Q2 2019 Earnings Call

July 24, 2019

Michael Michaelovich: You're calling the conferencing center. A conference coordinator will be with you momentarily. Thank you.

The conferencing centre a conference coordinator will be with you momentarily. Thank you.

Good morning, I have your conference I'd number.

Operator: Good morning. May I have your conference ID number?

Michael Michaelovich: It's 1183713.

1183713.

Operator: May I have your first and last name?

Have your first and last name.

Michael Michaelovich: First name Michael, last name Michaelovich, spelled M-I-C-H-A-E-L-O-V-I-C-H.

Our same Michael.

Last name Mckellar, which felt M.I.D.H.A. E. L E V I C H.

Operator: Thank you. May I have your company name?

Thank you and May I have your company name.

Raul Jacob Ruisanchez: Concerns with Brexit and an escalation of trade protectionism between the US and China. We expect a recovery in copper prices in the coming months. At this point, we're adjusting our view of our refined copper demand for 2019. We're now expecting a growth of 2%. Our previous mark was 2.5% for the year 2019. This will be driven by higher consumption in the US and Asia, with China demanding 3.5% more refined copper than in 2018. On the supply side, production losses have reinforced our view of a deficit to refined copper in the refined copper market as a result of labor strikes, heavy rains in Chile and Peru this year, and technical programs.

Michael Michaelovich: Aiera. It's spelled A-I-E-R-A.

Era, it's felt a high era.

And your email address.

Operator: Your email address.

Michael Michaelovich: Yep, it's Michael at Aiera, the company name, dot com.

It's Michael at Era, the company named Dot Com.

Operator: Thank you. I'll join you now.

Thank you I'll join you know.

Michael Michaelovich: Thank you.

In Q.

Raul Jacob: Concerns with Brexit and an escalation of trade protectionism between the US and China. We expect a recovery in copper prices in the coming months. At this point, we're adjusting our view of our refined copper demand for 2019. We're now expecting a growth of 2%. Our previous mark was 2.5% for the year 2019. This will be driven by higher consumption in the US and Asia, with China demanding 3.5% more refined copper than in 2018. On the supply side, production losses have reinforced our view of a deficit to refined copper in the refined copper market as a result of labor strikes, heavy rains in Chile and Peru this year, and technical programs.

Concerns with Brexit.

And an escalation of trade protectionism between the us and China.

We expect a recovery in copper prices in the coming months.

At this point were adjusting our view of our refined copper demand for 2018.

Were now expecting a growth of 2%.

Our previous March was 2.5%.

For the year 2019.

This will be driven by higher consumption in the us and nation.

With China demand in 3.5% more refined copper and in 2018.

On the supply side production losses has to reinforce our view of our deficit.

Refined copper in the risk in the refined copper market as a social labor strike.

Maybe ranging tdm through this year and technical programs as a reference wood Mackenzie considers that today the industry's half half.

Raul Jacob: As a reference, Wood Mackenzie considers that today the industry has had 481,000 tons of copper production losses. Consequently, we now expect a deficit of approximately 350,000 tons, that is 1.5% of the world's supply for this year. We expect this market deficit to put upward pressure on copper prices during the second half of 2018. Let us now focus on Southern Copper's production for the past quarter. Copper represented 79.7% of our sales in Q2 2018. Copper production increased 16.5% to 256,352 tons in Q2 of this year compared to the same period of 2018.

Raul Jacob Ruisanchez: As a reference, Wood Mackenzie considers that today the industry has had 481,000 tons of copper production losses. Consequently, we now expect a deficit of approximately 350,000 tons, that is 1.5% of the world's supply for this year. We expect this market deficit to put upward pressure on copper prices during the second half of 2018. Let us now focus on Southern Copper's production for the past quarter. Copper represented 79.7% of our sales in Q2 2018. Copper production increased 16.5% to 256,352 tons in Q2 of this year compared to the same period of 2018.

481000 pounds of copper production losses.

Consequently, we now expect the deficit.

Of approximately 350000 pounds days, 1.5% of the water supply for this year.

We expect this market density to put upward pressure on copper prices during the second half of 2018.

Theres now focus on southern Copper's production for this past quarter.

Copper represented 79.7% of our phase in the second quarter of 2018.

Copper production increased 16.5% to 256202 tones.

In the second quarter of this year compared to the same period of 2018.

It was principally due to higher production at the Toquepala mine, which pieces its production by 67.6%.

Raul Jacob: It was principally due to higher production at the Toquepala mine, which increases its production by 67.6% as a result of 27,061 tons of additional copper production from the successful ramping up of our new concentrator in this. In Mexico, copper production increased by 8.8% when compared to Q2 of last year. This was due to operating improvements at our Buenavista plant, where the SXEW new plant increased its production by 30.5%, and the new concentrator, well, already have some years of operation, but it's still a relatively new facility, 7% of increase. The new Toquepala concentrator in Peru reached full capacity usage at the end of Q2. Additionally, as part of this expansion, we initiated the production in the new molybdenum plant in April.

Raul Jacob Ruisanchez: It was principally due to higher production at the Toquepala mine, which increases its production by 67.6% as a result of 27,061 tons of additional copper production from the successful ramping up of our new concentrator in this. In Mexico, copper production increased by 8.8% when compared to Q2 of last year. This was due to operating improvements at our Buenavista plant, where the SXEW new plant increased its production by 30.5%, and the new concentrator, well, already have some years of operation, but it's still a relatively new facility, 7% of increase. The new Toquepala concentrator in Peru reached full capacity usage at the end of Q2. Additionally, as part of this expansion, we initiated the production in the new molybdenum plant in April.

As a result of 27100 tons of additional upper production.

This successful ramping Apple powers, the new concentrator in this.

In Mexico copper production increased by 8.8% when compared to the second quarter of last year. This was due to operating improvements at our wind ambitious plan.

Where the Essex CW.

New plant increase its production by 30.5% and the new concentrator will already have some years of operational is still relatively new facility 7% of increase.

The new Toquepala concentrator in Peru reach full capacity usage at the end of the second quarter.

Additionally, as part of this expansion we initiated the production of the new in the new molybdenum plant in April .

We expect our capella to produce 258000 tons of copper this year and 2006 hundred tons of molybdenum with a very competitive cash cost.

Raul Jacob: We expect Toquepala to produce 258,000 tons of copper this year and 2,600 tons of molybdenum, with a very competitive cash cost. For 2019, the new Toquepala concentrator is adding 100,000 tons to our annual copper production capacity, allowing us to reach 993,300 tons of annual copper production this year. This state-of-the-art unit will allow us to reach a new production record with an even lower cash cost per pound of copper. Consider this year's average prices for our main by-products. For 2019, we expect our cash cost to sit at $0.81 per pound, an additional reduction of 7% from last year's cash cost of $0.87. We reinforce Southern Copper's leadership as a low-cost producer.

Raul Jacob Ruisanchez: We expect Toquepala to produce 258,000 tons of copper this year and 2,600 tons of molybdenum, with a very competitive cash cost. For 2019, the new Toquepala concentrator is adding 100,000 tons to our annual copper production capacity, allowing us to reach 993,300 tons of annual copper production this year. This state-of-the-art unit will allow us to reach a new production record with an even lower cash cost per pound of copper. Consider this year's average prices for our main by-products. For 2019, we expect our cash cost to sit at $0.81 per pound, an additional reduction of 7% from last year's cash cost of $0.87. We reinforce Southern Copper's leadership as a low-cost producer.

For 2019, the new Toquepala concentrator is adding 100000 tons to our annual copper production capacity.

Allowing us to reach 993003 hundred tons of annual copper production this year.

This is state of the art unit will allow us to reach a new production record with a new and lower cash cost per pound of copper.

Consider these years average prices for our main by province for 2019, we expect our cash cost to set at 81 cents per pound an additional reduction of 7%.

Last years cash cost of 87 cents will reinforce southern coppers leadership as a low cost producer.

Looking at our main by product, which is molybdenum. It represented 8.5% of the company's saves valued in the second quarter and is currently as I said, our most significant growth.

Raul Jacob: Looking at our main by-product, which is molybdenum, it represented 8.5% of the company's sales value in Q2, and it's currently, as I said, our most significant by-product. Molybdenum prices averaged $12.13 per pound in the quarter, which compares with $11.55 in Q2 2018. This is a 5% increase in molybdenum price. Molybdenum mine production increased by 24.7% in Q2 of this year, compared with the same period of the last one, due to higher production at all our mines, particularly in Toquepala, where production of molybdenum increased by 94.5%. Result of the new molybdenum plant that started production in April of this year. In 2019, we expect to produce 24,800 tons of molybdenum.

Raul Jacob Ruisanchez: Looking at our main by-product, which is molybdenum, it represented 8.5% of the company's sales value in Q2, and it's currently, as I said, our most significant by-product. Molybdenum prices averaged $12.13 per pound in the quarter, which compares with $11.55 in Q2 2018. This is a 5% increase in molybdenum price. Molybdenum mine production increased by 24.7% in Q2 of this year, compared with the same period of the last one, due to higher production at all our mines, particularly in Toquepala, where production of molybdenum increased by 94.5%. Result of the new molybdenum plant that started production in April of this year. In 2019, we expect to produce 24,800 tons of molybdenum.

Molybdenum prices averaged $12.13 per pound in the quarter, which compares with $11.55 in the second quarter of 2013 is this a 5% increase in molybdenum price.

Molybdenum mine production increased by 24.7% in the second quarter this year.

Compared with the same period of the last one due to higher production at all our mines.

Particularly in Japan, where production will lead to an increased by 94.5%.

Sort of the new molybdenum plant that has started production in April of this year.

2019, we expect to produce 24800 chance of malignant this 13%.

Raul Jacob: This is 13% more than last year, with a contribution of the new molybdenum plant of Toquepala, 2,600 tons. For zinc, it represented 4.2% of our sales value effect with an average price of $1.25 per pound a quarter. A price increase of 11.3% from Q2 2018. Zinc mine production decreased by 1.3%, 17,749 tons, Q2, compared with Q2 last year, mainly due to lower production at the Charcas Mine. This was basically the result of lower grade, and offset the 1,133 tons of production coming from the San Martin Mine.

Raul Jacob Ruisanchez: This is 13% more than last year, with a contribution of the new molybdenum plant of Toquepala, 2,600 tons. For zinc, it represented 4.2% of our sales value effect with an average price of $1.25 per pound a quarter. A price increase of 11.3% from Q2 2018. Zinc mine production decreased by 1.3%, 17,749 tons, Q2, compared with Q2 last year, mainly due to lower production at the Charcas Mine. This was basically the result of lower grade, and offset the 1,133 tons of production coming from the San Martin Mine.

And last year, if that contribution of the new molybdenum plant of docket part.

Thousand 600 tons.

Forcing it represented 4.2% of our sales value the second quarter with an average price of $1.25 cents per pound.

Good quarter.

A price decrease of 11.3% from the second quarter of 2018.

Inc. mine production decreased by 1.3%.

17749 tons.

The second quarter.

Compare with the second quarter May last year, mainly due to lower production at the Charcas mine.

This was basically the result of lower or lower grade.

And offset the 1130 each on.

Our production.

Coming from.

Starting line.

Raul Jacob: As you know, we are in the rehabilitation process for the San Martin Mine. We expect to be at full capacity by this quarter. For 2019, we expect to produce 85,900 tons of zinc. That is a 21% increase compared to last year, with a significant contribution of 10,600 tons from the San Martin Mine. Silver represented 3.8% of our sales value in Q2 2018, an average price of $14.85 per ounce quarter, a 10% decrease from Q2 last year.

Raul Jacob Ruisanchez: As you know, we are in the rehabilitation process for the San Martin Mine. We expect to be at full capacity by this quarter. For 2019, we expect to produce 85,900 tons of zinc. That is a 21% increase compared to last year, with a significant contribution of 10,600 tons from the San Martin Mine. Silver represented 3.8% of our sales value in Q2 2018, an average price of $14.85 per ounce quarter, a 10% decrease from Q2 last year.

As you know we are in the in the.

We have limitation process for the summer teen nine and aerospace.

We at full capacity by.

By this quarters for 2019 with respect to produce 85900 tons of zinc that is up 21% increase compared to last year with a significant contribution of 10600 tons from the starting line.

Silver represented three 8% of our saints value in the second quarter of 2018.

An average price of $14.85 per ounce quarter, a 10% decrease.

Second quarter of last year.

Mined silver production increased by 5.2%.

Raul Jacob: Mine silver production increased by 5.2% in the last quarter, mainly as a result of higher production at our Toquepala operations, which increased their production by 85.9% as a result of additional copper production coming from the new concentrator of Toquepala. This offset the lower production at the Caridad and in San Guajone facilities, where we had a decrease in production different. For 2019, we expect to produce 20 million and 1 million ounces of silver, an increase of 16% or 2.8 million ounces of additional silver when compared to last year, mainly resulting from the important contribution of the San Martin Mine and the Toquepala operation.

Raul Jacob Ruisanchez: Mine silver production increased by 5.2% in the last quarter, mainly as a result of higher production at our Toquepala operations, which increased their production by 85.9% as a result of additional copper production coming from the new concentrator of Toquepala. This offset the lower production at the Caridad and in San Guajone facilities, where we had a decrease in production different. For 2019, we expect to produce 20 million and 1 million ounces of silver, an increase of 16% or 2.8 million ounces of additional silver when compared to last year, mainly resulting from the important contribution of the San Martin Mine and the Toquepala operation.

In the last quarter.

Mainly as a result higher production at our toquepala operations, which increased their production by 85.9%.

As a result of additional copper production coming from the new concentrator occupied.

These offset the lower production at our cardiac and ensuring we're honing their facilities, where we had a decrease in production to be firm.

For 2019, we expect to produce 20 million and 1 million ounces of silver.

An increase of 16% or.

2.8 million ounces of additional silver.

When compared to last year.

Mainly resulting from the important contribution of the summer Teen mine.

And the Toquepala operation.

On July nine at our Marine terminal in White So Nora.

Raul Jacob: On 9 July, at our marine terminal in Guaymas, Sonora, there was an incident that caused the discharge of approximately 3 cubic meters of sulfuric acid into the sea in the industrial port area. The Guaymas Bay has an estimated water volume of 340 million cubic meters. The spill, upon entering in contact with the sea's alkaline conditions, Well, the discharge was quickly diluted and the sulfuric acid was naturally and immediately neutralized. As a result, the discharge was considered harmless, and it was found that neither the flora nor the fauna of the area were affected. This was according to a report from the Ministry of Navy. On 10 July, the Mexican government, the Mexican Environmental Protection Agency, PROFEPA, made a first inspection of the area, concluding that the company executed all the correct procedures in order to contain the discharge.

Raul Jacob Ruisanchez: On 9 July, at our marine terminal in Guaymas, Sonora, there was an incident that caused the discharge of approximately 3 cubic meters of sulfuric acid into the sea in the industrial port area. The Guaymas Bay has an estimated water volume of 340 million cubic meters. The spill, upon entering in contact with the sea's alkaline conditions, Well, the discharge was quickly diluted and the sulfuric acid was naturally and immediately neutralized. As a result, the discharge was considered harmless, and it was found that neither the flora nor the fauna of the area were affected. This was according to a report from the Ministry of Navy. On 10 July, the Mexican government, the Mexican Environmental Protection Agency, PROFEPA, made a first inspection of the area, concluding that the company executed all the correct procedures in order to contain the discharge.

There was an incident that caused the discharge of approximately three cubic meters also forecasted into C in industrial port area.

The wind must be has an estimated order volume of $340 million.

This bill upon entering in contact with these fees alkaline conditions.

Well the discharge was quickly diluted and this will free cash it was naturally and immediately.

As a result, the roots charge was consumer harm.

And it was founded near the floor and northern part owner of the area where effect.

Putting this was according to a report from the Ministry of money.

Slide 10, the Mexican government.

The Mexican environment Protection Agency paper.

Made a first inspection of the area concluding that the company executed all the correct procedures in order to continue charge.

Raul Jacob: No reference was made to the existence of negative impact on the environment resulting from the incident. On last Friday, 19 July, PROFEPA revisited the facilities to carry out a second inspection, declaring a partial temporary shutdown related only to the storage process and transportation of sulfuric acid at the terminal, arguing the absence of an authorization of environmental impact. It's important to note that these facilities have been in operation since 1979, previous to the 1988 Mexican General Law of Ecological Balance and the Protection of the Environment. Therefore, these licenses are not a requirement for companies that have been operating before the mentioned law. In addition, PROFEPA's award in 2009, Certification of Clean Industry and Environmental Quality for such facility, which was subsequently renewed four times for periods of 2 years.

Raul Jacob Ruisanchez: No reference was made to the existence of negative impact on the environment resulting from the incident. On last Friday, 19 July, PROFEPA revisited the facilities to carry out a second inspection, declaring a partial temporary shutdown related only to the storage process and transportation of sulfuric acid at the terminal, arguing the absence of an authorization of environmental impact. It's important to note that these facilities have been in operation since 1979, previous to the 1988 Mexican General Law of Ecological Balance and the Protection of the Environment. Therefore, these licenses are not a requirement for companies that have been operating before the mentioned law. In addition, PROFEPA's award in 2009, Certification of Clean Industry and Environmental Quality for such facility, which was subsequently renewed four times for periods of 2 years.

I will reference was made to the existence negative impact on the environment, resulting from the incident.

On last Friday July 19 profit by revisited.

Facilities very out second inspection.

Glaring, a partial temporary shutdown related on the storage process and transportation upsell fortyk asset at the terminal.

Arguing the absence of an outdoor recession of environmental impact.

It is important to note that these facilities has been in operation since.

Seven to nine previous to 1988, Mexican general low of ecological balance and the protection of the environment.

Therefore, these licenses our northern requirement or companies that have been operating before dimension that low.

In addition professors award in 2009 certification of clean industry, an environmental quality or such facility, which Westcon subsequently renewed four times four periods of two years.

We don't know the response or cost for these partial and temporary club.

Raul Jacob: We don't know the reasons or causes for this partial and temporary closure. We will continue contributing with the environmental authorities with all the necessary elements in order to provide with respect to the operation and a strict adherence to environmental regulations. We expect environmental authorities to revoke the partial temporary shutdown once they clarify their concern. At this point, we don't expect any impact on our operations, as the terminal has no scheduled shipments until late. Looking at our financial results for Q2 2000, sales were $1,818 million. That is $19.2 million lower than sales of Q2 last year, or 1%. Corporate sales volume increased by 11.7%. Prices decreased by 11.2. In total, our value decreased by 2%.

Raul Jacob Ruisanchez: We don't know the reasons or causes for this partial and temporary closure. We will continue contributing with the environmental authorities with all the necessary elements in order to provide with respect to the operation and a strict adherence to environmental regulations. We expect environmental authorities to revoke the partial temporary shutdown once they clarify their concern. At this point, we don't expect any impact on our operations, as the terminal has no scheduled shipments until late. Looking at our financial results for Q2 2000, sales were $1,818 million. That is $19.2 million lower than sales of Q2 last year, or 1%. Corporate sales volume increased by 11.7%. Prices decreased by 11.2. In total, our value decreased by 2%.

But we will continue contributing with environmental authorities with all the necessary element in order to provide.

With respect to the patients and the strict adherence to environmental regulations.

We expect environmental authorities to revoke the partial temporary shutdown once they clarified their concern.

At this point, we don't expect an impact on our operations.

Terminal has no scheduled shipments and fueled late.

Looking at our financial results for the second quarter of 2000.

His where when the 1808 in million dollars.

That is a 19.2 million lower than sales of the second quarter of last year.

Comfort.

Copper sales volume increase.

By 11.7%.

But prices decreased by 11.2 in total our value decreased by 7%.

Regarding our main by proceeds we have hired sales of molybdenum, which increase.

Raul Jacob: Regarding our main byproducts, we had higher sales of molybdenum, which increased by 47.8% due to higher volume and better prices for this metal. Zinc, we had lower sales due to lower volume and prices, and for silver, we had both lower prices as well as volume, silver sales decreased by 17.4%. Looking at our operating costs, our total operating costs and expenses increased by $54.8 million, or 5.2% when compared to the same Q2 2018. However, our copper production increased by 16.5%, so that's a 5.2% increase in operating costs and expenses, and then production increase of 18.5% in copper.

Raul Jacob Ruisanchez: Regarding our main byproducts, we had higher sales of molybdenum, which increased by 47.8% due to higher volume and better prices for this metal. Zinc, we had lower sales due to lower volume and prices, and for silver, we had both lower prices as well as volume, silver sales decreased by 17.4%. Looking at our operating costs, our total operating costs and expenses increased by $54.8 million, or 5.2% when compared to the same Q2 2018. However, our copper production increased by 16.5%, so that's a 5.2% increase in operating costs and expenses, and then production increase of 18.5% in copper.

Hi, at 47.8% due to higher volume and better prices for this metric.

Inc., we had lower sales due to lower volume and prices.

And for silver we had both large.

No our prices as well as volume and.

Silver sales decreased by 17.4%.

Looking at our operating cost our total operating cost and expenses.

We used a $54.8 million.

5.2%.

When compared to the same second quarter of 2018, however, our copper production increased by 16.5%.

So that's a 5.2% increase in.

Operating cost and expenses and production increase in 0.5% in copper.

The main cost increments has been in depreciation and operating cost of the new Toquepala concentrator and this and Martina.

Raul Jacob: The main cost increment has been in depreciation and operating cost of the new Toquepala concentrator and the San Martin mine. These cost increments were partially compensated by lower inventory consumption and lower purchase copper from third party. The adjusted EBITDA for Q2 was $942.8 million. This is a 51.9% margin, compared with $955.2 million, or a 52% margin for Q2 of 2018. Our operating cash cost per pound of copper before by-product credit was $1.45 per pound in Q2 of 2018. That is 8.1 cents lower than the cost for Q1.

Raul Jacob Ruisanchez: The main cost increment has been in depreciation and operating cost of the new Toquepala concentrator and the San Martin mine. These cost increments were partially compensated by lower inventory consumption and lower purchase copper from third party. The adjusted EBITDA for Q2 was $942.8 million. This is a 51.9% margin, compared with $955.2 million, or a 52% margin for Q2 of 2018. Our operating cash cost per pound of copper before by-product credit was $1.45 per pound in Q2 of 2018. That is 8.1 cents lower than the cost for Q1.

These cost improvements were partially compensated by lower inventory consumption and lower purchased copper from third parties.

The adjusted EBITDA for the second quarter was $948 million. This is up 51.9% Martin.

Compared with $955.2 million or 52% margin for the second quarter of 2018.

Our operating cash cost per pound of copper before right profile.

$1.45.

As per pound in the second quarter of 2018.

At this 8.1 cents lower and the cost for the first quarter.

It's 5.3% decrease in operating cash.

Raul Jacob: This 5.3% decrease in operating cash cost is a result of lower cost per pound from production costs that decreased by 5%, our treatment and refining charges that reduced cost by 16.8%, and administrative expenses that were also reduced on a per pound basis. These were partially offset by lower premium. Southern Copper's operating cash costs, including the benefit of by-product credit, was $0.805 per pound in Q2 of this year. This cash cost was $0.099 lower than the cash cost of $0.904 per pound in Q1 of this year. This is an 11% reduction.

Raul Jacob Ruisanchez: This 5.3% decrease in operating cash cost is a result of lower cost per pound from production costs that decreased by 5%, our treatment and refining charges that reduced cost by 16.8%, and administrative expenses that were also reduced on a per pound basis. These were partially offset by lower premium. Southern Copper's operating cash costs, including the benefit of by-product credit, was $0.805 per pound in Q2 of this year. This cash cost was $0.099 lower than the cash cost of $0.904 per pound in Q1 of this year. This is an 11% reduction.

Is the result of lower cost per pound from production cost.

That decreased by 5%.

Our treatment and refining charges that reduced.

It costs by 16.8% and a means to date administrative expenses.

We're also.

Reduce on a per account basis. These were partially offset by lower fee.

I wasn't coppers operating cash cost, including the benefit of by product credits was 80.5 cents per pound in the second quarter of this year.

This cash cost was 9.9 cents lower.

And the cash cost of 90.4 cents per pound in the first quarter of this year is this an 11% reduction.

Raul Jacob: Regarding by-products, we had a total credit of $352.5 million, a 15.3% increase in absolute dollars when compared with the $305.7 million credit, Q1 2018. On a per pound basis, we had credits of $0.64 in Q2 this year, which compares with $0.622 per pound of credit in Q1. Total credits increased for molybdenum, zinc, and sulfuric acid, and decreased for silver and gold. Net income attributable to SCC shareholders, Q2 this year was $402.4 million, that is 22.1% of sales or diluted earnings per share of $0.52 per share.

Raul Jacob Ruisanchez: Regarding by-products, we had a total credit of $352.5 million, a 15.3% increase in absolute dollars when compared with the $305.7 million credit, Q1 2018. On a per pound basis, we had credits of $0.64 in Q2 this year, which compares with $0.622 per pound of credit in Q1. Total credits increased for molybdenum, zinc, and sulfuric acid, and decreased for silver and gold. Net income attributable to SCC shareholders, Q2 this year was $402.4 million, that is 22.1% of sales or diluted earnings per share of $0.52 per share.

Regarding by products, we had a total credit of $352.5 million.

15.3% increase in absolute dollars.

When compared with the 305.7 million.

We ended the first quarter of 2000.

On a per pound basis, we had rates of 64 cents in the second quarter of this year, which compares with 62.2 cents per pound of credit in the first quarter.

Total credits increased for molybdenum.

I think and sulphuric acid and decrease for silver and gold.

Net income attributable to SCC shareholders.

The second quarter of this year was $402 million when poor.

That is 22.1% of sales or diluted earnings per share of 52 cents per pound.

Per share.

Raul Jacob: This figure compares with net income attributable to SCC shareholders for Q1 of this year of $388.2 million, or diluted earnings per share of $0.50. Capital expenditures. Southern Copper's investment philosophy is not based on the outlook of copper prices, but on the quality of the assets that we operate and develop. Throughout the year, our strong financial discipline has consistently allowed us to invest continuous basis in our secure asset portfolio. Capital investments in the six months of 2018, the first half, were $253.5 million. These investments are in line with our growth program, aiming to produce 1.5 million tons of copper by 2025.

Raul Jacob Ruisanchez: This figure compares with net income attributable to SCC shareholders for Q1 of this year of $388.2 million, or diluted earnings per share of $0.50. Capital expenditures. Southern Copper's investment philosophy is not based on the outlook of copper prices, but on the quality of the assets that we operate and develop. Throughout the year, our strong financial discipline has consistently allowed us to invest continuous basis in our secure asset portfolio. Capital investments in the six months of 2018, the first half, were $253.5 million. These investments are in line with our growth program, aiming to produce 1.5 million tons of copper by 2025.

This figure compares with net income attributable to SCC shareholders for the first quarter of this year of $388.2 million.

Our diluted earnings per share of 50 cents.

Capital expenditures Southern Coppers investment philosophy is not based on the outlook of copper prices are on the quality of the assets that we operate and develop.

Throughout the year.

Our strong financial discipline has consistently allow us to invest continuous basis in our.

Our asset portfolio.

Capital investments in the six months of 2008 in the first half.

Were $253.5 million.

These investments are in line with our growth program aiming to produce 1.5 million tonnes of copper by 2020.

Looking at our Peruvian projects, we have currently our portfolio of $2.8 billion for approved projects in Peru of which 1.8 billion has already been invested.

Raul Jacob: Looking at our Peruvian projects, we have currently a portfolio of $2.8 billion for approved projects in Peru, of which $1.8 billion has already been invested. Considering the Michiquillay $2.5 billion project and Los Chankas, a $2.8 billion project, our total investment program in Peru increases to $8.1 billion. For the Toquepala expansion project, as this is a $1.3 billion project, including, as we mentioned, a new state-of-the-art concentrator, that has increased Toquepala annual production to reach 258,000 tons in this year, a 52% production increase from this operation when compared to last year. As of 30 June 2018, we have invested $1,291.6 million in this expansion.

Raul Jacob Ruisanchez: Looking at our Peruvian projects, we have currently a portfolio of $2.8 billion for approved projects in Peru, of which $1.8 billion has already been invested. Considering the Michiquillay $2.5 billion project and Los Chankas, a $2.8 billion project, our total investment program in Peru increases to $8.1 billion. For the Toquepala expansion project, as this is a $1.3 billion project, including, as we mentioned, a new state-of-the-art concentrator, that has increased Toquepala annual production to reach 258,000 tons in this year, a 52% production increase from this operation when compared to last year. As of 30 June 2018, we have invested $1,291.6 million in this expansion.

Considering dimitar $2.5 billion Troy.

And Los Chancas, a $2.8 billion project, our total investment program in Peru.

This is to $8.1 billion.

For the Toquepala expansion project.

As this is our 1.3 billion per year, concluding we mention a new state of the art concentrator.

And has increased stockpile annual production reached 258000 tons in this year.

52% production increase from this operation when compared to last year.

As of June .

Thirtyth of 2018, we have invested 1290 $1.6 million this expansion.

The construction of the project was completed and production initiated in the fourth quarter of 2018.

Raul Jacob: The construction of the project was completed and production initiated in Q4 2018. Full production was reached Q2 2019. For Tia Maria, as you all know, on 8 July the company received the construction license for the Tia Maria project. This permit was obtained after completing an strict review process, complying with all established regulatory requirements and addressing all observations made. Strongly believe the Tia Maria project, where we will invest $1.4 billion, will further improve the company's asset base and profitability, with an increase of 120,000 tons of additional annual copper production capacity at a very competitive cash cost. We think this project will also benefit Peru, the national, regional, and local level, through business and employment opportunities, royalties, and taxes.

Raul Jacob Ruisanchez: The construction of the project was completed and production initiated in Q4 2018. Full production was reached Q2 2019. For Tia Maria, as you all know, on 8 July the company received the construction license for the Tia Maria project. This permit was obtained after completing an strict review process, complying with all established regulatory requirements and addressing all observations made. Strongly believe the Tia Maria project, where we will invest $1.4 billion, will further improve the company's asset base and profitability, with an increase of 120,000 tons of additional annual copper production capacity at a very competitive cash cost. We think this project will also benefit Peru, the national, regional, and local level, through business and employment opportunities, royalties, and taxes.

Full production was reached.

Second quarter of 2008.

For Tia Maria.

As you will note on July eight the company received the construction license for the Tia Maria project. These Fermi was obtained after completing and strict review process complying with all established regulatory requirements and addressing all observations. Please.

Strongly believe the Tia Maria for you, where we will invest $1.4 billion will further improve the company's asset base and profitability with an increase of 120000 tons of additional annual copper production capacity at very competitive cash costs.

We think these pre will also benefit Peru.

The national regional and local level through business and employment opportunities for royalties and taxes.

Raul Jacob: On top of this, with sales estimated at $750 million, Tia Maria will improve Peru's economy with a 0.4% increase in its GDP. We guarantee to the population of Islay that the Tia Maria project will not adversely affect other local economic activities, because we will use desalinated seawater for our operations. For our supplies and copper production, we will build a 32 km industrial railway and an access road at a safe distance from the Tambo Valley. We reiterate our commitment to delay the construction of the project until it has established, in coordination with the government, a common ground for dialogue with the neighboring population, address any concerns, and provide assurances to achieve more social support for the project. Meanwhile, we will continue to work for the welfare of the local population.

Raul Jacob Ruisanchez: On top of this, with sales estimated at $750 million, Tia Maria will improve Peru's economy with a 0.4% increase in its GDP. We guarantee to the population of Islay that the Tia Maria project will not adversely affect other local economic activities, because we will use desalinated seawater for our operations. For our supplies and copper production, we will build a 32 km industrial railway and an access road at a safe distance from the Tambo Valley. We reiterate our commitment to delay the construction of the project until it has established, in coordination with the government, a common ground for dialogue with the neighboring population, address any concerns, and provide assurances to achieve more social support for the project. Meanwhile, we will continue to work for the welfare of the local population.

On top of these which sales estimated at 750 million Tia Maria will improve peru's economy with 5.4% increase in needs.

GDP.

We are entitled to the population of his line.

Now the Tia Maria project will not adversely affect older local economic activity.

Because we will use these selenide seawater for our operations and related transports are for our supply and copper production.

We will build a 32 kilometer industrial railway and an access road at a safe distance from the tumble light.

We reiterate our commitment to delay the construction of the project and de risk has established in coordination with the government a common grounds for dialogue with the neighboring.

Ablation address any concerns and provide assurances to achieve all social support for the project. Meanwhile, we will continue to work for the world of the local.

Our social programs in education health care and productive development will continue to improve the quality of life on the agriculture and livestock activities in the Tambo Valley.

Raul Jacob: Our social programs in education, healthcare, and productive development will continue to improve the quality of life and the agricultural and livestock activities in the Tambo Valley, as well as fishing and tourism in Islay. During the construction and operation phase, hiring local labor will be a priority. For this purpose, we have successfully launched, in June of this year, the free technical training program, Forging the Future, which will benefit 700 persons in this province, 2019, this year, and next year. After training, the participants will be eligible to apply for one of the estimated 9,000 jobs required during the Tia Maria construction phase. We strongly believe that the initiation of construction activities for Tia Maria will generate significant economic opportunities for Islay province and the Arequipa region.

Raul Jacob Ruisanchez: Our social programs in education, healthcare, and productive development will continue to improve the quality of life and the agricultural and livestock activities in the Tambo Valley, as well as fishing and tourism in Islay. During the construction and operation phase, hiring local labor will be a priority. For this purpose, we have successfully launched, in June of this year, the free technical training program, Forging the Future, which will benefit 700 persons in this province, 2019, this year, and next year. After training, the participants will be eligible to apply for one of the estimated 9,000 jobs required during the Tia Maria construction phase. We strongly believe that the initiation of construction activities for Tia Maria will generate significant economic opportunities for Islay province and the Arequipa region.

As well as fishing and tourism in his life.

During the construction and operation fate hiring local labor will be our priority.

For this purpose we have successfully launch in June of this year.

They accrete technical training program or in the future, which will benefit 700 person is driving the years night 2019, this year and next year.

After training the participants will be eligible to apply for one of the estimated 9000, Josh required during that time, the Tia Maria construction issues, we strongly believe that the initiation of construction activities for PM idea, we generate significant economic opportunities for Thislife Robbins and they are a key by region.

Winning operations, we expect Tia Maria we generate a significant contribution through mining royalties and taxes. They won and will directly employ seven 600 workers and indirectly provide jobs for another 4200.

Raul Jacob: When in operation, we expect Tia Maria will generate a significant contribution through mining royalties and taxes, day one, and will directly employ 600 workers and indirectly provide jobs for another 4,200. The good news of the Tia Maria and Toquepala projects give us the confidence to continue the effort of our $6.7 billion greenfield Peruvian investment program, which includes Tia Maria, as I said, with an investment of $1.4 billion, Los Chancas with $2.8 billion, and Michiquillay projects with $2.5 billion. For the Mexican projects in Buenavista, we have a zinc concentrator in the Sonora State of Mexico.

Raul Jacob Ruisanchez: When in operation, we expect Tia Maria will generate a significant contribution through mining royalties and taxes, day one, and will directly employ 600 workers and indirectly provide jobs for another 4,200. The good news of the Tia Maria and Toquepala projects give us the confidence to continue the effort of our $6.7 billion greenfield Peruvian investment program, which includes Tia Maria, as I said, with an investment of $1.4 billion, Los Chancas with $2.8 billion, and Michiquillay projects with $2.5 billion. For the Mexican projects in Buenavista, we have a zinc concentrator in the Sonora State of Mexico.

The good news of the TMT and Toquepala project to give us the confidence to continue the efforts of our 6.7 billion Greenfield proven investment program, which includes Tia Maria save with an investment of 1.4 billion euros, Chancas with 2.8 billion and Micciche eight projects with $2.5 billion.

Or the Mexican projects in Buenavista, we have.

Think concentrator in this on other staples.

Of Mexico.

Raul Jacob: This project is located between the Buenavista facility and includes the development of a new concentrator to produce approximately 80,000 tons of zinc and 20,000 tons of copper per year. Currently, we have completed the basic engineering. Environmental studies are in process. The project's budget is $413 million. We expect to initiate operations in Q4 2021. When completed, this new facility will double the company's zinc production capacity and will provide 490 direct jobs and 1,470 indirect jobs. The Pilares project, also in Sonora, is located 6 km from La Caridad. This project consists of an open pit mine operation with an annual production capacity of 35,000 tons of copper in concentrate.

This project is located within the window of Easter facility and includes the development of a new concentrator to produce approximately 80000 tons of zinc and 20000 tons of copper per year.

Raul Jacob Ruisanchez: This project is located between the Buenavista facility and includes the development of a new concentrator to produce approximately 80,000 tons of zinc and 20,000 tons of copper per year. Currently, we have completed the basic engineering. Environmental studies are in process. The project's budget is $413 million. We expect to initiate operations in Q4 2021. When completed, this new facility will double the company's zinc production capacity and will provide 490 direct jobs and 1,470 indirect jobs. The Pilares project, also in Sonora, is located 6 km from La Caridad. This project consists of an open pit mine operation with an annual production capacity of 35,000 tons of copper in concentrate.

Currently we have completed the basic engineering.

Environmental studies are in process.

The projects budget is $413 million and we expect to initiate operations in the fourth quarter of 2021.

When completed.

This new facility will double the company's think production capacity and we provide 490 direct jobs and 1470 indirect jobs.

The pilares protocols fleets on order dislocated six kilometers from Luckity that.

These primarily consist of an open pit mine operation with an annual production capacity of 35000 tons of copper in constant.

Youre will be transported from the pit.

Raul Jacob: The ore will be transported from the pit primary crushers of the La Caridad copper concentrator, via a new 25-meter wide off-road facility for mining trucks. Environmental permits have been obtained and additional land is being acquired. The project will significantly improve the overall mineral ore grade, combining the 0.78% expected from Pilares, the ore grade of Pilares is 0.78%, as I just said, with the 0.34% ore grades from La Caridad. The budget for Pilares is $159 million. We expect it to start production during the second half of 2020.

Raul Jacob Ruisanchez: The ore will be transported from the pit primary crushers of the La Caridad copper concentrator, via a new 25-meter wide off-road facility for mining trucks. Environmental permits have been obtained and additional land is being acquired. The project will significantly improve the overall mineral ore grade, combining the 0.78% expected from Pilares, the ore grade of Pilares is 0.78%, as I just said, with the 0.34% ore grades from La Caridad. The budget for Pilares is $159 million. We expect it to start production during the second half of 2020.

Primary crusher softer like Adidas copper concentrator via our new 25 meter wide of road facility for mining trucks.

Environmental permits have been obtained and additional land is being acquired the project will significantly improve the overall mineral or great combining the point, 78% expected frumpy Larry's youre greater clarity to this point.

When 78% as I just said.

With the the point, 34% or greater for chrome located.

The budget for Pilares, its a $159 million and we expect to start production during the second half of 2012.

Regarding dividends as you know it is the company policy to review at each board meeting the Companys cash resources position.

Raul Jacob: Regarding dividends, as you know, it is the company policy to review at each board meeting the company cash resources position, expected cash flow generation from operations, capital investment plans, and other financial needs, in order to determine the appropriate quarterly dividend. Accordingly, as announced to the market on 18 July, board of directors authorized a cash dividend of $0.40 per share of common stock, payable on 22 August, to shareholders of record at the close of business on 8 August 2019. Well, with this in mind, ladies and gentlemen, thank you very much for joining us, we would like now to open up the forum for questions.

Raul Jacob Ruisanchez: Regarding dividends, as you know, it is the company policy to review at each board meeting the company cash resources position, expected cash flow generation from operations, capital investment plans, and other financial needs, in order to determine the appropriate quarterly dividend. Accordingly, as announced to the market on 18 July, board of directors authorized a cash dividend of $0.40 per share of common stock, payable on 22 August, to shareholders of record at the close of business on 8 August 2019. Well, with this in mind, ladies and gentlemen, thank you very much for joining us, we would like now to open up the forum for questions.

Expected cash flow generation from operations.

Capital investment plan and other financial need closer to the Turkey.

Jeff provocative quarterly dividend.

Accordingly.

As announced to the market on July 18.

Auto director's authorized a cash dividend of 40 cents per share of common stock.

Payable on August 22 to shareholders of record at the close of business on August eight 2019.

Well with this in mind, ladies and gentlemen, thank you very much for joining us and we like now to open up the forum for quick.

Ladies and gentlemen at this time if you have a question. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key to prevent any background noise. We ask that you. Please place your line on mute. Once your question has been stated.

Operator: Ladies and gentlemen, at this time, if you have a question, please press the star then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. Our first question is from Petr Grishchenko from Barclays. Your line is now open.

And our first question is from Peter Grishchenko from Barclays. Your line is now open.

Hi, good morning, and thanks for taking my questions.

Petr Grishchenko: Hi, good morning, and thanks for taking my questions. First, I wanted to follow up a little bit on Tia Maria development. While the company received construction permits, there's some, you know, articles, including Bloomberg, suggested that Peruvian president said the company should not begin construction because of lack of social approval. I'm just curious, what's your reading of the situation, and if you actually expect to begin construction this year, or what's the timeline?

First I wanted to follow up a little bit on Tia Maria development.

While the company received.

Construction permits.

There is some articles, including Bloomberg suggested that proven president.

So the company should not begin construction because of lack of.

Social approval. So I'm, just curious what you're reading of situation and if you actually expect to begin construction.

This year or what what's the timeline.

Okay well.

Raul Jacob: Okay. Well, as I mentioned, during the presentation of the call, we have committed with the government to, and the local population to have a dialogue process. This will take a while. Currently, the government is initiating this process directly with the local population. We don't have at this point any specific date to end this dialogue process. Actually, I think that it may take as long as it is necessary for all the population in the area to be satisfied with the way that the company will address the project. I'm sure that they will see that the benefits of this investment will certainly surpass any cost that it may have for the local population.

Raul Jacob Ruisanchez: Okay. Well, as I mentioned, during the presentation of the call, we have committed with the government to, and the local population to have a dialogue process. This will take a while. Currently, the government is initiating this process directly with the local population. We don't have at this point any specific date to end this dialogue process. Actually, I think that it may take as long as it is necessary for all the population in the area to be satisfied with the way that the company will address the project. I'm sure that they will see that the benefits of this investment will certainly surpass any cost that it may have for the local population.

As I mentioned during the.

The presentation of the coal.

We are we have committed to with the government to and the local population to to have a dialogue process. This will take a while.

Currently the formalities initiating this this process.

Directly with the local population.

We don't have for at this point to any specific date to end. These data process actually I think that it may take a.

As long as it is necessary for four older population, India attribute.

Satisfied with the way that the company will address the pro you can and I'm sure that they will see the benefits of this.

Investment will certainly.

Surpassed.

Any any cost for these may have for the local population.

Got it Thats helpful.

Petr Grishchenko: Got it. That's helpful. Second question, I wanted to touch a little bit more on the spill, at the Guaymas terminal. I just wanted to clarify something. The scheduled shipment, in late August, was that copper shipment or was that sulfuric acid?

Second question I wanted to touch a little bit more on the spill.

The Gremlins terminal I, just wanted to clarify something the scheduled shipment.

In late August was that copper shipment or was that for forward answer no.

Raul Jacob: No. All of this refers to a sulfuric acid facility that we have at the Guaymas port. It does not affect our copper production or any other metal production at the company.

Raul Jacob Ruisanchez: No. All of this refers to a sulfuric acid facility that we have at the Guaymas port. It does not affect our copper production or any other metal production at the company.

All of these refers to a two to ASO forecasted facility that we have for the wine last port.

It does not affect our our copper production or any other metal production on the computer.

Okay. So there there are no metal shipments from the terminal.

Petr Grishchenko: Okay, there are no metal shipments from that terminal?

Not from from that facility that pertains to sulphuric acid.

Raul Jacob: Not, from that facility that pertains to sulfuric acid.

Raul Jacob Ruisanchez: Not, from that facility that pertains to sulfuric acid.

Got it.

Petr Grishchenko: Got it. Great. Thanks a lot, and best of luck to you guys.

Great. Thanks, a lot and.

Best of luck you guys.

Thank you very much.

Raul Jacob: Thank you very much.

Raul Jacob Ruisanchez: Thank you very much.

Thank you. Our next question is from Alex hacking from Citi. Your line is now open Alex.

Operator: Thank you. Our next question is from Alex Hacking, from Citi. Your line is now open, Alex.

Yes, good morning Roe.

Alex Hacking: Yeah, good morning, Raul. My first question is just around project sequencing. You know, as you look at the three big opportunities that you have, Michiquillay, Las Chankas, El Arco, as we sit today, which of those projects do you feel is most likely to begin construction first? Thank you.

My first question is just around project sequencing.

If you look at the three big opportunities that you have mr. Ki Ay, plus janka El Arco.

As you as we sit today, which of those projects do you feel is most likely to be begin construction first thank you.

At this point I will say that the Tia Maria is the one that has to.

Raul Jacob: At this point, I would say that Tia Maria is the one that has it's most likely to initiate construction in a time that we can't determine now. As I said, we have to follow a dialogue process with the government and the local population. currently, we're expecting Tia Maria to initiate production at some point in 2022. After that, we should have Las Chankas and Michiquillay later on in time.

Raul Jacob Ruisanchez: At this point, I would say that Tia Maria is the one that has it's most likely to initiate construction in a time that we can't determine now. As I said, we have to follow a dialogue process with the government and the local population. currently, we're expecting Tia Maria to initiate production at some point in 2022. After that, we should have Las Chankas and Michiquillay later on in time.

The it's most likely to initiate construction in a time that we can determine now we have team as I say, we have to follow.

Yeah.

Dial of process.

With the government and the local population.

But currently were expecting a gym idea at u. shaped production.

Some point in 2022.

And after that we should have full of tanker and micciche.

Later on in time.

Okay. So just to confirm less yankelovich EA are ahead of El Arco.

Alex Hacking: Okay, just to confirm, Las Chankas and Michiquillay are ahead of El Arco right now? Hello?

Right now.

Hello.

Yes Hello.

Raul Jacob: Yeah, hold on a second.

Raul Jacob Ruisanchez: Yeah, hold on a second.

Sure.

Alex Hacking: Sorry.

At this point, we have adequate capital for 2024.

Raul Jacob: At this point, we have El Arco scheduled for 2024, while Michiquillay and Las Chankas are for 2025.

Raul Jacob Ruisanchez: At this point, we have El Arco scheduled for 2024, while Michiquillay and Las Chankas are for 2025.

While micciche I am of chunk us are for 2020 fashion.

Okay. So on that basis, then El Arco would actually be.

Alex Hacking: On that basis, then El Arco would actually be ahead of the other two. In terms of capital allocation, I guess with Tia Maria on hold, Pocket Pile finished, company's gonna generate quite a bit of free cash flow. My question is: What is your target for your debt level or net debt level, you know, as you, as you kind of approach this new wave of projects, you know, maybe Tia Maria and then the other three projects that we discussed? Like, what's your target net debt level, and therefore, you know, what or conversely, how are you thinking about your dividend policy? Thank you.

Ahead of the other two.

And then in terms of capital.

Allocation I guess with Tia Maria on hold Toquepala, Finnish company is going to generate quite a bit of free cash flow.

My question is what is your target.

For Europe .

Debt level, our net debt level, you know as you as you kind of.

Approached this new wave of projects you know, maybe Tia Maria and then.

And then the other three projects that we discuss like what your target net debt level and therefore.

Water or Conversely, how are you thinking about your dividend policy. Thank you.

Sure.

Raul Jacob: Well, okay, on our target, it's set as total debt divided by EBITDA shouldn't be more than 2. That's our metric that we want to maintain. Currently, we're there, so it's under 2, our current view for this year. We are not considering at this point any specific debt issues. We will see how these projects evolve. At this point, we have enough funds to go on with the projects with our own cash generation. Obviously, for capital structure reasons, we may consider some action in the future. Regarding dividends, as I always mention, this is a decision that is made at the board level.

Raul Jacob Ruisanchez: Well, okay, on our target, it's set as total debt divided by EBITDA shouldn't be more than 2. That's our metric that we want to maintain. Currently, we're there, so it's under 2, our current view for this year. We are not considering at this point any specific debt issues. We will see how these projects evolve. At this point, we have enough funds to go on with the projects with our own cash generation. Obviously, for capital structure reasons, we may consider some action in the future. Regarding dividends, as I always mention, this is a decision that is made at the board level.

Well, okay on all our targets to it's a it's set a total debt divided by a aveed there shouldn't be less more than two.

More than two that's a that's how a metric that we went to maintain currently where there. So it's a it's a under to our current view for this year.

We.

Are not considering at this point any specific.

Debt issues, we will see how how Ah.

These projects evolve or at this point to.

Where we have enough funds to go along with the projects with our own cash generation, obviously for more for capital restructure reasons, we may consider some action in the future.

And regarding dividends has a I always mention.

This is our decision is made at the board level in each board meeting the Board review the company cash position the expectations on on the market on cash flow generation, given the projects or operations that we have had on that base a dividend. This established if you see our track record we have been paying 40 cents per share in the last quarters.

Raul Jacob: In each board meeting, the board review the company cash position, the expectations on the market, on cash flow generation, given the projects or operations that we have. On that base, a dividend is established. If you see our track record, we have been paying $0.40 per share in the last quarters. We believe that this price reduction that we have seen, and I mentioned it at the presentation of the call, it shouldn't be that long in time. We're expecting to either maintain this dividend level or the board will make a decision for the future depending on market conditions.

Raul Jacob Ruisanchez: In each board meeting, the board review the company cash position, the expectations on the market, on cash flow generation, given the projects or operations that we have. On that base, a dividend is established. If you see our track record, we have been paying $0.40 per share in the last quarters. We believe that this price reduction that we have seen, and I mentioned it at the presentation of the call, it shouldn't be that long in time. We're expecting to either maintain this dividend level or the board will make a decision for the future depending on market conditions.

We believe that this a price reduction we have seen their names and I mentioned it today and the presentation of the call it shouldn't be that long time.

So were expecting to either maintain this dividend level or.

The board will make a decision for the future depending on market conditions.

Okay, and just a follow up though.

Jens Spiess: Okay, just to follow up, though, you know, Las Chankas, El Arco, Michiquillay, you know, that's potentially $7, 8 billion of CapEx, right? That could, and theoretically all be happening around the same time, based on the guidance that you gave earlier. Do you feel the need to delever ahead of that, or you're comfortable sitting at the current 2 times level, and then financing those projects with cash flow going forward?

Alex Hacking: Okay, just to follow up, though, you know, Las Chankas, El Arco, Michiquillay, you know, that's potentially $7, 8 billion of CapEx, right? That could, and theoretically all be happening around the same time, based on the guidance that you gave earlier. Do you feel the need to delever ahead of that, or you're comfortable sitting at the current 2 times level, and then financing those projects with cash flow going forward?

Last chunk SLR till maturity, a you know that's potentially seven $8 billion up.

Oh Capex right, Chris in theoretically all be happening around the same time based on the guidance that you gave earlier.

Do you.

Do you feel the need to de lever ahead of that or you're comfortable selling at the current.

Sure two times level, and then financing of the project free cash flow going forward.

That is something that we will will I mean.

Raul Jacob: That is something that we'll, I mean, there is not only the position, but also the interest rates that we'll see in the future. I think that for just for technical reasons, it's a good idea to have some debt in our balance sheet. We are also very comfortable with the idea of having an underutilized balance sheet that allow us to be ready for any opportunities in the market.

Raul Jacob Ruisanchez: That is something that we'll, I mean, there is not only the position, but also the interest rates that we'll see in the future. I think that for just for technical reasons, it's a good idea to have some debt in our balance sheet. We are also very comfortable with the idea of having an underutilized balance sheet that allow us to be ready for any opportunities in the market.

There is not only a.

This should position, but also the interest rates elsewhere, and we will we will see in the future I think that that's for for just for technical resources is a good idea to have some derisking our balance sheet.

But we're also very comfortable with daily of having an underutilized and balance sheet that the Lois.

To to get ready for any opportunities in the market.

Okay. Thanks for the time.

Jens Spiess: Okay, thanks for the time, Raul.

Alex Hacking: Okay, thanks for the time, Raul.

You're welcome.

Raul Jacob: You're welcome.

Raul Jacob Ruisanchez: You're welcome.

Thank you. Our next question is from Gustavo Oliveira from Santander. Please identify yourself. Your line is now open.

Operator: Thank you. Our next question is from Gustavo Alievato from Santander. Please identify yourself. Your line is now open.

Hi, guys. Good morning, So I have two questions first of all regarding Pat we today your cost structure license how much can you expect the company to acts in Spain in 2019.

Gustavo Alievato: Hi, guys. Good morning. I have two questions. First one regarding Tia Maria. With the construction license, how much can you expect the company to spend in 2019? The second question, just to clarify regarding the net debt to EBITDA targets, you mentioned below 2x total debt or net debt to EBITDA? Thank you.

Gustavo Allevato: Hi, guys. Good morning. I have two questions. First one regarding Tia Maria. With the construction license, how much can you expect the company to spend in 2019? The second question, just to clarify regarding the net debt to EBITDA targets, you mentioned below 2x total debt or net debt to EBITDA? Thank you.

And the second question just to clarify regarding I'd attribute got five years.

You mentioned below two times total debt on that that's really done. Thank you.

Okay on the second one is total depth to lead that less than two times.

Raul Jacob: Okay, on the second one, it's total debt to EBITDA, less than 2 times. On the first one, it's on Tia Maria, we have a budget for this year of $300 million. At this point, we don't think that we will spend that much money. We're considering an adjustment in this budget, and we'll mention that on the next call.

Raul Jacob Ruisanchez: Okay, on the second one, it's total debt to EBITDA, less than 2 times. On the first one, it's on Tia Maria, we have a budget for this year of $300 million. At this point, we don't think that we will spend that much money. We're considering an adjustment in this budget, and we'll mention that on the next call.

On the first one its a.

On Tia Maria we have we have a budget for this year $200 million at this point, we don't think that we will spend that much money.

Where were considering an adjustment in this budget and will will you have mentioned that on the next call.

Okay. Thank you.

Gustavo Alievato: Okay, thank you.

Gustavo Allevato: Okay, thank you.

You're welcome.

Raul Jacob: You're welcome.

Raul Jacob Ruisanchez: You're welcome.

Thank you. Our next question comes from Carlos de Alba from Morgan Stanley . Please identify yourself. Your line is now open.

Operator: Thank you. Our next question is from Carlos Belva from Morgan Stanley. Please identify yourself. Your line is now open.

Yes, Hello. This is actually yen squeeze Carlos had to jump off the line.

Jens Spiess: Yes, hello. This is actually Jens Spiess. Carlos had to jump off the line. Thanks for taking my call. One question: Besides the training program you just mentioned, could you provide more details on what specifically you plan to do differently in Tia Maria versus what you have been doing for the past 2 years in order to reach social acceptance? Maybe what your expectations are in terms of timing to start production, something in order to start in 2022. Also, if you could provide an updated CapEx guidance and also cash costs before by-product. Also, if you could please repeat the production guidance by metal, because there was some noise on the line and didn't get that. Thank you so much.

Thanks for taking my call so.

One question. Besides training programs you just mentioned.

Could you maybe provide more details on what specifically you plan to do differently.

In Tia Maria versus what you have been doing for the past two years in order to reach social acceptance and maybe what your expectations are in terms of timing to start production something.

In order to to start in 2022.

And also if you could provide an updated.

Capex guidance.

And also cash cost before by product.

And also if you could please repeat the production guidance by metal because there was some noise on the line and.

Got that.

Thanks, so much.

Okay.

Raul Jacob: Okay. Well, we have been doing several activities in the Tambo Valley, and we're adding to that Mollendo and Matarani, which are the nearby towns, where about 25,000 people live. We think that having the construction permit already will let us access to some other additional funds for social work, which are very important. We believe that this is something that will certainly help the project to move forward. The change that I see at this point is that not only we will have a much stronger commitment towards the social work that we have been performing in this area, as I say, we're adding Mollendo and Matarani to our programs.

Raul Jacob Ruisanchez: Okay. Well, we have been doing several activities in the Tambo Valley, and we're adding to that Mollendo and Matarani, which are the nearby towns, where about 25,000 people live. We think that having the construction permit already will let us access to some other additional funds for social work, which are very important. We believe that this is something that will certainly help the project to move forward. The change that I see at this point is that not only we will have a much stronger commitment towards the social work that we have been performing in this area, as I say, we're adding Mollendo and Matarani to our programs.

Well, we have been we have been doing this several activities in the Tambo Valley.

And where were adding to that more gains on my tiny we charted nearby towns where about a 25000 people leave and we think that they're having to the construction permit already yeah, I will let us access to some other additional funds for social work, which are very important. We believe that this is something that will certainly help.

The project to move forward.

Sure the change that I see at this point is that not only we will have a much stronger commitment towards social work that we have been performing in this area as I'd say, we're adding more indoor and my dad and into lower programs.

Raul Jacob: But also, the process will have a much more important participation of the government authorities. We're seeing this. Well, we saw this before receiving the permit, certainly, but we're seeing it now as a much more stronger process coming from government agencies and ministers. At this point, it's a little bit premature to put a line or an estimate on when can we initiate the construction. We have a commitment to the government for not initiating it until this process for dialogue has arrived or reached a proper level. Okay, in production, let me give you our current view.

And that also.

Raul Jacob Ruisanchez: But also, the process will have a much more important participation of the government authorities. We're seeing this. Well, we saw this before receiving the permit, certainly, but we're seeing it now as a much more stronger process coming from government agencies and ministers. At this point, it's a little bit premature to put a line or an estimate on when can we initiate the construction. We have a commitment to the government for not initiating it until this process for dialogue has arrived or reached a proper level. Okay, in production, let me give you our current view.

The process will have.

We'll have a much more.

Important participation of the government currencies.

This we're seeing these are what we saw this before receiving the permit certainly but we're seeing it now there's a much more stronger process coming from from government agencies and ministers.

At this point, it's a little bit premature to to put line or or an estimate on when can we.

Jade or the construction, we have a commitment to a government for not initiating it until.

This process for dialogue.

Half a rise for reach a proper level.

Okay and productions Sidney let me give your current view.

Raul Jacob: For this year, we are expecting total copper production of 993,300 tons of copper. For next year, is 990,000 tons of copper. We will remain at almost 1 million tons or passing a little bit of over 1 million tons for the years, I would say, 2020, 2021. In 2022, we're expecting to have 1,070,000 tons. 2023, 1,200,000 tons. In 2024, the same level, 1.2 million tons. For molybdenum, our current view is 24.8 thousand tons for the year.

Raul Jacob Ruisanchez: For this year, we are expecting total copper production of 993,300 tons of copper. For next year, is 990,000 tons of copper. We will remain at almost 1 million tons or passing a little bit of over 1 million tons for the years, I would say, 2020, 2021. In 2022, we're expecting to have 1,070,000 tons. 2023, 1,200,000 tons. In 2024, the same level, 1.2 million tons. For molybdenum, our current view is 24.8 thousand tons for the year.

For this year, we are expecting a total copper production of 993300 tons of copper.

For next year is 990000 tons of copper.

And we will remain at almost a million ton or passing a little bit, though or a million pounds four or for the year. So I would say next year assuming 22021.

2020, we are expecting to have 1.070 million pounds.

2023, 1 million and 200000 pounds.

[laughter].

In 2024, it seemed like a 1.2 million tones.

For molybdenum our current view, it's a 24.8.

Thousand tons for this year, we should remain at that level.

Raul Jacob: We should remain at that level and having changes in in in production due to recoveries and ore grades. For zinc, we're expecting 85,900 tons zinc this year. Next year, with the with the San Martin mine running at full speed, we expect to have 109,000 tons of zinc production. In 2021, 126,000 tons of production. 2022, we should receive the benefit of the Buena Vista concentrator, adding a little bit north of 100,000 tons of zinc capacity. That will make us to produce about 230,000 tons of zinc for that year, and in 2023, 247,000 tons of zinc.

Raul Jacob Ruisanchez: We should remain at that level and having changes in in in production due to recoveries and ore grades. For zinc, we're expecting 85,900 tons zinc this year. Next year, with the with the San Martin mine running at full speed, we expect to have 109,000 tons of zinc production. In 2021, 126,000 tons of production. 2022, we should receive the benefit of the Buena Vista concentrator, adding a little bit north of 100,000 tons of zinc capacity. That will make us to produce about 230,000 tons of zinc for that year, and in 2023, 247,000 tons of zinc.

And.

Having no changes in there in production.

Due to recoveries on order rates.

Forcing.

We're expecting 85900 chance.

I think this year.

Next year with the with the San Martin mine running at full speed, we expect AP 109000 tons of zinc production.

In.

2021 126.

Allison tons of production.

Oh listen and 22, we should receive the benefit of the wouldn't have Easter concentrator, adding a little bit north of 100000 tons offer.

Capacity that will make us a to produce about 230000 tons of thing.

For the year and in 2023 247000 tons of zinc.

For silver were extracting 20.

Raul Jacob: For silver, we're expecting 20.1 million ounces this year. Should be paying for an increase to I'm sorry, 25 million ounces for the years 2021 and on. Cash cost obviously will be improving as we move on through the years. We're expecting cash costs this year to be at about $0.81, and either remain at that level or decrease next few years.

Raul Jacob Ruisanchez: For silver, we're expecting 20.1 million ounces this year. Should be paying for an increase to I'm sorry, 25 million ounces for the years 2021 and on. Cash cost obviously will be improving as we move on through the years. We're expecting cash costs this year to be at about $0.81, and either remain at that level or decrease next few years.

The point 1 million ounces this year.

Yes, if you're saying four.

An increase to 25000 million I'm, sorry, 25 million ounces.

For forward a years.

2021 and on.

Cash cost obviously will be.

We'll be improving as we move on through this years, we're expecting.

First affecting cash cost this year to be at about 81 cents.

And.

Either remain at that level or decrease.

Thanks, a few years.

Hernandez Luke: Okay. Before byproducts, how much would that be? What's the embedded, byproduct assumption you have in that number?

Jens Spiess: Okay. Before byproducts, how much would that be? What's the embedded, byproduct assumption you have in that number?

Okay, and and before by products.

How much would that be so what's embedded.

Byproduct assumption, Jeff and that number.

Raul Jacob: About $1.45, which is what we're expecting for this year, $1.47 before credits. It should remain at about that level. Until 2022, we will have an increase in our, over the 1 million ton production capacity that we have now. 2022, 2023, we should have a reduction on a per pound basis to about $1.40. Obviously, as you may imagine, this is not probably cash cost is the most difficult metric to predict because you not only have the metal prices as part of it, but also all the costs that affect the operations.

Raul Jacob Ruisanchez: About $1.45, which is what we're expecting for this year, $1.47 before credits. It should remain at about that level. Until 2022, we will have an increase in our, over the 1 million ton production capacity that we have now. 2022, 2023, we should have a reduction on a per pound basis to about $1.40. Obviously, as you may imagine, this is not probably cash cost is the most difficult metric to predict because you not only have the metal prices as part of it, but also all the costs that affect the operations.

About $1.45 cents, which is what we were expecting for this year 147 before before credits.

And it should remain at about that level.

Until 2022, we will have for.

An increase in our.

Over the 1 million Tom.

Production capacity that we have now so 2022 2023, we should have a reduction on a per pound basis.

About the dollar 40.

Obviously as you may imagine.

This is a this is not a.

Finally cash cost is the most difficult.

Metric to predict because your door only half the metal prices as part of it but also all the all the costs that affect the operations, but given the current.

Raul Jacob: Given the current cost level and considering the growth program that we have, we should be paying towards from where we are now, $1.47 for this year, down to $1.40 in the next few years. Before credits.

Raul Jacob Ruisanchez: Given the current cost level and considering the growth program that we have, we should be paying towards from where we are now, $1.47 for this year, down to $1.40 in the next few years. Before credits.

Gross level considering.

They drill program that we have we should be paying towards from where we are now $1.47 for this year.

Down to $1.40 in the next few years.

Before credits.

Hernandez Luke: Okay. Thank you, Raul.

Jens Spiess: Okay. Thank you, Raul.

Raul Jacob: You're welcome.

Raul Jacob Ruisanchez: You're welcome.

Okay. Thank you.

Operator: Thank you. Our next question is from Hernandez Luke from MetLife. Please identify yourself. Your line is now open.

You're welcome.

Thank you. Our next question is from her NAND Kessler from Metlife. Please identify yourself. Your line is now open.

Alfonso Salazar: Good morning. Thank you for taking my question. It's a short one regarding the bond maturity that you have on April 2025 for $400 million. If you already have any plans to refinance that, to pay that down, what's the idea there? Thank you.

Hernán Kisluk: Good morning. Thank you for taking my question. It's a short one regarding the bond maturity that you have on April 2025 for $400 million. If you already have any plans to refinance that, to pay that down, what's the idea there? Thank you.

Good morning. Thank you for taking my question. Its showed one regarding the bond maturity that you have on April next year for 400 million. If we already have any plans to refinance debt to pay that down what's what's like the other thank you.

Raul Jacob: At this point, we are considering, well, just, if you look at our cash position, obviously we can pay from our own funds. We're considering different options for this maturity, no decision has been made so far.

Raul Jacob Ruisanchez: At this point, we are considering, well, just, if you look at our cash position, obviously we can pay from our own funds. We're considering different options for this maturity, no decision has been made so far.

At this point, we are considering that well will.

Just a if you look at our cash position, obviously, we campaign from our own funds were considering different options for or.

These maturities.

But no decision has remained so far.

Alfonso Salazar: Yeah, thanks.

Hernán Kisluk: Yeah, thanks.

Raul Jacob: You're welcome.

Raul Jacob Ruisanchez: You're welcome.

Yes. Thanks.

Operator: Thank you. Our next question is from Alfonso Salazar, from Scotiabank. Please identify yourself. Your line is now open.

Hello.

Thank you.

Our next question is from Alfonso Salazar from Scotiabank. Please identify yourself. Your line is now bench.

Carlos De Alba: Hello, Raul, good morning to everyone. I have two questions. The first one regarding Maria. You already mentioned that you're going to get social license, what you're doing different and the opportunities we have had to get the social approval.

Alfonso Salazar: Hello, Raul, good morning to everyone. I have two questions. The first one regarding Maria. You already mentioned that you're going to get social license, what you're doing different and the opportunities we have had to get the social approval.

Hello Hello.

Good morning, everyone.

And what's the best ones with Andrew Lim idea, we already more so that they're going to get social license.

Do you plan on the pedicle screw up there to get that Victoza approvals.

Raul Jacob: Alfonso, we can't copy you well. I'm sorry, Alfonso, we cannot copy you well.

Raul Jacob Ruisanchez: Alfonso, we can't copy you well. I'm sorry, Alfonso, we cannot copy you well.

Hi, Dan.

Absolutely we can copy you well I'm, sorry, I can't say I'm, sorry, I believe we cannot copy you well.

Carlos De Alba: Can you hear me better now?

Alfonso Salazar: Can you hear me better now?

Can you hear me better now.

Raul Jacob: ... Yes, certainly.

Raul Jacob Ruisanchez: ... Yes, certainly.

[Analyst]: My question, the first question I have is on Tia Maria, that you were saying that what you're doing to get the social license. The question I have is, have you a plan B? Because you have been trying this for a decade or so, and certainly it hasn't been an easy task to get the social approval. What is the plan B? Have you thought about the possibility to monetize somehow this asset in case if you don't get the approval, or you are going to continue until you get it? The second question I have is if you have a strategy to improve public opinion in both Mexico and Peru after the spill in the Salto spill, there has been some comments, negative comments.

Yes, certainly.

Alfonso Salazar: My question, the first question I have is on Tia Maria, that you were saying that what you're doing to get the social license. The question I have is, have you a plan B? Because you have been trying this for a decade or so, and certainly it hasn't been an easy task to get the social approval. What is the plan B? Have you thought about the possibility to monetize somehow this asset in case if you don't get the approval, or you are going to continue until you get it? The second question I have is if you have a strategy to improve public opinion in both Mexico and Peru after the spill in the Salto spill, there has been some comments, negative comments.

Okay.

So my question My first question I have.

Okay.

Yes, you were saying that and what you're doing to get this social license.

Have you.

Plan B.

Yeah, I was just having tried useful advocate also and.

Certainly it hasn't been an easy task to to get the socialist bullet. So it wasn't a plan b have you thought about the possibility for to monetize somehow these assets in case that you don't get the approval.

Oh, you are going to to to continue until you get the second question I have is.

And if you have a strategy to improve public opinion in both Mexico and the who after this season in the soft like steel and there has been some.

[Analyst]: If you have any strategy there to improve public opinion? Thank you.

Alfonso Salazar: If you have any strategy there to improve public opinion? Thank you.

Goldman Sachs negative comments. So if you have any any strategy that drove a public opinion.

Raul Jacob: Thank you for your questions, Alfonso. On Tia Maria, we have no plan B. We want to keep following what we are doing now, which is having a very good, very successful social programs in this area. We believe that we're doing. At this point, we have a much better project environment than what we had in past years. This is somehow reflected in receiving the construction permit. We don't want to speculate on what if. We are currently focused and concerned and committed to moving forward with this project in both the social aspects that it has, as well as the operational once when we initiate the construction in the future.

Raul Jacob Ruisanchez: Thank you for your questions, Alfonso. On Tia Maria, we have no plan B. We want to keep following what we are doing now, which is having a very good, very successful social programs in this area. We believe that we're doing. At this point, we have a much better project environment than what we had in past years. This is somehow reflected in receiving the construction permit. We don't want to speculate on what if. We are currently focused and concerned and committed to moving forward with this project in both the social aspects that it has, as well as the operational once when we initiate the construction in the future.

Thank you.

Thank you for your question on Cellphones on Tia Maria we have no plan B, we want to keep following what we are doing now which is having a very good to be successful social programs.

In in this area are we believe that are that were.

Sure we're doing we're doing.

At this point, we have a much better strike environment at what we had in past years.

This is somehow reflected in receiving their construction permit.

We don't want to speculate on what is.

We are currently focused on I'm concerned I am committed to moving forward with this break in both the social aspects that it happens well after the operational plant when when we initiate the construction in there in the industry.

Raul Jacob: On your second comment or question on public opinion, obviously, we're working to inform. We're certainly informing in Peru and Mexico as well, on different levels of both government and public opinion on the quality of the operations and the way that we do our business. We believe that this is certainly helping us in both countries to moving forward with our projects as we are now doing.

Raul Jacob Ruisanchez: On your second comment or question on public opinion, obviously, we're working to inform. We're certainly informing in Peru and Mexico as well, on different levels of both government and public opinion on the quality of the operations and the way that we do our business. We believe that this is certainly helping us in both countries to moving forward with our projects as we are now doing.

On on the your second comment or question on on public opinion, obviously, we are we're working.

To inform where certainly informing or in Peru, and Mexico as well.

On on different levels of both government and public opinion on the on the.

The quality of the operations and the way that we do over business.

And we believe that this is certainly helping us so in most countries too to moving forward with our pre tax or as we are now doing.

[Analyst]: Okay. Thank you very much, Raul.

Alfonso Salazar: Okay. Thank you very much, Raul.

Okay. Thank you very much.

Operator: Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Raul Jacob for closing remarks.

Thank you.

At this time I'm showing no further questions I would like to turn the call back over our Jacobs for closing remarks.

Thank you very much AG well with this we conclude our conference call for Southern Coppers second quarter 2018 results. We certainly appreciate your participation and hope to have you back with US when we report the third quarter of 2019. Thank you very much.

Raul Jacob: Thank you very much, Gigi. Well, with this, we conclude our conference call for Southern Copper's Q2 2018 results. We certainly appreciate your participation and hope to have you back with us when we report the Q3 of 2018. Thank you very much, and have a nice day.

Raul Jacob Ruisanchez: Thank you very much, Gigi. Well, with this, we conclude our conference call for Southern Copper's Q2 2018 results. We certainly appreciate your participation and hope to have you back with us when we report the Q3 of 2018. Thank you very much, and have a nice day.

Operator: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program you may now disconnect.

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