Coppers operating units had hit a milestone set in 2018 to obtain the ESO 14001 certification for environmental management and the ease of 40.
5001 for occupational health and safety manage.
Our efforts to premier to prevent environmental and security risks are supported by our ecosystem.
And reflect our alignment with best International practice.
Therefore mentioned represents a significant step in our quest to obtain accreditation for responsible corporate production in the framework of the copper Mark.
Certification.
We continue to make progress in the development of our critical risk phase III. These tools strengthens environmental and safety risk management by increasing the visibility of these components at all levels of the organization.
<unk> creates a knowledge base for informed decision, making and insurers rigorous follow up on controls for prevention and mitigation to avoid or respond to unwanted event.
Yes.
This quarter in line with our corporate environmental policy, we formalized our protocols for sustainable water management biodiversity and closure of operations to establish our priorities and the means by which our operations address increasingly demanding environmental challenge.
In the ambit of biodiversity the second quarter of this year we report.
464 hectares in the state of Sonora in Mexico.
These represent 10 times the area affected in the period.
With these efforts we have successfully met an objective set two years ago to reduce our historic environmental footprint by reversing the net loss of <unk>.
Biodiversity and achieving a net positive impact for the area.
In the first half of this year.
First area totaled 934 hectare Aries, which is five six times the affected area year to date.
The implementation on promotional best practices, such as the aforementioned has helped corporate secure and maintain our place on the S&P, Peru General ESG sustainability sustainability index of the Lima stock exchange.
On April 28, 2023, Grupo Mexico issued its 2022 sustainability development annual report, which includes detailed information about southern copper's efforts on the social environmental and corporate governance fronts.
Positive impact on the communities in which we operate we have to serve more than 100 women from community is close to our operations in Peru.
Our community will beam program, which we conducted a more by World campaign health campaign to prevent.
Breast and uterine cancers.
ACC has been recognized by the Peruvian State agency pro in Brazil.
For its execution of drinking water and rural sanitation program in Palau Congo District of thought.
This project, which has benefit of 137 families and tailor an investment of $2 8 million.
Similarly in Mexico, We invested 565 7 million this quarter to improve water distribution and nacco, Saudi on kind of an error.
<unk> 53800 <unk>.
The yacht architect promoted by southern copper were recognized at the Mexican poly metallic seminar in 2023.
This orchestra support 1646 students in Mexico and Peru.
Additionally, in collaboration with the Instituto equal to a really thorough we held our first exhibition traveling workshop for documentary film as we've seen a taker in the state of Sonora in Mexico. During this event.
17 arena short firms where screen.
They were produced by some of the 747 students from communities that participated in the workshop.
Regarding dividends as you know it is the company's policy to review our cash position expected cash flow generation from operations capital investment plans and other financial needs at each board meeting to determine the appropriate quarterly dividend.
<unk> as announced to the market on July 20, the board of directors authorized a cash dividend of $1 per share of common stock payable on August 20, <unk> to shareholders of record at the close of business on August nine of this year.
Ladies and gentlemen, with these comments, we will like to end our presentation today. Thank.
Thank you very much for joining us and we will like to now open up the forum for questions.
Thank you and ladies.
And gentlemen to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Matthew Murphy with Barclays. Please proceed.
Hi, Raul thanks.
For your.
Comments on the.
Projects.
And the pipeline I'm interested in Peru.
Your take on it.
The situation I guess, we've seen in the economy and contraction, but we've also seen a bit less disruption to the mining sector.
I guess the first part of the question is are you seeing improvement in.
The mining sector's ability to operate in Peru, and the second part of that is just the implications for Tia Maria.
Youre still.
Waiting for.
The conditions locally and at the federal level to improve and do you see scope for that to happen this year.
If nothing changes could this project still be going forward in 2024.
Okay. Let me. Thank you for your question Mac.
Well first let me say as a general concept.
Social circumstance have improve in Peru politically speaking we have <unk>.
<unk> also a significant improvement.
Police is doing.
Their activities and working with the companies to solve the problems that we have that required the intervention in other cases.
Where such as as the casing Tia Maria.
Working with the local population, we believe that we have been making.
Progress on this matter.
And basically we're relatively much more optimistic than we were a year ago.
As I mentioned.
Copper production.
Year to date has increased 19% in Peru.
I should add that in May the increase has been over 30% and that is basically comparing our normal operation flasks are equal.
Last year, we had.
In May we had.
<unk>.
Stoppage and the production that's coming.
Coming back, but not not as strong.
As we were anticipated at that time, so so in general terms, our circumstances have improve.
And we're seeing <unk>.
<unk>.
Moving forward slowly but doing so.
Yes.
Okay. Thank you.
Thank you one moment for our next question. Please and as a reminder, that is star one one to get in the queue.
And it comes from the line of Gen space with Morgan Stanley . Please proceed.
Yes. Thank you all for taking my question I just wanted to ask on cash cost guidance for 2023, what do you expect before byproduct for the year.
Thank you.
For the second quarter, we're expecting a better.
Cash cost and what do we have had in the first part of the year and the reason for that is twofold.
Seeing some.
Cost reductions I mentioned grinding media.
Plosive.
And some other materials.
But on top of that we have.
We have.
More production of copper for the second half of the year.
That should improve our our cost per pound before trades and also we should have.
More credits coming from the volumes the much better volumes that we're expecting for the second half of the year that I mentioned.
While doing the company presentation.
Yes.
Okay. Thank.
Thank you.
Just to clarify for silver you expect $20 1 million ounces.
For 2023.
Yes.
Let me repeat.
Didn't repeat there.
The volumes that.
I mentioned.
For the second half.
We're expecting.
To produce 481000 tons to 300.
Of course, Sir.
1400 tons of molybdenum.
76000 tons of zinc.
And $10 9 million ounces of silver for the second quarter and I believe that your question with the specifically for silver production for the year right.
For the year for simpler, we're expecting 20 million 21 million ounces of silver.
Okay perfect.
And last one.
Factoring in any commercial production from we're not seeing for this year or will be.
Is it coming online.
Until next year, mainly.
No no we're expecting to increase.
Our think production coming from the new concentrator in Buenavista for about 43000 tons of zinc.
43, Okay perfect 43.
By the way will come in with a very very.
Very competitive cash cost.
Given the fact that the corporate production hopefully navistar will be absorbing the fixed fee.
Fixed cost at these production will will basically.
Enter our cost system that theyre very very competitive.
Yes.
Alright, thank you.
Thank you one moment for our next question. Please.
And he comes from the line of Arthur be Squilla with Santander. Please proceed.
Hi, Thank you for taking the question.
Follow up on production.
Yes diluted to reach a total copper conditional roughly.
480000 tons in the second half.
But in your view what.
What will be the main research for the company to reach the guidance and what it what it's worth being patient here.
So what to expect in terms of third party volumes into year end. Thank you.
And so sorry, I couldnt get.
The second part of your question could you repeat please.
Yes sure.
Just want to know what to expect in terms of third party volumes to year end.
For the second half, but we don't we don't want to guess.
Colbert are detected.
Yes, copper purchased from third parties will be basically zero. We are we will be we're longing in copper concentrates now and we went to process, 100% of our corporate and our in our own smelters.
Alright, thank you.
To your question.
Okay.
Yes.
Thank you.
And Mr. Yakov I don't see any further questions I will pass it back to you for any final comments.
Okay. Thank you very much more digest showed up if you want to pick it up.
So please please okay one moment please.
And he does comes from the line of Matthew <unk> with Bradesco <unk>. Please go ahead.
Hi, Thank you for having my question are you hearing.
Yes, I can hear you loud and clear.
Okay. Thanks, So so you mentioned.
Copper production in Florida for this year at about 999000.
<unk> funds, we also have any guidance on copper production for next year and onwards. Thank you.
Oh sure. Thank you very much for your question Matthew.
For this year I'm going to repeat the goal for the year for the full 2023 for all the metals.
Relevant Glenn that we produce for Cooper were for 2023, we're expecting to produce 932000 tons.
For molybdenum 24.
<unk> 2000 tons.
Tore sync 108000 tons.
Silver 21 million ounces.
With that our expectation is that we should have a cash cost.
Slightly lower than what we're seeing.
Well, obviously this is a continuing of byproduct prices volumes, we know that we will be better in zinc and silver than what we were last year.
I'm talking about the by products for copper, obviously, there is a 4% expected growth in production vis vis 2022.
For next year for.
For next year, we will have.
The positive full benefit of the zinc.
Vincent trader.
<unk>.
We expect to produce.
About 120000 tons of zinc coming from the <unk> testing concentrated or that's for next year.
In total.
For zinc next year is going to be 108000 tons I'm, sorry, 207 208000 tons.
Please.
Let me correct that what I, just said is 2000 8000 tons.
For 208000 tons 14.
For silver next year, it's going to be $57 million.
The ounces.
For molybdenum 26300 tons.
And fourth quarter.
$1 million and 26000 tons.
Let me repeat to the forecast for 2024 at this point for Cooper 1000, and.
26000 tons $1 million and 26000 tons.
Our molybdenum 26300 tons.
<unk> zinc 208000 tons.
For silver 27 1 million ounces.
That's basically it.
Okay. Thank you very much that's clear.
Thank you very much Matt.
Thank you.
And I am not showing any further questions Sir.
Okay.
With these we conclude our conference call for Southern Copper's second quarter of 2023 results. We certainly appreciate your participation and hope to have you back with US when we reported third quarter of this year results. Thank you very much and have a nice day.
And with that ladies and gentlemen, we thank you all for participating and you may now disconnect.
Okay.
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Yeah.
Okay.
Yes.
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