Operator: Hello, everyone, and thank you for holding. Welcome to Grupo Mexico's Q3 earnings conference call. With us today are all of Grupo Mexico's top executives, who will discuss the financial performance of the company during the Q3 2026 results, giving you a summary of the latest news and addressing any questions you may have at the end of the call. Before we begin, I would like to remind you that 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 on these forward-looking statements. Grupo Mexico 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.
Operator: The presentation may be followed through our webcast, but if you wish to ask a question during the Q&A session, you will need to do so via phone call by pressing star 11. A copy of the slides that the company will be reviewing today is available on the website at grupomexico.com. At this time, I would like to remind everyone that your lines must be in listen-only mode until the Q&A session. Now, we will begin with Marlene Finny. Please proceed.
Marlene Finny: Thank you so much, Carmen. Good morning, everyone, and thank you for joining us today for Grupo Mexico's Q3 earnings conference call. Sitting with me today are the top executives from our three divisions. During our call, we will be following, as Carmen mentioned before, a presentation that can be downloaded from our website or followed by accessing the webcast. Today's detailed program can be found on slide 3. I will start with Grupo Mexico's ESG highlights, followed by the quarter scorecard and financial highlights. Then Mr. Leonardo Contreras will provide detailed information regarding our Mining Division's main highlights, project updates, and comment on the industry's economic environment. He will then be followed by Mr. Fernando López Guerra, who will go through the financial results and the events of our Transportation Division. Lastly, Mr. Francisco Zinser will comment on the Infrastructure Division's relevant events and numbers.
Marlene Finny: As usual, at the end, the lines will be open for questions and answers. Now let's go to our main ESG highlights on slide 5. Firstly, four of our operations in Sonora received the CAMIMEX Silver Helmet Award, the Casco de Plata Award, for outstanding safety performance and accident prevention, making this the first time that four operations from the state have been recognized in the same edition, reflecting our commitment to the workers' safety. Then, at Michiquillay in Peru, the Participative Environmental Committee completed its third environmental performance verification of 2026. This committee, which includes community leaders and public and private sector representatives, plays an active role in environmental monitoring, reinforcing transparency and supporting effective management of environmental and community affairs.
Marlene Finny: Additionally, our construction company was selected from more than 50 companies in six countries to receive the FIIC Corporate Social Responsibility Award, recognizing its commitment to community well-being and responsible operations. Lastly, during this quarter, Dr. Vagón, the health train, provided free medical services to more than 17,000 people across 12 communities in five Mexican states, continuing to bring essential healthcare and medical support to remote communities. Now I will continue on slide 6 with our scorecard, and I want to note that we reached record financials this quarter, starting with our accumulated revenue for the first nine months of the year that totaled $17.6 billion, representing an increase of more than 35% when compared to the first nine months of 2025. Our EBITDA totaled $10.6 billion, showing an increase of close to 50% when compared to the same period of last year.
Marlene Finny: Our copper production reached roughly 776,000 tons for the first nine months of the year. This is a slight decrease when compared to 2025. This is very important. Our net cash cost totaled $0.38 per pound, an improvement of almost 60% when compared to the first nine months of 2025. Lastly, our board approved a stock dividend equivalent to one common share for every 194 common shares outstanding. This distribution, which follows the share repurchase program executed during the quarter, represents an estimated $1.26 per share and an annualized dividend yield of 2.1%. This reflects the company's forward-looking approach in an environment with market volatility and rising interest rates, where we are looking to remain flexible. Turning to slide 7, Grupo Mexico continues to have a solid balance sheet with $3.6 billion generated during the first nine months of the year.
Marlene Finny: As you might already know, our debt is mainly denominated in US dollars, and this represents 83% of our total debt, while the rest is in Mexican pesos. 89% of our debt was issued at a fixed rate. On this slide, you can also see the dividends paid since 2024, along with the corresponding payout ratios and the implied dividend yields. For this quarter, the dividend is calculated based on the closing share price of the declaration date. Moving to slide 8, we continue to have a comfortable debt maturity profile with no payments of over $1 billion until 2027. Our cash position stood at $13.8 billion at the end of the first nine months of 2026. That's all from me now, and I'll let Mr. Leonardo Contreras comment on our mining division's performance.
Leonardo Contreras: Thank you, Marlene. Good morning, everyone, and thank you again for joining us today. I will start today with a brief remark on the current copper market on slide 10. The LME copper price increased 44% from an average of $4.44 in Q3 2025 to $6.41 during this quarter. In the COMEX market, we saw a 34% increase with an average of $6.48 per pound during Q3. Based on current supply and demand dynamics, we think there will be probably a slight copper market surplus for 2026, as supply growth is expected to modestly outpace demand growth from key end markets such as decarbonization technologies, artificial intelligence, and electric vehicles. Copper inventories worldwide stood at 1,105,000 tons as of 9 October. We estimate that this inventory level can currently cover around 14 days of global demand.
Leonardo Contreras: Now let's continue with the mining division's financial highlights on slide 11. This quarter, we showed exceptional financial results that represent a record for the mining division. During the first nine months of this year, sales stood at $14.4 billion, almost a 40% increase versus 2025, driven by higher sales volumes of zinc, paired with stronger copper, molybdenum, zinc, and silver prices, which increased roughly 31%, 35%, 26%, and 108% respectively. Our EBITDA totaled just north of $9 billion, a 60% improvement compared to the first nine months of 2025 with a 63.5% margin. Our copper production reached close to 776,000 tons, a slight decrease of 2.8% when compared to the first nine months of 2025, mainly due to lower ore grades as we budgeted for 2026 within our Peruvian operations. This was partially offset by higher production at our mining units in Mexico.
Leonardo Contreras: Our net cash cost for the first nine months of this year settled at $0.38 per pound, a significant 58.8% improvement compared to the same period of 2025, reflecting a $0.55 reduction and showing a very competitive level. Now let's move into CapEx. We invested $1.4 billion during the first nine months of the year. I would like to continue talking about projects and their progress in slides 12 and 13. Starting with slide 12, Tía María continues to make steady progress, reaching nearly 50% of overall completion. As of 30 September, we have committed $1.1 billion, of which $884 has already been invested. Key milestones as of 30 September included the completion of major earthworks, continued progress on the project's power infrastructure, and the advancement of construction activities across processing and operational facilities. Key equipment orders also continue to advance.
Leonardo Contreras: Also, the project has generated more than 6,800 jobs, of which 1,200 are local positions and remain on track to begin operations within H1 2028. Now let's move on to Los Chancas, in which we continue implementing social and environmental programs in our local communities while advancing efforts to secure the project's area and address illegal mining activities. If we move to Michiquillay, we continue advancing on key technical studies and project planning activities. During the quarter, the mineral resource report was completed while development and infrastructure studies continued to move forward. Lastly, we are formally sharing our potential expansion at Cuajone. We are currently evaluating an expansion of the concentrator's milling capacity from 90,000 to 120,000 tons per day to maintain or potentially increase production.
Leonardo Contreras: The expansion would support an increase of roughly 55,000 tons of copper and 1.4 thousand tons of molybdenum per year, translating into a 33% increase in milling capacity. In addition, we are evaluating the feasibility of a potentially larger expansion to 150,000 tons per day. Now moving into Mexico, we are glad to share that El Pilar has obtained all required environmental permits, and early site preparation activities began during the quarter. Development activities continue to move forward across key infrastructure areas, including power facilities and the SX-EW plant, keeping the project on track for construction to begin in 2027 and production to come in line by 2029. If we turn to slide 15, you will see a timeline of our main projects. Please, if you have any follow-up questions, we will be happy to address them during the Q&A session.
Leonardo Contreras: Now I will let Fernando comment on our Transportation division.
Fernando López Guerra: Thank you. Thank you, Leo, and good morning, everyone. Thanks again for joining us. Continuing with the Transportation division results on slide 17, I am going to go through our financial highlights for the first 9 months of the year. Our sales reached $2.8 billion, a solid 14% increase compared to the first 9 months of 2025. Our EBITDA for the first 9 months of 2026 totaled just shy of $1.2 billion. This is 9.3% higher than 2025, where the EBITDA margin stood at 41.1%. Both in revenue and in EBITDA, this is a record for our division. As of our net income, it totaled $332 million during the first 9 months. This is 11% lower than the same period of 2025. Transported volumes grew 5.4%, both in net ton kilometers and in carloads, reflecting a solid accrued growth in the division.
Fernando López Guerra: Continuing with the main variations of our revenue on slide 18. As a reminder, these variations are considering results in Mexican pesos. I will start with the segments that delivered the strongest revenue growth through the quarter, which is Intermodal, leading the segment with a 16% increase, driven by growth in domestic traffic in both US and Mexico, as well as our cross-border operations. In Metals, we had a solid 14% increase, supported by a recovery in Mexico's scrap and steel slab market. Lastly, in Minerals, the segment grew by 13%, reflecting strong volume growth driven by longer iron ore hauls. In the mid-growth range, the Cement segment delivered a 9% growth in revenue, driven primarily by stronger demand in central and southeastern regions of Mexico.
Fernando López Guerra: Energy segment grew 7%, supported by higher LPG, coal, and asphalt freight volumes, partially offset by weaker refined products volumes resulting from higher oil prices in Mexico. Also, we saw a 4% growth in industrial segments due to the growth in paper imports, partially offset by a contraction in the new railcar market and beer consumption in the US. On the other hand, we saw revenue decline in some segments. Chemical and ag segments declined by 3%. The chemical segment was impacted mainly due to a quality issue affecting fertilizer imports and sulfuric acid shipments. This is paired with weather related to the disruptions at the Topolobampo port. The agricultural segment was impacted by lower volumes driven by higher soybean imports through ports and a shift of border imported to locally sourced corn, resulting in a shorter haul.
Fernando López Guerra: Lastly, the auto segment showed a 5% decrease due to scheduled maintenance shutdowns and shift reductions at some of the OEMs. Now let's take a look at our operating metrics shown on slide 19. During the Q3, average train speed remained stable, while dwell time increased 8% as a result of car velocity decline 2%. However, as you can see, there was a 3% improvement in average train length, reaching close to 1.9 kilometers, as well as 3% increase in gross tons per train. A 1% increase in crew starts during the quarter. To conclude, both train length and tonnage increased, and in some cases, in order to achieve these improvements, we must extend radical railcar dwell times at the most critical terminals until we target train length and tonnage is attained. Moving on slide 20, you can see our CapEx guidance for 2027.
Fernando López Guerra: The board approved an investment budget of $619 million for maintenance, special projects, and the acquisition of locomotives. This allows GMXT to continue growing and improving through sustained investments. Around 62% of our annual CapEx will be invested in rail infrastructure, equipment, bridges, and locomotive, and some machinery. 12% of the annual CapEx will be for yards and terminals, focusing on siding enlargement and yard reconfigurations. 7% of the budget is planned for special projects focusing on key infrastructure such as the bypasses and our safety program throughout some cities. Lastly, roughly 19% is planned for the acquisition of locomotives. This is the main reason our CapEx is higher for the next year, as it goes in hand with our volume growth guidance that we show on the next slide.
Fernando López Guerra: On slide 21, you'll find our 2027 outlook that implies 5% to 8% volume growth, along 8% to 10% revenue growth, along with a CapEx program that I just mentioned. We believe this volume increase will be led by intermodal and agricultural segments. With this, I conclude the general overview of the transportation division. I will now let Francisco Zinser comment on the infra division.
Francisco Zinser: Thank you very much, Fernando, and good morning, everyone. I will start by going through the financial highlights of the Infrastructure division shown on slide 23, which are a milestone for us and mark an important growth pathway for the coming years. Our sales for the first 9 months of the year stood at $618 million, an increase of 24.6% when compared to the first 9 months of 2025. This is mainly due to the integration of Saavi Energía, the reactivation of all our oil rigs, and higher revenues from the real estate leases. Our EBITDA totaled $309 million, a 30.5% increase for the first 9 months of the year, with a 50% margin, mainly driven by higher contributions from the energy, oil rigs, and real estate businesses, and slightly offset by lower results in our construction and engineering business and the effect of the toll road sale.
Francisco Zinser: Lastly, net income totaled $371 million, an increase of over 371% when compared to the same period of 2025 as a result of the sale of 81.1% of our stake in the Salamanca-León highway. Now, I would like to go through some of our most relevant events shown on slides 24 and 25. During the third quarter, the Energy division delivered strong growth, with revenues reaching $375 million, and EBITDA totaling $206.9 million, representing year-over-year increases of 60.4% and 69.1% respectively. This performance was driven by the consolidation of Saavi beginning on 8 September of this year, marking a major milestone in the expansion of Grupo Mexico's energy platform. With a 70% controlling stake, Grupo Mexico now leads one of Mexico's largest private power generation platforms, significantly expanding the scale and strategic relevance of the Energy division within the Infrastructure portfolio.
Francisco Zinser: Turning to Perforadora México, the company reported revenues of $55.4 million and EBITDA of $14.7 million in the third quarter, representing year-over-year increases of 3.8% and 114.8% respectively. The strong EBITDA recovery reflects the return to operations of the Zacatecas and Chihuahua platforms in early July, followed by Campeche in late August and Tabasco in early September. With all the oil rig fleet now fully operational, the business is entering a new phase of improved asset utilization and earnings recovery following the operational disruptions we had over the past few months. Going into slide 25, during the third quarter, the Real Estate division continued to deliver solid results, with revenues reaching $81.1 million and EBITDA totaling $50.1 million, year-over-year growth of 14.7% and 10.4% respectively.
Francisco Zinser: Performance was driven by higher rental income, favorable foreign exchange rates, and a strong occupancy of almost 94%, reinforcing the platform's ability to generate resilient growth and recurring cash flows. The company continues to actively evaluate growth and investment opportunities to further expand its presence in the real estate sector. Lastly, since the beginning of the year, Grupo Mexico Infraestructura has consolidated Grupo Proyecta, adding the fourth stage of Lomas de Angelópolis in Puebla and further extending and strengthening its development pipeline within the real estate portfolio. While most projects are still in the early stages of development, and therefore contribute only marginally to current results, they represent an important source of future growth, with contributions expected to increase as projects move through the commercialization and continue to mature.
Francisco Zinser: Finally, moving into slide 26, you can see a map of our newly integrated energy division assets, which include a diversified portfolio of combined cycle power plants, wind, solar, mobile natural gas facilities located across Mexico and the US. I am very proud to know that we are now the largest privately owned power generation company in the country, and we have very interesting project pipeline, sorry, in the coming years. With this, I conclude our review of the main highlights of the Infrastructure division. Now, I will let Marlene give her closing remarks. Thank you.
Marlene Finny: Thank you so much, Francisco, Leonardo, and Fer. Thank you, everybody. Also, you can find a summary of our financial highlights on slide 28. With that, we will open the line for Q&A.
Operator: Thank you so much. As a reminder, to ask a question, press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. We ask that you please project your voice clearly and ask your question slowly, one at a time. One moment for our first question.
Operator: A reminder: to ask a question, press star 11 to get in the queue. Our first question comes from the line of Regina Carrillo with GBM. Please proceed.
Regina Carrillo: Hi. Good morning, and congratulations on the outstanding results. I have one question for Marlene, one for Fernando, and one for Francisco, if that is okay. Marlene, what was the main rationale for choosing a stock dividend rather than a cash dividend? Should we see this as a one-off or a tool that could be used again as investment cycle accelerates? Fernando, can you give us a general update on the Belgrano Cargas tender in Argentina? Are you still participating in that? If so, what is the progress there? Finally, Francisco, congratulations on the Saavi completion. Beyond the initial consolidation, what will be the key sources of growth from Saavi and what level of annual sales and EBITDA can we expect from this business going forward? Thank you.
Marlene Finny: Thank you so much, Regina. Thank you for your questions. I will answer your first question, then I will let Fernando and Francisco answer the other ones. I was hoping to address this and give everyone a little bit more color on the matter regarding the dividend. As you may know, this is a board decision, and there is a rationale behind the stock dividend decision driven by several factors. I would say that mainly the first one would be the flexibility, to have flexibility in all the growth that we are looking in our three divisions to continue to grow organically and inorganically. These are results, as you know, of the share buyback program we currently have in place, which we are giving the stock support among volatile environment.
Marlene Finny: This is also the result of the feedback we have been hearing from the market at a time we think it makes sense. Another point was considering that we are looking at major maturities next year from GMXT. Depending on the rate and how we see everything, we wanted to have that flexibility as well to see if we should refinance or do anything else. I think the most important thing to have in mind here is we are looking to grow within our three business lines, and we are evaluating opportunities that we can ensure sustained growth and value creation, again, with our existing business lines of infrastructure, transportation, and mining. The idea was to remain flexible for the coming opportunities and internal cash needs or external cash needs.
Fernando López Guerra: You want, Regina, I can answer on the Marlene, are you done? I am sorry.
Marlene Finny: I was just going to mention that we will continue to see what is happening and how everything is evolving and the project we are analyzing to see if this is one-off or if this will continue to be the case. But as of now, this is all we can share. Sorry, Fernando.
Fernando López Guerra: That is okay. About Belgrano and Argentina, as you, we have been public about this, that we were interested and putting a lot of teams and time into the project. However, at the end of how the bidding process came out and it is an open access model. This is the same as Europe operates under that. But for that model, you have one operator for the track, several operators on top, and you do not get to build synergies or economies of scale. So they basically, none of them make money or break even. Governments need to step in and subsidize, and we are not keen on that model. As you remember, Mexico followed the US and Canadian, the North American model, and we did not reinvent the wheel. We were just focusing on economies of scale. In railroads, you need to build density, longer trains.
Fernando López Guerra: That way, we can lower the cost and then lower our rates. If not, we cannot compete versus over the road. So for that decision is that we are stepping away of this bidding process, and that is basically it.
Francisco Zinser: Finally, this is Francisco Zinser. Thank you very much, Regina, for the congratulations and the question. So we are expecting next year, which we will be fully consolidating for the whole year, the new Saavi platform with our existing assets. We are expecting sales of roughly $1.9 billion for 2027 and an EBITDA of roughly $640 million for next year as well.
Regina Carrillo: Thank you all for your answers.
Operator: Thank you. One moment for our next question. It comes from Pedro Mello with Citi. Please proceed.
Gabriel Barra: Hi, team. Can you hear me?
Operator: We can hear you now. Thank you, Pedro.
Gabriel Barra: Yeah. Sorry, Gabriel Coelho Barra here. I have two questions from our end here. The first one, just following up the last question about the capital structure indeed and cetera. We have seen these two recent news that GMXT is not going to continue with the potential investments in Argentina, and we have some news about the discussion about Rumo in Brazil, right? When we take a look on the capital structure of the company, we see a company with a really comfortable leverage situation, net cash. We understand the flexibility that you want to have for potential investments in the future. My question is, how do you see the leverage level for this moment, right? It is a net cash, or we should see a potential small leverage here.
Gabriel Barra: How should we model this leverage going forward, given that we do not have any clear target given all this recent news on those investments that I mentioned? The second one about the investment in Brazil. You have touched base on Argentina and the potential investment, but I want to hear about Rumo and about the news that I have seen here in Brazil, on this transaction. Not only in terms of Rumo, but how do you see Brazil in terms of a potential target for investment, in infrastructure or even any other logistic business here in the region? How do you see the region going forward at this moment? Those are the two questions that I have. Thank you.
Fernando López Guerra: Yes. Thank you for your question. On the leverage side, we are still evaluating our options, and as Marlene was mentioning, we want to maintain ourselves flexible. As you know, there are very few opportunities that come out there, and the fact that we have a solid balance allows us to step in. That is the way we have done it in the past. We are evaluating our options. About Rumo, I think we are not geared to comment on that end as of now, right now. Sorry.
Marlene Finny: Regarding the capital structure and the dividend and the cash we are generating, as Fernando López Guerra mentioned right now, and I mentioned earlier, we want to remain flexible, even though as of now, we are very common in Argentina, but we do still have a lot of organic, and we are analyzing inorganic growth projects, so we want to remain flexible. That is the main thing.
Gabriel Barra: Okay. Thank you, team.
Operator: Thank you. One moment for our next question that comes from Alejandro Demichelis with Jefferies. Please proceed.
Alejandro Demichelis: Yes. Good morning. Thank you very much for taking my question. Actually, two questions, if I may. The first one is regarding ASARCO. Fernando, you could comment on how you see the ASARCO project, the refinery, if you are thinking about that.
Alejandro Demichelis: Okay. The second question, maybe for Marlene. Marlene, you just mentioned that you are looking at organic and also inorganic opportunities. Just to clarify, those inorganic opportunities, could those be within your existing verticals? Would you look to do something outside of your existing perimeter?
Leonardo Contreras: All right. Thank you, Alejandro. Let me answer the first one first. In terms of ASARCO, we continue with our path forward for the Ray expansion. We are just waiting on some feasibility studies, and hopefully we can have more clarity by Q1 of next year. Silver Bell as well, it continues with feasibility studies, and we will have more clarity as well in the upcoming quarters. As per the smelter and the refinery in Hayden, we are increasingly optimistic to restart Hayden at 1.4 million tons of copper of concentrate annually. We do believe that this would bring critical mineral copper processing capacity back to the US, and this would account almost for 350,000 metric tons of copper contained. If this goes into our refinery, then we might as well think of 500,000 metric tons of copper as well. So we are optimistic.
Leonardo Contreras: I do not know, Marlene, if you would like to answer the other question.
Marlene Finny: Sure. Thank you, Leo. I want to be very clear. I think we are looking at organic growth, that we have a very strong pipeline in all of our three divisions, and inorganic opportunities that we are analyzing. Nothing to mention right now, but we are analyzing in our three divisions. That means Infrastructure, Transportation, and Mining, not anything else.
Alejandro Demichelis: That is very clear. Thank you. A bit of a follow-up to Leonardo. Leonardo, could you please update us on what is the CapEx required for all of those projects in ASARCO, please?
Leonardo Contreras: Yes. Alejandro, we are talking about to use between $4 billion and $6 billion, considering the three, four projects that we just mentioned. Again, we are finalizing and having more detail engineering for each of them.
Alejandro Demichelis: Fantastic. Thank you very much.
Operator: Thank you. One moment for our next question, please. It comes from Alfonso Salazar with Scotiabank. Please proceed.
Alfonso Salazar: Thank you. I have two questions. The first, Marlene, sorry to insist on this one, but regarding the cash dividend and the optimization of balance sheet. There is a trade-off. We understand that you want to have flexibility for growth. There is a lot in the pipeline, very attractive projects, no question. At the same time, you have a very high level of cash, and you have access to debt whenever necessary. It is good to use it reasonably, even if interest rates are increasing, to increase return on equity. Just wondering if you can share how Grupo Mexico sees this trade-off between optimization of balance sheet and flexibility. That is the first question. The second is regarding ASARCO and the expansion of Ray. I remember this is a project that has been postponed, and many years ago, you talked about this. It did not happen.
Alfonso Salazar: I remember that back then, one of the problems that you were facing was hardness of rock. The rock hardness was very high, and that was one of the problems. How do you plan to solve that for that? Are you going to implement a pre-crusher? If you can give us some details on the Ray expansion.
Marlene Finny: Thank you, Alfonso, for your questions. Obviously, we take into consideration everything when the board actually is analyzing the decision to give a dividend or how much as a dividend. This time, in this board meeting, we were very focused on all the growth that we want to do to continue to create value. We think that the value we can create with the growth coming into the company has a better return for everybody. So we do take into consideration to optimize the capital structure of the company. But in this case, and during this quarter, we focused on the growth and the flexibility we wanted to have.
Leonardo Contreras: Answering your second question, Alfonso, all the analysis that we have done, the life of mine and so on, I do think that the expansion justifies. Yes, we have seen some hardness, but it is all taken into account into this expansion, so we do not see any problems with that going forward.
Operator: Thank you. As a reminder, if you do have a question, simply press star one one to get in the queue. One moment for our next question. It comes from Henrique Braga with Morgan Stanley. Please proceed.
Henrique Braga: Hello, team. Thank you for taking my question. I just have a few across the divisions. If we can start on the Transportation. Can you clarify on the guidance for 2027 if the revenue is in USD or in Mexican pesos, and if the volume is in net ton per kilometer?
Fernando López Guerra: Yes. Our guidance is in USD. All of Grupo reports in USD, so you should always look at us in that end. Volume growth, it is not net ton kilometers and in carloads, but what appears here is carloads.
Henrique Braga: Great. Thank you. If I can ask about ASARCO, could you disclose what was the cash cost before and after by-product during Q3 2026, and what is the outlook for Q4? Maybe if you have a view on 2027, that would be helpful.
Leonardo Contreras: Yes, Henrique. The cash cost for Q3 2026 was before by-products of $3.78 and after by-products, $3.60. Basically, where we lagged was on the pounds produced. I do think that the cost control has been pretty well managed, even with the fuel increases. I would expect that if we have a better production within Q4, we should be lower in our cash costs. For 2027, yes, we would definitely envision a big reduction on the cash cost again from the production side of things. The only variable that we do not control, such as fuel and those variables, are the only ones that could impact going forward, but we should be able to manage with producing more.
Henrique Braga: Okay. That is helpful. How much more are we thinking 2027?
Leonardo Contreras: We should be between 4,000 to 7,000 metric tons of copper year versus year.
Henrique Braga: Okay. If I may, sorry if I am extending a little bit here, but I just want to clarify something in the energy division, the agreement with Saavi, the integrated new company. During Q3 2026, did the reported results. You consolidated everything, but was it pro rata for just the days after the due announcement, or were those results for the entire quarter?
Francisco Zinser: Yeah. Thank you for the question. No, we consolidated only from 8 September to 30 September, so that is 22 days of power generation. In the financial results, that is what we consolidated. Obviously, the whole balance sheet is consolidated, but in terms of power production and in terms of the financial income statement, 22 days.
Henrique Braga: Okay. Can you give us a little bit more color on how the new company looks like? I was thinking in terms of if you could clarify a little bit, how much was the energy production in Q3 2026, and how much do you expect for the upcoming quarters? Maybe if you could give us a little bit more color on how those new assets that Saavi is bringing to the operation, how are they operating? Their capacity utilization, and what are the margins of that business? Also, if you could give us a ballpark number of what their net income margin, because that would be relevant for the minorities that were going to be merged.
Francisco Zinser: Yeah. Sure. With the consolidated platform, that means our three previously existing assets, our combined cycle power plant and two wind farms, and the 10 assets that Saavi has, which are seven combined cycle power plants, one solar asset, and they also have three mobile gas turbines that are currently contracted with xAI in the US. Roughly, we will be generating 2 GWh per month. That will give you 24 GWh per year of power generation, which is a significant increase of what we were having previously. The assets that Saavi have are operating at very similar levels than the ones we have. You are talking about 97%, 96% utilization factor, across basically all of their different assets.
Francisco Zinser: As you know, they are located in places in Mexico where there is a lot of current demand, and roughly three-quarters of the Saavi pre the merge is the combined cycle assets that we have. Regarding how we are expecting next year sales, EBITDA, as you probably know, in this business, gas prices, which again, is the most important cost for the combined cycle power plants and the mobile gas turbines, they are passed through. We are expecting $1.9 billion, as I said before, in sales. This is mostly a reflection of how the gas curves are looking forward for next year. In the same proportion, that is how the costs are affected, because again, it is a pass through.
Francisco Zinser: The relevant measure, it is obviously the spark spread, which affects directly your EBITDA, and that is the one we are expecting at $640 million for next year, which accounts Saavi's existing assets and Grupo Mexico's existing assets as well. This is the result of the combined platform moving forward.
Henrique Braga: Very clear. Thank you.
Francisco Zinser: Sure.
Operator: Thank you. Our next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please proceed.
John Tumazos: Thank you. Could you explain a little bit more the new reserves at updated reserve report for Michiquillay, if I am pronouncing it correctly. Was the prior tons and grade with the government calculated when the project was auctioned five or more years ago? Was the updated calculation of Southern Copper exactly the same? Are there any more details?
Leonardo Contreras: Yes, John. I will look into your question, probably send you a note after the meeting. What we have seen is that the potential of Michiquillay is greater than what we initially expected. Going back to your point of when we acquired it, yes, we are seeing more resources. Let me share with you a note, with the specifics.
John Tumazos: The tons are more, and the grades are about the same. Is that a fair summary?
Leonardo Contreras: I would probably hint you that the grades are a little bit higher and the tons are higher as well.
John Tumazos: Muchas gracias.
Leonardo Contreras: No, thank you.
Operator: One moment for our next question, please. It comes from Emerson Vieira with Goldman Sachs Group, Inc. Please proceed.
Emerson Vieira: Hello. Good morning. Thanks for the opportunity. I have two questions. First of all, just confirming my understanding in terms of when to expect the company to release the final feasibility studies for US projects, and which products are most advanced?
Leonardo Contreras: Yes. Thank you for that question. I think let me put them in order. I do think that it is the Ray expansion. Again, I think that the next quarter we should have a much clearer path, as well with the smelter and the refinery. Silver Bell will probably be during the ongoing year next year.
Emerson Vieira: All right. Thank you. On the expansion, the refinery as well, what conditions must the company see in order to move along with the project? Of course, we have all the tariff situation in the US. What is that, like a necessary condition to move ahead? I do not know, you guys are thinking about other levers to potentially bring the project to an economically viable situation and then move ahead. Just understand it depends on, I do not know, a political decision or the project is by itself viable.
Leonardo Contreras: I think that it is on our hands to make the project viable. That being said, we are in active conversations and engaging with the US government as well.
Emerson Vieira: Okay. Thank you. Just a final one, please. On capital allocation, very clear that the company wants to have flexibility to spend money in growth avenues. Given that the company decided to not go ahead with the Argentinian bidding process and the potential acquisition of Rumo also has not gone through. What is the type of capital allocation pipeline? What is the kind of M&A pipeline, I would say, the company is looking at in terms of, I do not know, geography or maybe sectors? If you focus on core business or maybe you could, I do not know, start looking at other segments as well. Thank you.
Marlene Finny: Sure. Thank you. We are looking at different options, both organic growth in mining. As you know, we already discussed earlier today the projects that we are developing and everything that we have in our pipeline. We discussed Saavi, and such as Saavi, we are looking into further growth in energy, real estate. In transportation division, we are looking to other alternatives or possibilities. So we are analyzing different growth paths in our divisions, in our businesses.
Emerson Vieira: Right.
Marlene Finny: Geographies that we already have operations, in Mexico and Peru. We have exploration in other countries, such as in the mining division in Argentina and Chile. We are looking mainly in the US, in the countries that we already have operations, and we know how to operate in the jurisdictions that we like and we know how to handle and feel comfortable.
Emerson Vieira: Okay. Thank you.
Operator: Thank you. This will conclude our Q&A session. I will turn it back to Marlene Finny for final comments.
Marlene Finny: Thank you so much. Thank you for all your questions. Thank you, Francisco, Leo, Fer, for being here, and we will keep in touch. Let us know if you have any further questions afterwards. You know we are always open and hope to see you next quarter. Bye.
Operator: Thank you so much for participating in today's conference. You may now disconnect.
