Q2 2024 Southern Copper Corp Earnings Call
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Operator: Good morning, and welcome to Southern Copper Corporation's second quarter in six months 2024 results conference call. With us this morning, we have Southern Copper's Mr. Raul Jacob, Vice President of Finance, Treasurer, and CFO, who will discuss the results of the company for the second quarter in six months 2024, 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 risk and uncertainties.
Operator: Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. All results are expressed in full US GAAP.
Speaker Change: Good morning and welcome to Southern Copper Corporation's second quarter in six months 2024 results conference call.
Speaker Change: With us this morning we have Southern Copper Corporations, Mr. Raul Jacob, Vice President Finance, Treasurer and CFO , who will discuss the results of the company for the second quarter in six months 2024, as well as answer any questions that you may have.
Speaker Change: The information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risk and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements.
Speaker Change: Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: All results are expressed in full US GAAP. Now I will pass the call on to Mr. Raul Jacob.
Raul Jacob: Now, I will pass the call on to Mr. Raul Jacob. Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's second quarter 2024 results conference call. At today's conference, I'm joined by Mr. Oscar González-Rocha, CEO of Southern Copper and board member, as well as Mr. Leonardo Contreras, who is also a 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, expansion projects, and ESE. After this, we will open the session for questions.
Raul Jacob: Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's second quarter 2024 results conference call.
Speaker Change: At today's conference, I'm joined by Mr. Oscar González Rocha, CEO of Southern Copper and board member, as well as Mr. Leonardo Contreras, who is also board member.
Raul Jacob: Now let us focus on the copper mine. The London Metal Exchange Copper Prize increased 15% from an average of $3.85 per pound in the second quarter of 2023 up to $4.42 this quarter. Based on the production costs announced by several producers and other information to date, we are expecting a market deficit of about $200 billion and 17,000 tons of copper in 2024. At this point in time, we estimate that the copper supply will increase slightly by 0.6%. That's about 1% of the population.
Speaker Change: 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. Thank you.
Speaker Change: Pipe, Expansion Projects, and ESE. After this, we will open the session for questions.
Speaker Change: Now, let us focus on the copper market.
Speaker Change: The London Metal Exchange Copper Prize
Speaker Change: Increased 15% from an average of $3.85 per pound in the second quarter of 2023, up to $4.42 this quarter.
Speaker Change: Based on the production cuts announced by several producers and other information to date, we are expecting a market deficit of about $200 billion.
Speaker Change: and 17,000 tons of copper for 2024. At this point in time, we estimate that the copper supply will increase slightly by 0.6%. That's about 1% of a percentage point.
Raul Jacob: Looking at the demand, even though we see weak Chinese demand, mainly from its real estate market, Market, a resilient U.S. economy, and new demand from decarbonization technologies as well as artificial intelligence are supporting copper demand and price. Now let's look at Southern Copper's production for the past quarter. Copper represented 76% of our sales in the second quarter of this year.
Speaker Change: Looking at the demand, even though we see weak China's demand, mainly from its real estate
Speaker Change: Market, a resilient U.S. economy.
Speaker Change: Ruizanchez, Raul Jacob
Speaker Change: Now let's look at Southern Copper's production for the past quarter.
hopper: Copper represented 76% of our sales in the second quarter of this year.
Raul Jacob: Production. Thank you. percent in the second quarter, in quarter-on-quarter terms, to stand at 242,474. Our quarterly results reflect a 15% increase in production in Peru. And this improvement was driven by growth at the Toque Pala mine, which increased its production by 21%, which was boasted by higher or great. Production at our Mexican operations increased by 0.7% in quarter-to-quarter terms, mainly due to higher production at our La Caridad mine, partially offset by a decrease in production at Buena Vista and Inca. For 2024, we expect to produce 963,200. 2023's final.
hopper: Copper Production.
hopper: percent in the second quarter, in quarter-on-quarter terms, to stand at 242,474 tons.
hopper: Our quarterly results reflect a 15% increase in production in Peru.
hopper: This improvement was driven by growth at the Toque Pala mine, which increased its production by 21%, which was boasted by higher ore grades.
hopper: Production at our Mexican operations increased by 0.7%.
hopper: in quarter-to-quarter terms, mainly due to higher production at our La Calidad mine, partially offset by a decrease in the production at Buenavista and INSA.
hopper: For 2024, we expect to produce 963,200...
Raul Jacob: This growth will be fueled by recovery at our SXCW facilities at Buena Vista and by the copper production of our new Buena Vista zinc concentrator, which is operating at full capacity. Molybdenum production represented 12% of the company's sales value in the second quarter of the year, and it's currently our first by-product. Molybdenum prices averaged $21.69 per pound, compared to $20.87 per This represents an increase of 4%. Molybdenum subduction increased by 21% in the second quarter compared to the same period last year.
hopper: 2023's final print.
hopper: This growth will be fueled by recovery at our SXCW facilities at Buena Vista and by the copper production of our new Buena Vista zinc concentrator, which is operating at full capacity.
Speaker Change: Smaller than introduction, represented 12% of the company's sales value in the second quarter of this year, and is currently our first by product.
Speaker Change: Molybdenum prices average $21.69 per pound.
Speaker Change: to $20.87 per pound in the second quarter of last year.
Speaker Change: This represents an increase of 4%.
hopper: Molybdenum subduction increased by 21% in the second quarter compared to the same period of last year.
Raul Jacob: This was mainly driven by higher production at the Peruvian operation and the Buenavista mine due to higher demand. These results were partially offset by lower production at La Caridad. In 2024, we expect to produce 27,400 tons of molybdenum, which represents an increase of 2% over our 2023 production. Silver represented 5% of our sales value in the second quarter of this year, with an average price of $28.84.
hopper: This was mainly driven by higher production at the columbian operations,
hopper: and the Buenavista mine due to higher ore grades.
hopper: These results were partially offset by lower production at La Caridad mine.
hopper: In 2024, we expect to produce 27,400 tons of molybdenum, which represents an increase of 2% over our 2023 production level.
hopper: Silver represented 5% of our sales value in the second quarter of this year, with an average price of $28.84 per ounce in the quarter.
Raul Jacob: $28.84 per ounce in the quarter, which reflected an increase of 19% versus the 2023 second quarter price. Silver is currently our second-biggest by, Mine silver production increased 8% in the second quarter of 2024 versus the same period of 2020; with the sole exception of INSA, production rules at all our operations, refined silver production increased by 28 percent quarter over quarter, which was mainly driven by growth in our La Calidad and Ilo refineries.
hopper: We've reflected an increase of 19% versus the 2023 second quarter price.
hopper: Silver is currently our second byproduct.
hopper: Mine silver production increased 8% in the second quarter of 2024 versus the same period of 2023.
hopper: With the sole exemption of INSA, production rules at all our operations.
Speaker Change: We find silver production increased by 28% quarter over quarter, which was mainly driven by growth in our La Caridad and Ilo refineries.
Raul Jacob: In 2024, we expect to produce 20.6 million ounces of silver, an increase of 12% compared to 2020. Copper represented 4% of our sales value in the second quarter of this year with an average price of $1.29 per pound in the quarter, which represents a 12% increase in price compared to the second quarter of last year.
Speaker Change: In 2024, we expect to produce 20.6 million ounces of silver, an increase of 12% compared to 2023.
Speaker Change: Think represented 4% of our sales value in the second quarter of this year, with an average price of $1.29 per pound in the quarter, which represents a 12% increase in price compared to the second quarter of last year.
Raul Jacob: Think Mind Production increased 71%, quarter and quarter, and totaled $29,419. Growth was driven primarily by the 13,653 tons produced at the new Buena Vista Sink Concentrator and by increasing production at the Charcot's Mound. Refined zinc production increased 6% in the second quarter of 2024 vis-a-vis the second quarter of last year. For this year, we expect to produce 121,800 tons of zinc, which represents an increase of 86% over our 2023 production level.
Speaker Change: I think my production increased 71%.
Speaker Change: Quarter and Quarter, and total 29,419 tons.
Speaker Change: Growth was driven primarily by the 13,653 tons produced at the new Buena Vista Zinc Concentrator and by an increase in production at the Charcas mine.
Speaker Change: We find zinc production increased 6% in the second quarter of 2024 vis-à-vis the second quarter of last year.
Speaker Change: For this year, we expect to produce 121,800 tons of zinc, which represents an increase of 86% over our 2023 production level. So we're increasing our expected production for zinc in 86% this year.
Raul Jacob: So we're increasing our expected production for zinc by 86% this year. This group will be driven by production at our Buena Vista Sink Concentrator that will have 55,400 tons, which has ramped up to better than planned. For 2025 and on, we expect to produce 178,000 tons of zinc per year. Financial.
Speaker Change: This group will be driven by production at our Buena Vista Sink Concentrator that will have 55,400 tons.
Speaker Change: which has ramped up to better than planned. For 2025 and on, we expect to produce 178,000 tons of zinc per year.
Raul Jacob: This year, net sales were $3,818 million, which represented growth of 36% with regard to the second quarter of the past year. The expansion was primarily fueled by an increase in sales volumes of copper, which grew 5.5 percent, molybdenum by 21 percent, silver, 32% increase, and zinc, 78% increase in sales volume. Also, we had an increasing net of prices for all of our products. Our total operating costs and expenses increased by $11.5 million.
Ruisanchez: Financial Resource
Ruisanchez: This year, net sales were $3,818 million, which represented growth of 36% with regard to the second quarter of the past year.
Ruisanchez: Expansion was primarily fueled by an increase in sales volumes of copper, which grew 5.5% molybdenum by a 21% increase.
Ruisanchez: Silver, 32% increase, and Zinc, 78% increase in sales volumes.
Ruisanchez: Also, we had an increase in metal prices for all of our products.
Ruisanchez: Our total operating costs and expenses increased 111 million or 8% when compared to the second quarter of last year.
Raul Jacob: 111 million, or 8% when compared to the second quarter of last year. The main cost increments have been in workers' participation, repair materials, contractors, and operating materials, sales expenses, and others. These cost increments were partially offset by a decrease in energy costs and in exchange rate barriers.
Ruisanchez: The main cost increments have been in workers' participation, repair materials, contractors' and operating materials, sales expenses.
Speaker Change: and other factors.
Speaker Change: These cost increments were partially offset by a decrease in the energy cost and in exchange rate variances.
Raul Jacob: In the first half of the year, we saw unitary cost reductions for several materials and services, such as Branding Media, Steel, Explosives, Tires, and Power Comps. These savings, however, have been somewhat offset by higher costs associated with growth in production and savings volume and by an increase in maintenance and contractor expenditures, which we are closely monitoring and controlling. Looking at our EBITDA, the second quarter of this year's adjusted EBITDA was $1,797,000,000, which represented an increase of 61% with regard to the $1,116,000,000 registered in the same period of 2023, the second quarter.
Speaker Change: In the first half of the year, we saw unitary cost reductions for several materials and services, such as grinding media, steel, explosives, tires, and power costs.
Speaker Change: These savings, however, have been somewhat offset by higher costs associated with growth in production and sales volume and by an increase in maintenance and contractor's expenditures.
Speaker Change: which we are closely monitoring and controlling.
Speaker Change: Looking at our EBITDA, the second quarter.
Speaker Change: of this year adjusted the bid that was $1,797 million.
Speaker Change: which represented an increase of 61% with regard to the $1,116 million registered in the same period of 2023, the second quarter.
Raul Jacob: The adjusted EBITDA margin in the second quarter of this year stood at 58% versus 49% in the same period of 2012, adjusted for the bid that in the six months of 2024 was $3,215 million, which is 20% higher than what we had in the six months of last year, which adjusted a bit the margin for the first half of the year stood at 56% versus 53% in the same period of 2023. Cash.
Speaker Change: The adjusted EBITDA margin in the second quarter of this year stood at 58% versus 49% in the same period of 2023.
Speaker Change: I just did a bid that in the six months of 2024 was $3,215 million, which is 20% higher than what we had in the six months of last year.
Speaker Change: The adjusted EBITDA margin for the first half of the year stood at 56% versus 53% in the same period of 2023.
Raul Jacob: Southern Copper's operating cash, including the benefit of byproduct rates, was 76 cents per pound in the second quarter of 2024. This cash cost was $0.31 lower than the cash cost of $1.07 that we had for the first quarter of 2024. This is a 29% reduction in cash. Before public credit, the operating cash cost was $2.15 per pound this past quarter.
Speaker Change: [inaudible]
Speaker Change: Southern Copper's operating cash costs.
Speaker Change: Including the benefit of byproduct rates was 76 cents per pound in the second quarter of 2024.
Speaker Change: This cash cost was $0.31 lower than the cash cost of $1.07 that we had for the first quarter of 2024. This is a 29% reduction in cash cost.
Speaker Change: Before by public credit, the operating cash cost was $2.15 per pound this past quarter. This is $0.04 higher than the value that we had for the first quarter of 2024.
Raul Jacob: This is $0.04 higher than the value that we had for the first quarter of 2024. This 2% increase in operating cash costs before byproduct credits reflects an increase in costs per pound from production costs. Administrative Experiences, lower premium. And these higher costs were partially offset by higher, that by lower treatment and refining. Regarding byproducts, we had a total credit of $716 million, or $1.40 per pound, in the second quarter of this year.
Speaker Change: This 2% increase in the operating cash costs before byproduct credits reflects an increase in costs per pound from production costs.
Speaker Change: Administrative expenses, lower premiums, and more.
Speaker Change: and these higher costs were partially offset by higher...
Speaker Change: that lower treatment and refining charges.
Speaker Change: Regarding byproducts, we had a total credit of $716 million, or $1.40 per pound, in the second quarter of this year.
Raul Jacob: These figures represent a 34% increase in byproducts when compared with the credit of $532 million or $1.04 that we had in the first quarter of this year. Total credits have increased for Molybdenum, Zinc, and Silver and decreased somehow for Sulfuric. The second quarter of 2024 net income was $950 million, which represents a 74% increase with regard to the $548 million registered in the second quarter of last year. The net income margin in the second quarter stood at 31% versus 24% in the second quarter of 2010.
Speaker Change: These figures represent a 34% increase in byproducts when compared with the credit of $532 million or $1.04 that we had in the first quarter of this year.
Speaker Change: Total credits have increased for molybdenum, zinc, and silver, and decreased somehow for sulfuric acid.
Speaker Change: The second quarter of 2024 net income was $950 million, which represents a 74% increase
Speaker Change: With regard to the $548 million registered in the second quarter of last year.
Speaker Change: The net income margin in the second quarter stood at 31% versus 24% in the second quarter of 2023.
Raul Jacob: This increase was mainly driven by a 36% increase in sales, which was partially offset by higher operating costs related to sales volume, GMA, and exploration expenses. On a year-on-year basis, net income was 24% higher than in 2023 for similar Cash from Operations. Cashflow from operating activities in the six months of this year was $1,622 million, which represents a decrease of 18% compared to the $1,982 million posted in the six months of 2020. Cash flow in the first half of this year was affected by a significant increase in working capital, of $511 million, which was mainly driven by an increase in accounts receivable at our Mexican operator.
Speaker Change: This increase was mainly driven by a 36% increase in sales, which was partially offset by higher operating costs related to sales volume, GMA, and exploration expenses.
Speaker Change: On a year-on-year basis, net income was 24% higher than in 2023 for similar reasons.
Speaker Change: Cash from Operations
Speaker Change: Cash flow from operating activities in the six months of this year was $1,622 million, which represents a decrease of 18% compared to the $1,982 million posted in the six months of 2023.
Speaker Change: Cash flow in the first half of this year was affected by a significant increase in working capital of $511 million, which was mainly driven by an increase in accounts receivable at our Mexican operations.
Raul Jacob: For capital investments, our current capital investment program exceeds $15 billion, and it includes investments in the Ta Mara, Los Chancas, and Michiguiay projects in Peru and in the Buenavista, CINC, El Pilar, and El Arco projects. This capital forecast includes several infrastructure investments, including key investments to both. Business of the El Arco Project
Speaker Change: For capital investments, our current capital investment program exceeds $15 billion, and it includes investments in the Tía María, Los Chancas, and Michig-I projects in Peru.
Speaker Change: And in the Buena Vista, CINC, El Pilar, and El Arco Projects in Mexico.
Speaker Change: This capital forecast includes several infrastructure investments.
Raul Jacob: In the second quarter of this year, we spent $332 million on capital investments, which reflected a 31% increase over the figure reported in the second quarter of 2023 and represents 36% of net income this quarter. In the first half of the year, we spent $546 million on capital investments, which represents 33% of net income and reflects the impact of an 11% increase in capital expenses here on YouTube. Since there is a description of our main capital projects in Southern Copper's first release, I'm going to focus on updating new developments also.
Speaker Change: Including key investments to both
Speaker Change: of the El Arco project.
Speaker Change: In the second quarter of this year, we spent $332 million on capital investments.
Speaker Change: which reflected a 31% increase over the figure reported in the second quarter of 2023 and represents 36% of net income this quarter.
Speaker Change: In the first half of the year, we spent $546 million on capital investments, which represents 33% of net income and reflects the impact of an 11% increase in capital expenses year-on-year.
Speaker Change: Since there is a description of our main capital projects in Southern Copper's purse release, I'm going to focus on updating new developments for each.
Raul Jacob: This past quarter, we completed ramp-up at the Buena Vista Sink Concentrator, which graduated from project to operating unit staff. The zinc concentrator is operating according to our expectations, producing 23,300 tons of zinc and 5,500 tons of copper today.
Speaker Change: This past quarter, we completed ramp-up at the Buena Vista Zinc Concentrator, which graduated from project to operating unit status.
Speaker Change: The zinc concentrator is operating according to our expectations, producing 23,300 tons of zinc and 5,500 tons of copper today.
Raul Jacob: Our projections indicate that we will comply with the 2024 plan of producing 55,400 tons this year, and we expect this facility to generate an average of 90,200 tons of zinc and 20,000 tons of copper per year in the next five years. For the Peruvian projects, we have the Tia Maria project, which is a Greenfield project. This project will use state-of-the-art SXCW technology with the highest international environmental standards to produce 120,000 tons of SXCW copper cathodes per year.
Speaker Change: Our projections indicate that we will comply with the 2024 plan of producing 55,400 tons this year.
Speaker Change: We expect this facility to generate an average of 90,200 tons of zinc and 20,000 tons of copper per year in the next five years.
Speaker Change: For the Peruvian projects, we have the Tia Maria project, which is a Greenfield project
Speaker Change: This project will use state-of-the-art SXCW technology with the highest international environmental standards to produce 120,000 tons of SXCW copper cathodes per year.
Raul Jacob: Southern Copper has consistently promoted the welfare of the population of the Islay province and the Arequipa region. As part of these efforts, we have implemented successful social programs in education, healthcare, and productive development to improve the quality of life in the region. As of July 1st of this year, the company has restarted activities at the Tia Maria, in the province of the Rikipa region, and at the Nationals. We reiterate our view that Tia Maria will generate significant economic and social opportunities for the Sly Province and the Arequipa Region.
Speaker Change: Southern Copper has consistently promoted the welfare of the population of the Islay province and the Arequipa region.
Speaker Change: As part of these efforts, we have implemented successful social programs in education, healthcare, and productive development to improve the quality of life in the region.
Speaker Change: As of July 1st of this year,
Speaker Change: in the province of Islay.
Speaker Change: the Arequipa region, and at the national level. We reiterate our view that Tia Maria will generate significant economic and social opportunities for this live province and the Arequipa region.
Raul Jacob: In 2024, the company will, among other scheduled activities, install a live fence, as well as 1,000 fog caps. Southern Copper will also roll out air moving work. All these activities will generate 270 direct jobs in 2024 for the local population.
Speaker Change: In 2024, the company will, among other scheduled activities, install a live fence, as well as 1,000 fog catchers.
Speaker Change: Southern Copper will also roll out air moving work this year.
Speaker Change: All these activities will generate 270 direct jobs in 2024 for the local population. In 2025, we expect to begin mine construction.
Raul Jacob: In 2025, we expect to begin mine construction, which will generate 1,100 direct jobs with workers from the FBI program. When we start operations in 2027, the project will generate 600 direct jobs and an estimate of 4,800 indirect jobs. Our social programs in July totaled $6.3 million in the last two years.
Speaker Change: which will generate 1,100 direct jobs.
Speaker Change: with workers from the Islay province.
Speaker Change: When we start operations in 2027, the project will generate 600 direct jobs and an estimate of 4,800 indirect jobs.
Raul Jacob: Our current programs promote a reduction in the cost of agricultural production by improving productivity with cutting-edge technology. Additionally, we're working to provide internet access to 4,600 schools. On top of this, we're committed to developing health facilities, high-performance schools, research centers, and roads in the Arequipa region via the Work for Taxes mechanism. Tia Maria will generate significant revenues for the Arequipa Region from day one of its operation. At current copper prices, we expect to export $17,500 million and continue to receive $3,400 million in taxes and royalties during the first 20 years of operation.
Speaker Change: Our social programs in its life totaled $6.3 million in the last two years.
Speaker Change: Our current programs promote a reduction in the cost of agricultural production by improving productivity with cutting-edge technology.
Speaker Change: Additionally, we are working to provide internet access to 4,600 school students.
Speaker Change: On top of this, we're committed to developing health facilities, high-performance schools, research centers, and roads in the Arequipa region via the Work for Taxes mechanism.
Speaker Change: Tia Maria will generate significant revenues for the Arequipa region from day one of its operation. At current copper prices, we expect to export $17,500 million.
Speaker Change: and continue with $3,400 million in taxes and royalties during the first 20 years of operation.
Raul Jacob: The company is currently reviewing its historical capital budget for Pia Maria of $1.4 billion. We will update this budget by year, for the Los Chancas project located in the, the company continues to coordinate efforts with the Peruvian authorities to eradicate illegal mining in Peru. 40,000 meters to gather additional information on the characteristics of the Loshanka people for the Michiquillay project in Arequipa, in the Cajamarca region of Peru.
Speaker Change: The company is currently reviewing its historical capital budget for Tia Maria of $1.4 billion. We will update this budget by year-end.
Speaker Change: For Los Chancas project located in the...
Speaker Change: Ruizanchez, Raul Jacob
Speaker Change: 40,000 meters to gather additional information on the characteristics of the Los Chancas deposit.
Raul Jacob: As of June 30th of this year, total expansion on the exploration project stood at 30%. We drilled 104,000 meters, on a total program of 148,000 meters, and obtained 33,991 core samples for chemical analysis. Diamond drilling is underway, which will provide data for cross-section interpretation, geological modeling, and resource evaluation.
Speaker Change: For the Michiquillite project in the Cajamarca region of Peru.
Speaker Change: As of June 30th of this year, total advancement on the exploration project stood at 30%.
Speaker Change: We drilled 104,000 meters.
Speaker Change: on a total program of 148,000 meters.
Speaker Change: and obtained 33,991 core samples for chemical analysis.
Speaker Change: Diamond drilling is underway, which will provide data for cross-section interpretation, geological modeling, and resource evaluation.
Raul Jacob: This month, we will begin hydrogeological studies, and in August, geotechnical studies will begin. We will also assess the results of metallurgical testing at the Depositing Office. For Environmental, Social, and Corporate Governance, or ESG practices, we are glad to report that on August 1st of this year, the company will begin receiving eolic energy from the Phoenicius Wind, which is operated by Grupo Mexico in Festa. This will reduce our CO2 emission by approximately 250,000 tons per year, which is equivalent to 7% of Southern Copper's carbon footprint.
Speaker Change: This month we will begin hydrogeological studies and in August geotechnical studies will commence.
Speaker Change: We will also assess the results of metallurgical testing at the deposit in August .
Speaker Change: For Environmental, Social, and Corporate Governments, or ESG practices, we are glad to report that on August 1st of this year, the company will begin receiving eolic energy from the Phoenicius Wind Park.
Speaker Change: which is operated by Grupo Mexico Infraestructura.
Speaker Change: This will reduce our CO2 emissions by approximately 250,000 tons per year, which is equivalent to 7% of Southern Copper's carbon footprint.
Raul Jacob: Southern Copper recently published its sustainability development report, significantly improving the granularity and specificity of information regarding our performance, commitment, and efforts in environmental, social, and government areas. Our Buenavista mine in Sonora, Mexico, has received the copper mark, the zinc mark, and the molybdenum mark certifications for responsible production, following a third-party independent evaluation of our performance in environmental, social, and government matters, including on human rights. Consequently, all open pit, copper, zinc, and molybdenum production from our Mexican operation is currently certified by MARC standards.
Speaker Change: Southern Copper recently published its Sustainability Development Report, significantly improving the granularity and specificity of information regarding our performance, commitment, and efforts in environmental, social, and government areas.
Speaker Change: Our Buenavista mine in Sonora, Mexico, has received the copper mark, the zinc mark, and the molybdenum mark certifications for responsible production.
Speaker Change: Following a third-party independent evaluation of our performance in environmental, social, and government matters.
Speaker Change: Including on this human rights.
Speaker Change: Consequently, all open pit, copper, zinc, and molybdenum production from our Mexican operation is currently certified by MARC standards.
Raul Jacob: For education, our IMPULSA program seeks to provide our workers in Mexico with opportunities to qualify for certification of attainment in Primary and Secondary Education and Bachelor's degrees. From 2022 to date, more than 970 people have participated in this program, and 430 have graduated.
Speaker Change: For education, our IMPULSA program seeks to provide our workers in Mexico with opportunities to qualify for certification of attainment.
Speaker Change: of Primary and Secondary Education and Bachelor's Degrees.
Speaker Change: From 2022 to date, more than 970 people have participated in this program and 430 have graduated.
Raul Jacob: At present, there are 540 workers actively participating in impulse. For Human Development, the sports advisor and coach of the Sonora Operations Swimming Team, Jorge Higa, qualified for the Paris 2024 Olympic Games after breaking the Mexican record for the 100-meter freestyle. Thanks to Mr. Iga's support, in 2024, 17 students from our academies participated in six top-level competitions. Vivian Announce: Regarding dividends, as you know, it is the company policy to review our cash position. [inaudible] Accordingly, on July 18th of this year, Southern Copper Corporation announced a quarterly cash dividend of $0.60 per share of common stock and a stock dividend of 0.0056 shares of common stock per share.
Speaker Change: At present, there are 540 workers actively participating in INPULSA.
Speaker Change: For Human Development, the Sports Advisor and Coach of the Sonora Operations Swimming Team.
Speaker Change: Jorge Higa qualified for the Paris 2024 Olympic Games after breaking the Mexican record for the 100-meter freestyle.
Speaker Change: Thanks to Mr. Iga's support, in 2024, 17 students from our academies participated in six top-level competitions.
Speaker Change: Deviant Announcement.
Speaker Change: Regarding dividends, as you know, it is the company 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.
Speaker Change: Accordingly, on July 18 of this year, Southern Copper Corporation announced a quarterly cash dividend of $0.60 per share of common stock.
Speaker Change: and a stock dividend of 0.0056 shares of common stock per share.
Raul Jacob: This is payable on August 26th of this year, 2024, to shareholders of record at the close of business on August 9th, 2024. Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us.
Speaker Change: This is payable on August 26 of the year 2024 to shareholders of record at the close of business on August 9, 2024.
Speaker Change: Ladies and gentlemen, with these comments we end our presentation today. Thank you very much for joining us. Now we would like to open the forum for questions.
Operator: Now we would like to open the forum for questions. Thank you. And as a reminder, you need to press star then 11 to get in the queue and wait for your name to be announced. To remove yourself from the queue, press star 11 again.
Speaker Change: Thank you. And as a reminder, you need to press star then one one to get in the queue and wait for your name to be announced. To remove yourself from the queue, press star one one again. One moment for our first question, please.
Carlos de Alba: One moment for our first question. And it comes from the line of Carlos de Alba with Morgan Stanley. Please proceed. Thank you very much, Raul and everyone. Good talking to you. Raul, just on Tia Maria.
Speaker Change: And it comes from the line of Carlos de Alba with Morgan Stanley . Please proceed.
Speaker Change: Thank you very much Raul and everyone, good talking to you. Raul, just on Tia Maria.
Carlos de Alba: And I would like to understand the rationale behind the new environmental... Approval. That is a study that the company is doing or trying to get from the government that would be in relation to a dam that would supply water and not pursue the original desalination, plant, post-pumping station, and pipeline.
Speaker Change: I would like to understand the rationale behind the new environmental
Speaker Change: approval or a study that the company is doing or trying to get from the government that would be in relation to a dam that would supply water and not pursue the original
Speaker Change: desalination plant, post-pumping station, and pipeline. Given the...
Carlos de Alba: Given the less than positive history of the project, why would the company introduce this new uncertainty? Which, honestly, in my opinion, is just gonna complicate matters for the company, potentially. But I want to clarify with you, this is because the CAPEX will be lower, and or the OPEX will be lower. And can you talk about the magnitude, if I'm correct, the magnitude of the return on investment that the company would get with a dam as opposed to a desalination plant?
Speaker Change: less than positive history of the project.
Speaker Change: Why would the company introduce this new uncertainty?
Speaker Change: is just going to complicate matters for the company.
Speaker Change: Potentially, but I want to clarify with you, this is because...
Speaker Change: the CAPEX will be lower and or the OPEX will be lower.
Speaker Change: Can you talk about the magnitude, if I'm correct, the magnitude of the return on investment that the company would get with a dam as opposed to a desalination plant? Or how much is the CAPEX?
Raul Jacob: Or how much is the CAPEX? for desalination, the pumping station, and the pipeline relative to the construction of a high dam. And what is the difference in the opex going forward between the two projects? OK, thank you very much for your question, Carlos. At this point, we're maintaining our approved project, which considers the desal plant. This is what we're developing right now. If there is a possibility later on in time of including a dam to get the water that the project requires, we will consider that.
Speaker Change: for the desalination, the pumping station, and the pipeline relative to the construction of high dam. And what is the difference in the opex going forward between the two projects? Thank you.
Raul Jacob: But at this point, we're following our current desal plant for the project. Regarding the costs, we're currently... As you know, we have been reporting a capital expense of about $1.4 billion for the project, but we are currently revising it because we want to add some facilities that were not considered in the first project, and we need to accommodate some inflation costs in the project total cap. By new facilities, I mean a new road that will connect the project to the coast of Islay, not passing through the Tambo Valley.
Speaker Change: Okay, thank you very much for your question, Carlos.
Speaker Change: At this point, we are maintaining our proof.
Speaker Change: Project, which considers the D cell plant.
Speaker Change: This is what we're...
Speaker Change: developing right now.
Speaker Change: If there is a possibility, later on in time, of including a dam to get the water that the project requires, we will consider that, but at this point, we're following our current DHEL plan for the project.
Speaker Change: Regarding the costs, we're currently...
Speaker Change: As you know, we have been reporting a capital expense of about $1.4 billion for the project, but we are currently revising it because we want to add...
Speaker Change: Ruizanchez, Raul Jacob
Speaker Change: the project to the coast of Iceland.
Raul Jacob: That will remove one of the concerns that the farmers of Islay or the valley have about the trucks and all the materials that will move on for the project construction that will disturb the valley's environment. To avoid that, we are considering building a new road that is a 20-kilometer road, roughly speaking.
Speaker Change: not passing through the Tambo Valley. That would remove one of the concerns.
Speaker Change: that the farmers of...
Speaker Change: of Islay or the valley have about the trucks and all the materials that will move on for the project construction.
Speaker Change: Ruizanchez, Raul Jacob
Raul Jacob: And some other changes, since the project was approved in 2014, we have seen some technological advances that we want to include in the capital budget as well. So, as we indicated in the press release, we are expecting to announce this by year end at the most. So, that's the current status. Thanks Raul. Just one clarification: you will build a road, not a railway, right? No, both things. The railroad will be for moving up the sulfuric acid and materials that we need to operate and down basically the production on a daily basis. However, for the construction phase and to communicate directly with the coast, there will be a road that will connect the plant and the facilities for the project with the coast of Moyen. Got it.
Speaker Change: It's a 20-kilometer road, roughly speaking. And some other changes, since the project was approved in 2014, we have a...
Speaker Change: We have seen some technological advances that we want to include in the capital budget as well. So, as we indicated in the press release, we are expecting to announce this by year end at the most.
Speaker Change: So that's the current status.
Speaker Change: Thanks Raul, just one clarification, so you will build a road, not a railway, right?
Raul: No, both things.
Speaker Change: The railroad will be for moving up the sulfuric acid and materials that we need to operate.
Speaker Change: and down, basically, the production...
Speaker Change: However, for the construction phase and to communicate directly to the coast, there will be a road that will connect the plant and the facilities for the project with the coast of Moyendo.
Carlos de Alba: Okay. And then my second question is related to the outlook for costs before byproducts. If I missed it, I'm sorry, but if you didn't mention it, could you please let us know how you see the evolution of your cash costs before byproducts, the benefit of byproducts. [inaudible] It's hard to know because we always have price variances either way, but I believe that we will be at about $2 per pound before subtracting credits.
Speaker Change: Alright, got it. Okay, and then my second question is related to the outlook for costs before byproducts. If I missed it, I'm sorry, but if you didn't mention, could you please let us know how you see the evolution of your cash costs before byproducts, the benefit of byproducts?
Speaker Change: Well,
Speaker Change: It's hard to know because we always have price variances either way, but I believe that we will be at about $2 per pound before subtracting credit.
Raul Jacob: Please keep in mind that those $2 now include the additional cost of our new concentrator for zinc. So it's all the cost of the company, which includes the cost of the by-product plants that are related to our production complex, divided by the pounds of copper that we're producing. So for this year, we expect it to be about $2.
Speaker Change: Please keep in mind that those two dollars now include the additional cost of our new concentrator for zinc.
Speaker Change: So, it's all the cost of the company, which includes the cost of the by-product plants that are related to our production complex.
Speaker Change: Ruizanchez, Raul Jacob
Raul Jacob: And then it depends on the production level that we have. If we, for instance, in 2027, when we add Tia Maria to our current production profile, we certainly will reduce our cost before by product credit because the Tia Maria expected cash cost is in the range, the lower range of a dollar plus. You're welcome.
Speaker Change: And then it depends on the production level that we have.
Speaker Change: For instance, in 2027, when we had...
Speaker Change: Tia Maria to our current production profile, we certainly will reduce our cost before by product to edit because the Tia Maria expected cash cost is in the range, the lower range of a dollar plus.
Operator: Thank you. One moment for our next question, and it's coming from Marcio Farid with Goldman Sachs. Please proceed. Thank you. Good morning, everyone.
Speaker Change: Okay. Thank you very much.
Carlos: You're welcome, Carlos.
Speaker Change: Thank you. One moment for our next question, and it's coming from Marcio Farid with Goldman Sachs. Please proceed.
Marcio Farid: Thanks for the opportunity. A couple of follow-ups on my side here. Firstly, Raul, I think our execution was a bit stronger than we're expecting for the quarter.
Marcio Farid: Thank you, everyone, and thanks for the opportunity.
Marcio Farid: A couple of follow-ups on my side here, firstly Raul, I think up execution was a bit stronger than we were expecting for the quarter, it's still relatively, you know, half of yearly guidance, right? But just trying to understand.
Marcio Farid: It's still relatively, you know, half of yearly guidance, right? But just trying to understand if investments for TMRD are expected to be much, really higher for this year. I think you had pretty much close to zero for TMRD in the guidance for this year. Are you anticipating some more disbursements related to that as adjustments seem to be quite, quite, you know, remarkable at this point? Yeah. And yeah.
Marcio Farid: If investments for Tia Maria are expected to be materially higher for this year, I think you had pretty much close to zero for Tia Maria in the guidance for this year. Are you anticipating some more disbursements related to that as investments?
Marcio Farid: And how should we think about, you know, final year CAPEX and for TMRD specifically as well? And similarly for production, I think pretty good numbers, but roughly in line with our estimates. You know, we had, I think, guidance for the year around 950,000 tons. How are you thinking about final year guidance and your ability to reach the production guidance for the year, please? That will be my question.
Speaker Change: seems to be quite remarkable at this point.
Speaker Change: And yeah, and how to think about, you know, final year CAPEX.
Raul Jacob Ruisanchez: Raul Ruisanchez, Raul Jacob
Marcio Farid: Thank you. The second one is how sure we feel about the production guidance. Yes, yes. Okay, let me start with this one.
Speaker Change: You know, we had, I think, around 50,000 drones.
Speaker Change: How are you thinking about final year guidance and your ability to reach the production guidance for the year at least? That would be my question. Thank you.
Speaker Change: The second one is how sure do we feel about the production guidance.
Raul Jacob: Okay, we feel very confident that we will either maintain or improve our production guidance in the second half of this year. We're seeing our Think new concentrator, and it's certainly operating at a very good pace. We were very satisfied with that. In the first half of the year, our SXCW production at Buena Vista was affected by some water scarcity that has been fixed. We're already getting even more water than we expect to have due to the higher rainy season that we're seeing in Sonora State.
Speaker Change: Yes, yes.
Speaker Change: Okay, let me start by this one. Okay, we feel very confident that we will either maintain or improve our production guidance in the second half of this year.
Speaker Change: We're seeing our think...
Raul Jacob Ruisanchez: Raul Ruisanchez, Raul Jacob
Raul Jacob Ruisanchez: was affected by some water scarcity that has been fixed.
Raul Jacob Ruisanchez: It's already, we're already getting a...
Raul Jacob Ruisanchez: Even more water than what we expect to have due to the higher rainy season that we're seeing at the
Raul Jacob: That is going to help our production of SXCW copper for the second half of this year. We have not included that as part of our current guidance. I believe that that will be an upside factor for us.
Raul Jacob Ruisanchez: Ruizanchez, Raul Jacob
Raul Jacob: Coming to your first question on CAPEX for Pia Maria, this year we are spending, as I said, we are doing a live, Life Defense, that will be around the expected place for the new facilities for the project. And we will basically spend much less than a project of this magnitude would require. However, we believe that we will be accelerating the capital expenditures for the project through the second half of the year. And for 2025, we will spend, in Tia Maria, about $316 million that will be for earth-moving activities and some other activities.
Speaker Change: Coming to your first question on the CAPEX for Pia Maria.
Speaker Change: This year, we are spending, as I said, we are doing a live stream.
Speaker Change: I like the fence that will be around the expected place for the new facilities for the project.
Speaker Change: We will basically spend much less than a project of this magnitude would require.
Speaker Change: However, we believe that we will be accelerating the capital expenditures for the project through the second half of the year. And for 2025.
Speaker Change: We started spending, Pia Maria, about $316 million.
Pia Maria: That will be for earth-moving activities and some other activities.
Raul Jacob: I mentioned the road that we want to build. That will obviously be a very important source of new labor requirements, which is one of our priorities to use people from the Eastside Province and the Tambo Valley specifically. And then for the rest of the conference, Tia Maria, we will advise you before year end. Okay. Can I just do a quick follow up as well? It sounds like cost was a lot better on the after byproducts basis. Volume is very strong, obviously.
Speaker Change: The items that are related to the project, I mentioned the road that we want to build.
Speaker Change: That will be obviously a very important source of new labor requirement, which is one of our priorities, to use people from the Islay province and the Tambo Valley specifically.
Speaker Change: And then for the rest of the conference, Tia Maria, we will advise before year-end on this.
Raul Jacob: We did not have the breakdown by each product until the full final financial statements are out. What do you think was the beat in terms of positive surprise for after byproducts cost and, obviously, byproducts production and revenues as well? Well, as I commented when we covered the cash cost portion of the presentation, we have had the benefit of both better prices and higher volumes. The new zinc concentrator obviously was important for getting higher volumes of molybdenum production coming from our mines, zinc, well I mentioned already the impact of having a much higher zinc production coming from the new zinc concentrator, and silver comes in higher quantities not only from our mines but also as a byproduct of the zinc That's great, Raul.
Speaker Change: Okay, can I just quick follow up as well? It sounds like cost was a lot better on after byproducts base.
Raul Jacob: Thank you very much. Thank you, one moment for our next question. And it's from the line of Alejandro Demichelis with Jeffries.
Speaker Change: Raul Ruisanchez, Raul Jacob
Speaker Change: Well, as I commented when we covered the cash cost portion of the presentation,
Raul Jacob Ruisanchez: We have to have the benefit of both better prices.
Raul Jacob Ruisanchez: Ruizanchez, Raul Jacob
Raul Jacob Ruisanchez: and we'll look at production coming from our...
Raul Jacob Ruisanchez: from our mind.
Raul Jacob Ruisanchez: I think, well, I mentioned already the impact of having a much higher zinc production coming from the new zinc concentrator.
Raul Jacob Ruisanchez: Silver comes in higher quantities not only from our mines but also as a by-product of the zinc.
Raul Jacob Ruisanchez: So, higher volumes and better prices, that's what, in my view, explains the positive surprise that you were mentioning, Arthur.
Martin: That's great Raul, thank you very much.
Speaker Change: You're welcome. Thank you. One moment for our next question.
Alejandro Anibal Demichelis: Please proceed. Yes, good morning, gentlemen. Thank you very much for taking my questions. There are a couple of things. First, a follow-up on your net cash cost. Raul, if I understand correctly what you were saying, which is higher volumes of zinc and higher volumes of silver, then we should assume that that extra by-product revenue should be stable, obviously with all the variations of prices, but then your net cash cost, should it remain below $1 per pound?
Speaker Change: and is from the line of Alejandro Demichelis with Jeffries. Please proceed.
Alejandro Anibal Demichelis: Yes, good morning gentlemen, thank you very much for taking my questions.
Alejandro Anibal Demichelis: I have a couple of things. First is a follow-up on your net cash cost.
Speaker Change: Raul, if I am understanding correctly what you were saying, which is...
Raul Jacob Ruisanchez: Raul Ruisanchez, Raul Jacob
Raul Jacob: Hopefully, yes, but we have to see where the prices are going through the rest of the year. We don't know where prices are going to be in the second half of this year, but regarding volumes, I believe that we will maintain the volumes that we have been achieving here today for our byproducts, as well as copper. I already mentioned copper that we would like to improve on the forecast that we mentioned. But for byproducts also, we should maintain production levels. Hopefully, prices will be the same or even better if we see a better forecast. But that's where we are now.
Speaker Change: Hopefully, yes, but we have to see where the prices are going.
Speaker Change: Through the rest of the year, we don't know.
Speaker Change: where prices are going to be in the second half of this year. But regarding volumes, I believe that we will maintain the volumes that we have been achieving here today.
Speaker Change: I already mentioned on copper that we would like to improve on the forecast that we mentioned.
Speaker Change: Raul Ruisanchez, Raul Jacob
Alejandro Anibal Demichelis: And then, obviously, from the last quarter, maybe you can give us some kind of indication of how we should think about, or how you're thinking about, dividends for the rest of the year. Should we assume it's like a 50-50 between cash and stock? I can only say that it's up to the board to make that decision. I think that the dividend, as was approved, with 50% in cash and 50% in shares, is reflecting the new investment that we are undertaking, the Tia Maria investment, as well as some payments that we have to do for next year.
Speaker Change: Okay and then this is a follow-up obviously from the last quarter. Maybe you can give us some kind of indication how we should think about or how you're thinking about dividends for the rest of the year. Should we assume it's like a 50-50 between cash and stock?
Speaker Change: I can only say that it's up to the board to make that decision.
Speaker Change: I think that the dividend, as was the proof, having 50% in cash and 50% in shares.
Speaker Change: It's reflecting the...
Speaker Change: Well, the new investment that we are undertaking, the Tia Maria investment, as well as some payments that we have to do for...
Alejandro Anibal Demichelis: If you see on our balance sheet, we have almost $500 million in debt repayment that we'll have to do in April next year, so I believe that has made our board a little bit more conservative in the cash dividend and, well, a way to reflect the good times that we're seeing in our market and the production levels of the company that has been joined by a dividend in shares.
Speaker Change: Ruizanchez, Raul Jacob
Speaker Change: I believe that has made our bore a little bit more conservative in the cash.
Speaker Change: Dividend and Will.
Speaker Change: A way to reflect the good time that we're seeing in our market and the production levels of the company that has been joined by dividend in shares as well.
Raul Jacob: Okay, that's good. And just to confirm, you said that for Tia Maria, for 2025, the CapEx expectation is about $300 million, something like that? 316 million, that's the current budget.
Speaker Change: Okay, that's good. And just to confirm, you said that for Tia Maria, for 2025, the capex expectation is about $300 million, something like that?
Raul Jacob: However, it's under review, and we would like to accelerate our CAPEX expenses in Tia Maria, but obviously with the proper activities to move on. Okay, that's fantastic. Thank you very much.
Speaker Change: 316 million, that's the current budget.
Speaker Change: However, it's under review and we would like to accelerate our CAPEX expenses in Tia Maria, but obviously with the proper activities to move on.
Speaker Change: Okay, that's fantastic. Thank you very much.
Alejandro Anibal Demichelis: You're welcome. Thank you. One moment for our next question that comes from Sofia Martin with GBM. Please proceed. Hi, thank you for taking my call. I was just wondering if you could share with us your copper production guidance for the next couple of years. Thank you. Certainly, Sofia. I'm going to take...
Speaker Change: You're welcome. Thank you.
Speaker Change: One moment for our next question that comes from Sofia Martin with GBM. Please proceed.
Sofia Martin: Okay, for 2024, I already mentioned 963,200 tons. For 2025, we will have a slight reduction in production coming from the Buena Vista mine and the open pit operations of Peru. That will put us now at 921,000 tons. All of these adjustments are basically coming from lower ore grades. For 2026, we are expecting a little bit less than 900,000 tons. 1027, 960, and 70,000 tons.
Sofia Martin: Hi, thank you for taking my call. I was just wondering if you could share with us your copper production guidance for the next couple of years. Thank you.
Speaker Change: Certainly, Sofia.
Speaker Change: Follow-up in effect, please.
Speaker Change: Okay, for 2024, I already mentioned 963,200 tons.
Speaker Change: For 2025, we will have a slight reduction in production coming from the Buena Vista mine and the open pit operations of Peru.
Speaker Change: That will put us now at 921,000 tomes.
Speaker Change: All of these adjustments are basically coming from lower ore grades. For 2026, we are expecting a little bit less than 900,000 tons.
Speaker Change: 2027, 960, and 70,000 tons.
Speaker Change: And then when we get in 2000, well, in 2027 and 2028, we'll be getting the benefit of the Tia Maria food production. And that will increase our...
Speaker Change: Our production forecast to over a million tons, a million tons by 2028.
Raul Jacob: And then when we get in 2000, well, in 2027 and 2028, we'll be getting the benefit of Tia Maria production, and that will increase our production forecast to over a million tons, a million tons by 2028. Perfect, thank you very much.
Sofia Martin: Yes. And for the next years, even though we haven't received the board's approval yet, we're considering an expansion of the Quahogne mine that will increase its capacity by about one-third of what it is right now. However, that is not included in our current capital forecast, but it's something that the company is working on. Perfect. Thank you very much.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Yes, and for the next years, even though we haven't received the board approval yet, we're considering an expansion of the Quahogne mine.
Raul Jacob Ruisanchez: Raul Ruisanchez, Raul Jacob
Raul Jacob Ruisanchez: Perfect, thank you very much.
Hernan Kisluk: Thank you. Our next question comes from the line of Hernan Kisluk with MetLife. Please proceed. Good morning, thank you for taking my questions. Following up on the previous questions about dividends and also talking about Tia Maria and the capex that we need going forward, can you maybe remind us what your capital allocation priorities are so we can start? Apex will be higher, but then thinking about the cash position, the net debt level, and the changes that you have been doing on the dividend front, how should we think about it going forward?
Raul Jacob Ruisanchez: You're welcome.
Speaker Change: Thank you.
Speaker Change #100: Our next question comes from the line of Hernan Kisluk with MetLife. Please proceed.
Hernan Kisluk: Good morning, thank you for taking my questions. Following up on the previous questions about dividends and also talking about Tia Maria and the CAPEX that we need going forward, can you maybe remind us what are your capital allocation priorities?
Raul Jacob Ruisanchez: Raul Ruisanchez, Raul Jacob
Raul Jacob: Well, going forward, the company is focused, as it has been mentioned in several forums as well as these conference calls, we are focusing on organic growth. We already finished the new zinc concentrator in Buenavista, and we're focusing on the projects that the company has, which are pretty much 100% owned by the company, and well, currently we are moving forward with Tiamaria. We already finished the zinc concentrator in Mexico. We do have two other projects in Peru, and one big project in Mexico, which is in Peru, the Los Chancas and Chiquillay projects, and in Mexico, El Arco and El Pilar, that are two projects, and that's a part of our pipeline in mining, specific copper mining projects, and besides that, for the future, we're also considering the construction of metallurgical complexes, one in Peru and one in Mexico, that will certainly be a way to process the long concentrate production that we have now.
Speaker Change #104: Well, going forward, the company is focused, as it has been mentioned in several forums as well as these conference calls, we are focusing on organic growth.
Speaker Change #103: We are currently developing, we already finished the new zinc concentrator in Buena Vista.
Speaker Change #102: We are focusing on the projects that the company has, which are pretty much 100% owned by the company.
Speaker Change #102: and well currently we are moving forward with Tia Maria.
Speaker Change #102: We already finished the zinc concentrator in Mexico.
Speaker Change #102: We do have two other projects in Peru and one big project in Mexico, which is in Peru, the Los Chancas and Nichiquillay projects, and in Mexico, El Arco and El Pilar.
Speaker Change #102: Thank you very much.
Speaker Change #105: Ruizanchez, Raul Jacob
Raul Jacob: And given the growth project that you have at Apera, who is going to grow that space, should we expect a stable net debt level for the next few years, or will it go along with... I'm so sorry, I'm so sorry, I couldn't understand what you said. Well, for now, we have been paying our total debt. We have paid about $700 million in the last five years.
Speaker Change #106: And even the group project that we have at IRC, which is going to grow the asset space.
Speaker Change #107: Ruizanchez, Raul Jacob
Raul Jacob Ruisanchez: and they will not be bad. Shall we conclude that this group...
Raul Jacob Ruisanchez: [inaudible]
Raul Jacob Ruisanchez: For now, we have been paying our total debt.
Hernan Kisluk: This year, we have the maturity of one of our 10-year loans or bonds that will mature for the same amount in April, and it has a capex or a principal of $500 million. If we move on with projects, I believe that we will certainly touch the debt markets in the future, but at this point, we have no concrete plans to do that. Okay, thank you. Thank you. One moment for our next question, and it's from the line of Alfonso Salazar with Scotiabank. Please proceed.
Raul Jacob Ruisanchez: We've paid about $700 million in the last five years. Next year we have the maturity of one of our 10-year loans.
Raul Jacob Ruisanchez: [inaudible]
Raul Jacob Ruisanchez: If we move on with projects, I believe that we will certainly touch the debt markets in the future, but at this point we have no concrete plans to do that.
Speaker Change #108: Okay, thank you.
Speaker Change #109: Thank you. One moment for our next question.
Speaker Change #110: And it's from the line.
Hernan Kisluk: Hi, Raul, and good day. Two questions on my side. The first one is regarding production and sales levels. For several quarters now, we have seen that production is above shipment, so I'm just wondering what is behind this, and if there is any reason in the long term to assume that these numbers shouldn't be the same.
Speaker Change #110: of Alfonso Salazar with Scotiabank. Please proceed.
Alfonso Salazar: The second question is regarding permits for tailings dams in Mexico. We hear that some companies are having problems securing these permits, and they have to slow down production, or they are considering having to do that in the future unless they get these permits. If there is any situation like that in your case, and also, if there's any update on the water pipeline that you need for one of them. OK. Well, we have the difference that you mentioned, Alfonso.
Alfonso Salazar: Hi Raul and good day. Two questions on my side. The first one is regarding production and sales levels.
Alfonso Salazar: For several quarters now, we have seen that production is above shipment, so I'm just wondering what is behind this.
Speaker Change #112: and if there is any reason in the long term to assume that these numbers shouldn't be the same.
Speaker Change #113: The second question is regarding permits for tailings dams in Mexico, which we heard that some companies are having problems to secure these permits and they have to slow down production or they are...
Speaker Change #114: Raul Ruisanchez, Raul Jacob
Alfonso Salazar: It refers to the difference between the copper contained in our mine production vis-a-vis the refined copper that we sell. As you know, we sell about 75% of all the copper production that we do it as refined copper or further processed copper, such as rock. If you see our production of copper and the sales, usually they are slightly lower in volume compared to the sales volumes that we report.
Speaker Change #114: Okay.
Raul Jacob Ruisanchez: Well, um...
Raul Jacob: We have the difference that you mentioned, Alfonso, it refers to the difference between the copper contained in our mine production.
Speaker Change #115: Vis-a-vis the refined copper that we sell. As you know, we sell about 75% of all the copper production that we do is sold as refined copper or further processed copper such as rot.
Speaker Change #115: If you see our production of copper and the sales, usually they are slightly lower, the sales in volume, compared to the production volumes that we report.
Raul Jacob: That's one of the reasons why you see this over time, and your second question, I'm so sorry, could you repeat it please? Yeah, sure. Regarding tailings dam permits in Mexico, because I see that some companies are having some problems. Yes, no, we haven't had any problems with that.
Speaker Change #115: That's one of the reasons why you see this over time.
Speaker Change #116: And your second question, I'm so sorry, could you repeat it please?
Speaker Change #117: Yeah, sure. Regarding selling some dam permits in Mexico, because we hear that some companies are having some problems.
Speaker Change #118: Yes, no we haven't had any problems with that, we are currently working to have all of our tailings dams not only operating with the safe.
Alfonso Salazar: We're currently working to have all of our tailings dams not only operating with the safety that we need them to have in order to maintain our operations at a sound pace, but we have nothing to report in that regard. We are basically looking into growing the capacity of these tailings dams, and we've so far had no issues with that. Excellent. Any update on the water pipeline for Buena Vista? No, for now, it's basically the same as has been reported before.
Raul Jacob: Okay, perfect. Thank you, Raul. Thank you. One moment for our next question, and he's on the line with Myles Alsop with UBS. Please proceed.
Speaker Change #118: that we need them to have in order to maintain our operations at a sound pace.
Speaker Change #119: Ruizanchez, Raul Jacob
Speaker Change #120: Excellent. Any update on the water pipeline for Buena Vista?
Speaker Change #121: No, for now it's basically as has been reported before.
Raul: Okay, thank you, Raul.
Speaker Change #122: Thank you. One moment for our next question.
Myles Alsop: Great, thank you very much for taking the question. Maybe a few quick questions, follow-ups. With Tia Maria, since your activity has been picking up over the last few months, have you seen any social unrest? Clearly, that's been an issue for many years with Tia Maria, but do you feel you have more acceptance by the local community at this juncture? Much better local acceptance of the project. Obviously, there are some people that will never change their minds, they don't like mining, and they are protesting, but so far, we are seeing that the majority of the Islan population, which is roughly speaking a little bit more than 50,000 people live in this province of Arequipa. Of those 50,000 we don't see, we see interest in the project to move on. People are registering themselves on a website that we have opened for job offers.
Speaker Change #123: and he's from the line of Miles Alsop with UBS. Please proceed.
Miles Alsop: Great. Thank you very much for taking the question. Maybe a few quick questions, follow-ups. With Tia Maria,
Miles Alsop: Since your activity has been picking up over the last few months, have you seen any social unrest? Clearly that's been an issue for many years with Tia Maria, but do you feel you have more acceptance by the local community at this juncture?
Speaker Change #125: Much better local acceptance to the project.
Speaker Change #126: Obviously, there are some people that will never change their mind, they don't like mining and they are protesting, but so far we are seeing that the majority of the Islan population, which is, roughly speaking, a little bit more than 50,000.
Speaker Change #126: People live in this province of Arequipa.
Speaker Change #126: of those 50,000, we don't see, we see interest in the project to move on. People is registering themselves into a website that we have opened for job offers.
Raul Jacob: So we are seeing a very positive development in that regard, and obviously, we are making efforts to explain that the project will be environmentally safe for the people of Islan. I think that's the case with our operations in the southern part of Peru, where we have no issues regarding environmental matters with the local population of Moquegua, Tacna, and Islan. Now maybe going back to that capital allocation question earlier, where does M&A fit within, obviously organic growth is clearly the priority, but there are a few opportunities in Europe and so on at the moment, where does that M&A kind of optionality sit within the priority of management?
Speaker Change #126: So we're seeing a very positive development in that regard.
Speaker Change #126: Obviously, we are making efforts to explain that the project will be environmentally safe for the people of this line.
Speaker Change #126: I think it's the case with our operations in the southern part of Peru, where we have no issues regarding environmental matters with the local population of Moquegua, Tacna, and Hilo.
Speaker Change #126: Yeah
Speaker Change #127: Okay, and then maybe going back to that capital allocation question earlier, where does...
Speaker Change #128: M&A, Fitts,
Speaker Change #129: Within obviously organic growth is is clearly the priority, but there are
Speaker Change #130: A few opportunities in Europe and so on. At the moment, where does that M&A kind of optionality sit within the priority of management?
Raul Jacob: Well, the company is always open to reviewing any opportunities that we have on the M&A front. At this point, we're not looking into anything specific. We are working on organic growth, but if there is a good opportunity out there, our responsibility as management will be to analyze it and to report it to our board of directors and ask them for a decision. There's only really tier one assets that you're interested in, like proper big ones, you know, 120 plus thousand tons or would you look at smaller opportunities as well?
Speaker Change #131: Well, the company is always open to review any opportunities that we have on M&A issues.
Speaker Change #132: At this point, we're not looking into anything specific.
Speaker Change #132: We are working on organic growth, but if there is a good opportunity out there, our responsibility as management will be to analyze it and to report to our Board of Directors and ask them for a decision on that.
Speaker Change #133: Is it only Tier 1 assets that you're interested in, like proper big, 120 plus thousand tons, or would you look at smaller opportunities as well?
Myles Alsop: We have done both things in the past, so the answer is yes and yes. We have looked into assets that have over 100,000 tons of copper production, as long as they are a good fit with our current operations, meaning mainly copper and low cash costs, and that can be assets of 100,000-plus sites or smaller assets that are close to our operations, as has been the case with Pilares, for instance. We have developed that deposit, and it's feeding our Caridad operations right now. So it depends on certain conditions, but for smaller assets, they should most likely be relatively close to where we have our major operations. For bigger ones, that's a different story.
Speaker Change #134: We have made both things in the past, so the answer is yes and yes. We have looked into assets that have over 100,000 tons of copper production, as long as they are...
Speaker Change #134: You know, a good fit with our current operations, meaning mainly copper and low cash costs.
Speaker Change #134: And then that can be assets of...
Speaker Change #138: A hundred thousand plus.
Speaker Change #143: Ruizanchez, Raul Jacob
Speaker Change #143: We have developed that deposit and it's feeding our Caridad corporations right now.
Speaker Change #143: So it depends on certain conditions, but for smaller assets, they should most likely be relatively close to where we have our major operations. For bigger ones, that's a different story.
Raul Jacob: Okay, that makes sense. Maybe the last question just on Mexico, obviously we've had the elections, and do you think that the new government and the policy will impact your operations in Mexico? Obviously, there have been kind of incremental challenges, shall we say, over the last six years. And just on that El Pilar project as well, it's never really talked about because it's so small, but is that still getting all the permits, is it actually moving forward, or is that still on hold? Is El Arco viable under the current administration?
Speaker Change #135: Okay, that makes sense. Maybe the last question, just on Mexico, obviously we've had the elections and...
Speaker Change #137: Do you think that there's...
Speaker Change #140: The new government and the policy will impact your operations potentially in Mexico, obviously there has been
Speaker Change #139: kind of incremental challenges shall we say over the last six years um you know and just on that El Pilar project as well it's never really talked about because it's so small but
Speaker Change #136: Is that still got all the permitting? Is it actually moving forward or is that still on hold? Is El Arco viable under the current administration?
Myles Alsop: For El Pilar, we are looking into some issues regarding the recovery of the FEXEW solution. Um, we're working on that. For the other concern that you indicated... questions about the new policies of the coming government. We have to see when they present them. At this point, we have no specific issues to comment on. Thank you very much. You're welcome. Thank you. One moment for our next question, which is from the line of John Brandt with HSBC. Please proceed. Hi, good morning, Raul. Thanks for taking my questions. Just two really quick ones for me.
Speaker Change #145: For El Pilar, we are looking into some issues regarding the recovery of the FEXEW solution.
Speaker Change #144: We are working on that.
Speaker Change #141: Raul Ruisanchez, Raul Jacob
Speaker Change #142: Thank you very much.
Speaker Change #146: You're welcome. Thank you. One moment for our next question.
Jonathan L. Brandt: Just on Tia Maria, I know you're reviewing the CapEx that you have, but I'm more curious about the timing. I believe, you know, you're looking at a potential startup in the second half of 2027. Do you see any risk that that maybe slips into 2028?
Speaker Change #148: and is from the line of John Brandt with HSBC. Please proceed.
Jonathan L. Brandt: Good morning, Raul. Thanks for taking my questions. Just two really quick ones for me. Just on Tia Maria, I know you're reviewing the CapEx that you have, but I'm more curious about the timing.
Jonathan L. Brandt: I believe, you know, you're looking at a potential startup in the second half of 2027. Do you see any risk that that maybe slips into 2028? If you could just talk a little bit about the timing as you see things.
Speaker Change #149: Second question is, you mentioned the possibility of expanding the Quijone mine. I'm hoping you can give us a few more details around that, and if there are any other similar types of projects.
Speaker Change #150: You know sort of smaller brownfield projects that you might have at your other mines that could help boost production in the coming years. Thank you.
Jonathan L. Brandt: If you could just talk a little bit about the timing as I'm hoping you can give us a few more details around that and if there are any other similar type, you know, sort of smaller brownfield projects that you might have at your other mines that could help boost production in the coming years. Thank you. Yeah, thank you for your question, John. In the case of the Tia Maria current timeline, the best that we have at this point is finishing the project by the first half of 2027, initiating the ramping up, and having the project stabilized and operating at full capacity by sometime between the second and the third. We lost your audio, sir.
Speaker Change #150: Yeah, thank you for your question, John .
Speaker Change #151: In the case of the Tia Maria current timeline, that's...
Speaker Change #152: The best that we have at this point is finishing the project by the first half of 2027, initiating the ramping up and having the project stabilized and operating at full capacity by sometime between the second and the third quarter.
Raul Jacob: Ladies and gentlemen, please stand by. Carmen, I'm going to connect again, okay? I think, okay, perfect. Please stand by. Thank you for your patience, ladies and gentlemen. Just one moment while he connects.
Speaker Change #152: Ladies and gentlemen, please stand by.
Speaker Change #152: Carmen, I'm going to connect again, okay? Okay, perfect. Please stand by.
Speaker Change #152: [inaudible]
Speaker Change #152: Thank you for your patience, ladies and gentlemen. Just one moment while he connects.
Operator: And thank you for your patience, ladies and gentlemen. Please stand by. Ladies and gentlemen, thank you for your patience. Please continue to stand by. Yeah. Yes, it is.
Speaker Change #152: Ladies and gentlemen, thank you for your patience. Please continue to stand by.
Operator: Carmen, can you hear me now? Yes, we can hear you now. You can continue your presentation from this line. Carmen, can you listen to us now? I can hear you, yes. Will the audience listen to us? The audience is listening to you.
Speaker Change #153: Yes, we can hear you now.
Speaker Change #154: You can continue your presentation from this line.
Speaker Change #154: Carmen, can you listen to us now? I can hear you, yes. Will the audience listen to us? The audience is listening to you. And we still have Mr. John Brandt from HSBC.
Operator: And we still have Mr. John Brandt from HSBC with his question. Okay, thank you very much. First, let me excuse us for what just happened. Sorry about that. We'll move on with John Brandt's second question. On the guajone expansion, the idea is to increase the capacity of the guajone operation by about one-third of its current capacity. Nowadays, guajone can mill about 90,000 tons of mineral per day at the guajone concentrator. The idea is to build new facilities that will allow guajone to increase its milling capacity to 120,000 tons of material.
Raul Jacob: That's basically it. As I said, we're still working on that. We have no board approval, which is important that you keep in mind.
Speaker Change #155: Ruizanchez, Raul Jacob
Speaker Change #155: We'll move on with Jon Brandt's second question on the Quajone expansion. The idea is to increase the capacity of the Quajone operation by about one-third of its current capacity.
Speaker Change #155: Nowadays, Guajone can mill about 90,000 tons of mineral per day.
Raul Jacob Ruisanchez: Raul Ruisanchez, Raul Jacob
Raul Jacob: I think that you already covered the question about the kind of project that we have been looking at. All right. Great. Thanks, Raul. You're welcome. Thank you. And ladies and gentlemen, that is star 11 if you have a question. Our next question comes from the line of David Feng with CICC.
Speaker Change #156: It's important that you keep in mind.
Speaker Change #157: I think that you already covered the question about the kind of project that we have been looking at.
Speaker Change #158: Thank you, and ladies and gentlemen, that is star 11 if you do have a question. Our next question comes from the line of David Feng with CICC. Please proceed.
David Feng: Please proceed. So, good morning, Raul and Tim. This is David from CICC.
David Feng: Thanks for taking my question. Just one quick question on your pricing for copper. We know that the COMEX copper price tends to have some premium over the LME copper price at some time this year. And given that our customers are mainly based in America, so I just wonder, should we assume that the COMEX copper price would be a better referencing index for your copper sales instead of the LME copper price in most of your contracts?
David Feng: Good morning, Raul and Tim. This is David from CICC. Thanks for taking my question. Just one quick question on your pricing for copper.
Speaker Change #160: We know that the COMAX copper price tends to have some premium over LME copper price.
Speaker Change #161: in some time this year.
Speaker Change #162: And given that our customers are mainly based in America, so I just wonder, shall we assume that...
Speaker Change #163: The COMEX copper price would be a better referencing index for your copper sales instead of the AME copper price in most of your contracts.
David Feng: Okay, David, most of our sales from the Mexican operations are priced using the COMEX price. For the Peruvian operations, then, some of the... concentrates of the Mexican operation, we have as a reference the L&E pilot. Well, for now, it looks more attractive to sell on the COMEX market, but that could change very quickly. This year, as you say, the arbitrage has been favoring the COMEX market due to the relative scarcity that we're seeing in the market that prices with COMEX is a bit similar to the LME market. But that's something that may vary over time, so we are, for that reason, having a portion of our sales in COMEX terms as well as the LME terms for some other portion of our sales.
Speaker Change #164: Ruizanchez, Raul Jacob
Speaker Change #164: For the Peruvian operations and some of the...
Speaker Change #166: concentrate sales of the Mexican operation, we have as a reference the L&E product.
Speaker Change #170: And well, for now, it looks more attractive selling on the Comex market, but that could change.
Speaker Change #165: Very quickly, this year it is, as you say...
Speaker Change #168: There is a, this is...
Alcatraz: Alcatraz has been favoring the commerce market due to the relatively scarcity that we're seeing in the market that prices with commerce vis-à-vis the LME market.
Speaker Change #167: Raul Ruisanchez, Raul Jacob
Raul Jacob: That's really helpful. Thank you so much, Raul. You're welcome. Thank you. And Raul, I'm not showing any further questions in the queue. I will pass it back to you for final comments. Thank you very much, Carmen. With this, we conclude our conference call for the solver. Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect.
Speaker Change #171: That's really helpful. Thank you so much, Raul. You're welcome. Thank you. And, Raul, I'm not showing any further questions in the queue. I will pass it back to you for final comments.
Speaker Change #169: Thank you very much, Carmen. With this, we conclude our conference call for Southern Copper.
Speaker Change #172: Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect.