Southern Copper Q1 2025 Earnings Report

Southern Copper EPS Results

• Actual EPS: $1.19
• Consensus EPS: $1.05
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: N/A

Southern Copper Revenue Results

• Actual Revenue: $3.12 billion
• Expected Revenue: $3.05 billion
• Beat/Miss: Beat by +$75.16 million
• YoY Revenue Growth: N/A

Southern Copper Announcement Details

• Quarter: Q1 2025
• Date: 4/25/2025
• Time: After Market Closes
• Conference Call Date: Friday, April 25, 2025
• Conference Call Time: 10:00AM ET

Southern Copper (NYSE:SCCO) engages in mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. The company is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce blister and anode copper; refining of anode copper to produce copper cathodes; production of molybdenum concentrate and sulfuric acid; production of refined silver, gold, and other materials; and mining and processing of zinc, copper, molybdenum, silver, gold, and lead. It operates the Toquepala and Cuajone open-pit mines, and a smelter and refinery in Peru; and La Caridad, an open-pit copper mine, as well as a copper ore concentrator, a SX-EW plant, a smelter, refinery, and a rod plant in Mexico. The company also operates Buenavista, an open-pit copper mine, as well as two copper concentrators and two operating SX-EW plants in Mexico. In addition, it operates underground mines that produce zinc, lead, copper, silver, and gold; a coal mine; and a zinc refinery. The company has interests in 156,818 hectares and 502,688 hectares of concessions in Peru and Mexico; and 168,200 hectares and 28,453 hectares of exploration concessions in Argentina and Chile. Southern Copper Corporation was incorporated in 1952 and is based in Phoenix, Arizona. Southern Copper Corporation is a subsidiary of Americas Mining Corporation.

Southern Copper Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning and welcome to Southern Copper Corporation's First Quarter twenty twenty five. With us this morning, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance Treasurer and CFO, who will discuss the results of the company for the first quarter twenty twenty five, as well as answer any questions that you might have. The information discussed on today's call may include forward looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions to not place undue reliance on these forward looking statements.

[Operator]

Southern Copper Corporation undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. All results are expressed in full U. S. GAAP. Now I will pass the call on to Mr.

[Operator]

Raul Jacob.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Thank you very much, Gigi. Good morning, everyone, and welcome to Southern Copper's First Quarter twenty twenty five Results Conference Call. At today's conference and accompanied by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board member as well as Mr. Leonardo Contreras, who is also a Board member.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

In today's call, we will begin with an update on our view of the copper market and then review Southern Copper's key results related to production, sales, operating costs, financial results, expansion projects, and equity. After this, we will open the session for questions. Now let us focus on the corporate market. The London Metal Exchange copper price increased 11% from an average of $3.83 per pound in the first quarter of last year to $4.24 this past quarter. Based on current supply and demand dynamics, we estimate that the deficit at year end will stand at about 300,000 metric tons.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

This is the market deficit that we're expecting. Regarding copper inventories worldwide, we estimate that they are currently covering about one week of global net. Over the past quarter, the copper market registered a significant arbitrage difference between COMEX and LME price. At its peak in March 26, the COMEX price was 73¢ per pound or 17% above the London Metal Exchange price. This huge difference and unusual reflected the strong possibility of a 25% tariff to be imposed on U.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

S. Copper imports. Although we maintain a very positive long term outlook for copper, we believe an intense commercial war between The U. S. And China will affect economic growth worldwide, consequently impacting copper demand.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Now let's look at Southern Copper's production for the past quarter. Copper represented 78% of our sales in the first quarter of this year. Copper production remained stable at 240,226 tons for the first quarter of twenty twenty five. We registered positive results for Buenavista XEW cattle production that increased by 24% and Toquepala concentrate production that uptick by 2%. These good results were partially offset by a decrease in copper production at La Caridad due to a drop in ore grades and recovery.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

At this point, we expect to produce 968,200 tons of copper this year, twenty twenty five. This is a 2,400 tons increase when compared to our plan of 965,000 tons AHA. Molybdenum represented 10% of the company's sales value in the first quarter of this year and is currently our first buy product. Molybdenum prices averaged $20.43 per pound this quarter compared to $19.84 in the first quarter of twenty twenty four. This represents an increase of 3%.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Molybdenum production rose 9% in the first quarter of this year compared to the same period of 2024. This was mainly driven by an increase in production at the Toquepala, Caridad and Buenavista mines, fueled by higher ore grades. These results were partially offset by lower production at the Cuauhone operation. In 2025, we expect to produce 27,400 tons of molybdenum. This is 5% above our initial plan.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

For silver, it represented 6% of our sales in the first quarter with an average price of $32.31 per ounce this past quarter. This represents an increase of 38% compared to the first quarter of twenty twenty four. Silver is currently our second byproduct. Mined silver production increased 14% in the first quarter versus the same period of 2024. This was driven by better production at Buena Vista, IMSA and Guajone.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Refined silver production increased by 8% quarter over quarter propelled by an increase in all our refineries. In 2025, we expect to comply with our plan to produce 23,000,000 ounces of silver, an increase of 9% compared to 2024. For zinc, it represented 4% of our sales in the first quarter of this year with an average price of $1.29 per pound in the quarter. This represents a 16% increase compared to the first quarter of twenty twenty four figure. Zinc is currently our third by product.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Mined zinc production increased 49% when compared to the first quarter of twenty twenty four and totaled 39,375 tons. This was mainly driven by a 161% increase in production at the new Buena Vista Zinc Concentrator. Refined zinc production dropped 11% in the first quarter of this year vis a vis the same period of 2024. For 2025, this year we expect to produce 170,100 tons of zinc in line with our plan. This represents an increase of 31% over our 2024 production level.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

This growth will be driven by the production of our Buena Vista zinc concentrator that will add 105,000 tons to our production. And this facility is certainly operating at full speed and we're very pleased with the results that we're getting from this investment. Moving to the financial results of the company. For net sales in the first quarter of this year, sales were $3,000,000,000 This is $522,000,000 above the sales registered in the first quarter of twenty twenty four or a 20% increase. Corporate sales rose 19% and volume by 4% in a scenario of better prices.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Regarding our main by products, we registered growth in sales of molybdenum by 10%, which rose on the back of higher prices and an uptick in volume. We had a significant increase in sales of zinc, 59%, which was fueled by better prices and bolstered by rising zinc volumes. Zinc sold volumes increased by 42% mainly from Buena Vista. Finally, silver sales increased 58% due to higher prices and a larger volume. Our total operating costs and expenses increased $176,000,000 or 12% when compared to the first quarter of twenty twenty four.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

The main cost increments has been in inventory consumption, workers' participation, repair materials, depreciation, exchange rate variance and other materials such as tires, explosive, funding media, etcetera. These cost increments were partially compensated by lower fuel and leachable materials costs. The first quarter of twenty twenty five adjusted EBITDA was $1,746,000,000 dollars which represented an increase of 23% over the $1,418,000,000 dollars registered in the first quarter of twenty twenty four. The adjusted EBITDA margin in the first quarter of this year was 56% versus 55% in the first quarter of twenty twenty four. The first quarter adjusted EBITDA was 16% over the $15.00 $7,000,000 registered in the fourth quarter of twenty twenty four.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Cash cost. Operating cash cost per pound of copper before by product credits was $2.05 per pound in the first quarter of this year. This was $0.27 lower than the value for the fourth quarter. It was $2.32 per pound. This 12% drop in the operating cash cost was driven by both decreases in cost per pound from production cost, treatment and refining charges, administrative expenses and by an increase in the premium.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Southern Copper operating cash costs, including the benefit of byproduct credits, was $0.77 per pound in the first quarter of twenty twenty five. This cash cost was $0.19 lower than the cash cost of $0.96 that we had in the fourth quarter of twenty twenty four. This is a 21% reduction in cash cost. Regarding by products, we had a total freight of $659,000,000 or $1.29 per pound in the first quarter of this year. These figures represent a 5% decrease when compared with the credit of $779,000,000 or $136 per pound in the last quarter of twenty twenty four.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Total credit has been has increased for molybdenum silver and decreased for zinc and sulfuric acid. For net income, the first quarter of twenty twenty five net income was $946,000,000 which represented an improvement of 29% compared to the $736,000,000 registered in the first quarter of last year. The net income margin this past quarter was 30% versus 28% in the same period of 2024. Net income in the first quarter of twenty twenty five was 19% versus the $794,000,000 registered in the last quarter or the fourth quarter of twenty twenty four. Regarding cash from operations, cash flow from operating activities in the first quarter of twenty twenty five was $721,000,000 which represented an increase of 9% versus the $6,000,000 post in the first quarter of twenty twenty four.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

This improvement was attributable to the strong cash generation at our operations, which was driven by higher sales and cost control efficiency. For capital investments, our current capital program for this decade exceeds 15,000,000,000 and includes investments in projects in Mexico and PEL. Given that there is a description of our main capital projects in Southern Copper's press release, I'm going to focus on updating new developments for each. In the case of the Mexican projects, Minera Mexico is planning to invest more than $600,000,000 this year at both its open pit and underground mines. Half of this investment will be used to guarantee the viability of long term operations by actively modernizing and updating assets.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Remaining funds will target improvements in water usage and tailings management to ensure safety and efficiency of our operations. We will also invest in efforts to bolster optimization and growth. For the El Arco project in Baja California, the company has moved on with detailed engineering, which is still underway for the concentrator, as well as for the SXEW plant, water salinization, logistics infrastructure and power delivery. SCC has several projects in its Mexican pipeline that may boost organic growth if they are found to be of value for both stakeholders and the communities in which we operate. These projects are Angangayo and Chagwehites and the Palmette smelter, which could bolster our position as a fully integrated copper producer.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

For the Peruvian projects, in the case of the Tia Maria project as of March of this year, the company has generated more than six twenty eight jobs. Of those five zero three were filled with local applicants. To the fullest extent possible, we intend to fill the 3,500 jobs estimated to be required during Tia Maria's construction phase with workers from the Islay Province. In 2027, when we start operations, the project will generate seven sixty four direct jobs and about 5,900 indirect jobs. In the early construction phase, progress on access roads and platforms stands at 61%.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

We will advance these efforts alongside work to set up a temporary camp, engage in massive airworks and roll out mine operating activities. To date, we have installed 59 kilometers of license to delimit the property. For the Los Chancas project in Apulimac, on February fourth of this year, the company acquired 3,125 hectares of surface land from the Tiaparo community. This was an important step in securing our stake in the Los Chancas project. Sadly, between March twelve and fourteen of this year, a group of illegal miners attacked the project's facilities and set fire to our camps in Nacopampa and Batallas, damaging both equipment and facilities.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

The company is coordinating with the authorities to remove the 75 label miners who are excavating our property so that the project development can continue. For the Michiquillay project, as of March in the Cajamarca region of Peru, As of March thirty first of this year, the total progress of the exploration project was 39%. We have drilled almost 146,000 meters and obtained 48,000 drill core samples for chemical analysis. Diamond drilling will continue and will provide information to interpret mineralization in geological sections, develop geological models, and evaluate mineral resources. Geometallurgical as well as hydrological and hydrogeological studies has been initiated.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

The geotechnical study for the project is scheduled to begin shortly. For environmental, social and corporate governments, ESG, we have in Peru Two high performance schools named Coar has been built by Southern Coppers Corporation in the TAGNA and Moquewa region of Peru. These were inaugurated by the President of The Republic Of Peru and the Minister of Education. A total of $60,000,000 was invested through the works for taxes mechanism. The schools feature top level services, which have been designed to maximize the student academy, artistic and athletic activities.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Every year these schools will educate 600 outstanding students from vulnerable areas of Peru. As well, this is a way to actively contribute to closing the educational gaps in the country. Work to build a new core in the Apurima region is slated to begin soon. Our social practices has been recognized again. This is the third consecutive year that we received the exceptional company award, which recognizes our commitment to Mexican communities.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

This extension, bestowed by Business Coordinating Council, the Communications Council and the Institute for Promotion of Quality, applauds our initiative to drive regional economic and recreational development by developing the Tamosura and Pinakate urban parks in the mining municipalities of Kananea and Nakosari in Sonora. Every year more than 50,000 users will benefit from the sports, recreational and cultural facilities developed by the company. We maintain our rating in the climate change and water security in the Carbon Disclosure Project, better known as CDP in the evaluation that this agency has done. The CDP is the world's leading environmental disclosure platform. We're part of more than 24,800 companies than last year for entirely reported their environmental impact to the CDP, representing nearly two thirds of global market capitalization.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

SCC as part of Grupo Mexico, ranked above the average for both the materials sector and the North America region in evaluations for both categories. Moving to dividends, as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans and other financial needs at each Board meeting to determine the appropriate quarterly dividend. Accordingly, on April 10, Southern Copper Corporation announced a quarterly cash dividend of $0.70 per share of common stock and a stock dividend of 0.00999 shares of common stock per share payable on 05/19/2025 to shareholders of record at the close of business on 05/02/2025. So this is basically the shares dividend is one share for almost 100 shares of stock position. So with this ladies and gentlemen, we end up our presentation today.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Thank you very much for joining us. And we would like to open the forum for questions now.

[Operator]

Our first question comes from the line of Alejandro Demichelis from Jefferies.

[Alejandro Demichelis, Managing Director - Equity Research at Jefferies Financial Group]

Yes. Good morning, gentlemen. Thank you very much for taking my question. Two questions, if I may, please, probably. The first one is, as you mentioned, we have seen an improvement in your cash cost this quarter.

[Alejandro Demichelis, Managing Director - Equity Research at Jefferies Financial Group]

How we should think about cash costs evolving the rest of the year? That's the first question. And then the second question is on the dividend that you just kind of mentioned, we have seen an increase in the proportion of the share dividend. So first, why was that or what was the thinking behind that? And how we should think about proportion of shares on the dividend side?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Well, are relatively prudent regarding the management of cash flow for the company. We as you know, we don't want to hold cash, but at the same time, we have to fund our operations properly. In the case of the past quarter, we had some well, the first quarter of the year, we usually have to pay do a final payment of taxes to the tax authorities in both Mexico and Peru. And when you have a year where prices or productions as it has been the case are better than excuse me, please. So let's see.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

When you have a a year where So when we have a year where results are better than the prior one, usually, you have to do much higher payment for at the closing of the year of the prior year for taxes and some other benefits for the workforce, such as the profit sharing. Last year in particular, we had to pay on top of all the taxes that we pay through the year 2024, a final closing payment of $711,000,000 in taxes. That was for 2024. That made our cash from operation relatively smaller than what may be expected given the prices and production profile of the company. And besides this, we have to pay also two specific taxes in both Mexico and Peru that are due in the first quarter.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

And all of these has, as I say, affected a little bit our cash flow generation in the first quarter, but we believe that this will not be the case in the rest of the year, particularly in the second quarter because usually the Mexican taxes are paid in the second quarter of the year and this time for just the calendar that we have for these payments, we had an unusual payment in the first quarter for the Mexican operations. Going back to your first question, cash cost for the rest of the year. Well, it depends on how are we seeing the market prices. We're doing a little bit better than our initial plan. And I expect this to be the case through the year.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

So if we have the same prices that we're seeing for our byproducts, my expectation is that we end up the year in this range of $75 to $0.8 per pound of copper as a cash cost for 2025.

[Alejandro Demichelis, Managing Director - Equity Research at Jefferies Financial Group]

That's great. Yes. Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of David Feng from China International Capital Corp.

[Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)]

Hi, good morning, Raul, Victor and team. Thanks for taking the question. So my first question is regarding your CapEx. So we can see that your CapEx increased a lot of those year over year and quarter over quarter during the last quarter. So a little how much does Tia Maria's construction cost accounted in this TEDx?

[Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)]

And besides Tia Maria, is there any increments from other projects? That's my first question. I'll come back with my second one.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Okay. For for Tia Maria specifically, we expect to spend a little bit less than $200,000,000 this year, 02/2025.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Next year, 2026, we will be spending about $980,000,000 and in 2027, '4 '60 million. That's basically for Tia Maria. In the case of the other projects, Michiquillay and Los Chancas will start spending more money as we move on from the exploration part of the development of the project towards the the construction. And that is that is being reflected in our capital for the next few years. So I'll give you the number of our forecast at this point for CapEx.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

It's for this year, 1,500,000,000.0. For next year, twenty six, will be $2300000000.0.20 27, 2 point 7 billion 20 20 8, 2 point 7 billion. And about that, until we start finishing our projects, that should be by about 02/1931, '2 thousand and '30 '2.

[Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)]

Thank you, Rod. That's very helpful.

[Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)]

And my second question is, we know that the treatment and refining charges or TCIC has been inactive for a long time in the spot market. So just wonder how much flexibility do you have at this moment for you to sell more copper concentrate instead of refined copper based on the current market conditions and the long term contract you have?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Well, we we want to well, the first thing is that we have to comply with our contracts and our contracts are a little bit north of 70% based on refined copper or further processed materials such as roll rock and and copper concentrates. Well, when you produce refined copper, you not only have the the the copper itself, but also have precious metals that sometimes are not recognized when you sell copper concentrates and you have some other some other materials. So the main one of the byproducts of a smelter for instance is sulfuric acid.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

So when you do all the aromatic, even though the terms of TCs, RCs are very favorable now for concentrate producers, the smelters, at least in our case, are very competitive. And we believe that we're doing more or less a very small difference between selling concentrates or selling refined copper. So in that regard, we're okay with what we do. And as I'd say, our main point this year is complying with the contract that we have signed and to deliver copper to our industrial customer base as well as some other customers that we have in in the case of Southern Copper.

[Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)]

Understood.

[Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)]

Thank you very much.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Timna Tanners from Wolfe Research.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Yes. Good morning. Thanks, Earl. I wanted to ask a few questions about the Mexican pipeline. You mentioned a few projects have sweet dates and another one I just Googled.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

So I just wanted to understand how imminent they might be, how incremental. It looks like there's some decent information about the opportunity there online, but I'd like to hear it from you. And then can you remind us of your exposure to the CME as well? We keep getting questions about that. Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Tina, could you so sorry that I couldn't get your first question well.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Oh, sure. So just trying to understand, you mentioned in the press release and in the remarks that you're looking into some new opportunities to expand the pipeline in Mexico. I might butcher this, child sweet taste and another one that you detailed, again, to pronounce. So wondering if you could provide some further detail about how imminent they might be, what MIND products you're looking at, what timeframe? Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Okay. In the case of well, we have the other projects that have been mentioned on Gangeo. It's an underground project that we were looking in the Michoacan state. It silver, zinc and lead as materials and it's very attractive. So, we're looking into it.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

We're still on the initial steps of this project. The other one is Challichiwites. That's probably the one that had some difficulties for pronunciation. This is in the Zacatecas region and it's on the exploration phase, but they are very interesting. And besides this, we're considering the construction of a new smelter in Empale, the region of the Northern part of Mexico.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

And this is something that we will review entertain as a possible investment. But at this point, I think that this is not the best time to build a smelter. But whenever conditions are the proper ones, the company will consider to move on with this.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Okay. So in terms of timeline, would we think about tacking them on your existing project pipeline? Or is it something that could be more imminent? And again, yes.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Is not that imminent. As we move on with the projects, we will report on them and we'll add them to our list of projects at the Mexican operations when it is proper.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Okay, helpful. Thank you. And then about the CME exposure, if you could remind us on that as well?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

What do you mean by CME?

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

The Comex versus the LME exposure.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Okay. Okay. The Comex. Okay. Well, we we do have some of some of our contracts based on comments.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

There is still a spread. Now it's much lower than the one that I mentioned. It's about less than 10% now, about 7% if you look at the prices yesterday. And we are well, basically dealing with this as we deal with some other issues at the commercial side of the business.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Okay. And then one last one, if I could, please. You commented broadly on a trade war and the negative impact on global demand for copper. But any thoughts about Mexico possibly getting excluded in early negotiation of USMCA or any insights? Have you been in dialogue with the Mexican government?

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Just wanted your thoughts there. Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Actually, not much to report. At this point, we have no duties tariffs applied to the Mexican or the Peruvian operations for copper. And this is, in my view, a very positive action from The U. S. Because The U.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

S. Is significantly short of copper. So, putting tariffs on imported copper wouldn't make the country production move on with just with the tariffs. And basically it increase the cost for the end consumers of the products that are manufactured with copper and reduce the company the the country competitiveness in several industries. So to me, it's a wise decision that the the US government has not put any tariffs on copper so far.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Okay. Great. Thanks again.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of John from John Tumazos Very Independent Research LLC.

[John Tumazos, Owner and CEO at John Tumazos Very Independent Research]

Congratulations on the good results, Raul. Some other large mining companies have had a lot of cost escalation. First Quantum and Newmont, for example, had 10%, fifteen % unit cost sequential escalations. Newmont had a $2,000 gold cost in Argentina, for example. Could you explain in a little more detail the ability of Southern Copper to hold the cash cost at $0.77 how your suppliers don't hold you up and get price hikes or just how you're able to keep costs under control so uniquely and superbly.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Well, thank you very much for your comment, John. Well, in reality, what we do is it's a part of DNA or the company DNA to be very extremely cautious about costs, operating costs. And the other point which is very important is that we continue investment our continuing investment in maintaining our facilities in very good shape. I think that in general, we do negotiate and have a very good relationship with our vendors. And at the same time, we are focusing on increasing our production, maintaining our cost in line.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

And particularly in this year, we're seeing the positive effect of the important investment that we did in the last three years in Buena Vista by building a new concentrator that it's giving the company excellent results. The cash cost of this facility is extremely low per pound of zinc. And we are seeing that as a major contribution of value this year. Besides that, the company had a very good year last year in production and we have we're maintaining our production level this year, which is excellent for us. So, think that this combination of being well focused on keeping our production on track, increasing it as much as we can, obviously without jeopardizing long term situation of the company, as well as having a strategic alliances and development of opportunity together with our suppliers.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

It's some of the reasons why the company is maintaining a very competitive cash cost and very likely the lowest of companies of this size in the copper space.

[John Tumazos, Owner and CEO at John Tumazos Very Independent Research]

Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Myles Allsop from UBS.

[Myles Allsop, Research Analyst at UBS Group]

Great. You. Just a few quick questions. Maybe, on the production guidance you've talked to 2025. Could you give us a sense whether you'll be able to maintain production in 2026 and 2027 as well?

[Myles Allsop, Research Analyst at UBS Group]

Or are you expecting a bit of a dip to come through? That's the first question.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Okay. We will have an adjustment in production for next year. At this point, we want to maintain our production level where it is. But eventually, we may reduce a little bit our profile next year for copper. After that, you will see the impact of our new projects, particularly in 2027, Tia Maria.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

And we are expecting it to move towards over 1,000,000 tons for production in 2028 and on. We will be increasing our production from a little bit north of 1,000,000 tons in 2028 up to 1,080,000 tons by 02/1930.

[Myles Allsop, Research Analyst at UBS Group]

Maybe just on Tianira as well. When do you expect I know you normally issue bonds ahead of the big CapEx. And is, you know, is the delay in the financing for Tia Maria a reflection of the project or the market? You know? And and should we expect some of that step up in CapEx to be pushed out?

[Myles Allsop, Research Analyst at UBS Group]

Or is it imminent, should we say?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

No. We will move on with Tia Maria. Let me put it differently. We have no concerns on the Tia Maria construction in terms of the project viability. We believe that the project is moving forward on a very nice way.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

We're very happy to how the community is working with the company at several instances to develop the project as fast as we can. I will say that we are considering moving forward with some financing for the project, but we believe that the market has to be more stable and reflect better the qualities that the company credit that the company has for going to finance the project. So for now, I would say that to your question is more the market than specifically the project.

[Myles Allsop, Research Analyst at UBS Group]

That makes sense. And has there been any protests over the last quarter Has has the project now been more widely kind of accepted by the local communities?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Quite quite clearly, it's the second option. The project has been very widely approved and supported by the locals. There is always a small group of people that is against it. That's part of human nature, about 40 persons that demonstrate against the project in an area where 52,000 people live. So you may imagine that this is not getting any traction at all.

[Myles Allsop, Research Analyst at UBS Group]

Okay. That's encouraging. Maybe on the projects, LPLA, you it's not mentioned at all in the release. Is that reflecting a a change in heart with that project, or is it still bubbling along in the background?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

No. We're doing some work. We haven't reported it because there is no update that has changed vis a vis what we have been reporting. The epilada, we're looking into ways to improve the recovery of the project. That is something that we're focusing in and we believe that we should have some information to report through the year.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

But for now, in this press release, we didn't believe it was necessary to include it because they had no significant changes since the last time.

[Myles Allsop, Research Analyst at UBS Group]

Okay. That makes sense. Maybe one very last question on the projects. Los Chancas, have you bought all the land that you need to buy? And when oh,

[Myles Allsop, Research Analyst at UBS Group]

yeah. How long's a

[Myles Allsop, Research Analyst at UBS Group]

piece of string? I mean, with these illegal miners, it seems every quarter that there's a challenge still to to remove them. Yeah. Is there any meaningful progress or, you know, when can we expect kind of drilling to restart that?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

With the acquisition that we mentioned in the press release, we are basically have acquired pretty much almost all the land that we need. Very high percentage of what we need. In the case of the removing of the legal miners, we are working with the authorities and we are developing our own plans to move on and retire these people from where they are operating. We're seeing very positive actions by the national government on this matter. So, we believe that we could see some progress through the year and we initiate the work that we have to move on with.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

We believe that if we solve this problem, we will probably in a year, year and a half, we'll be finishing the environmental as well as permitting part of the project and that could open up the construction of Los Chancas. Hopefully, little bit better than we're expecting now, but more desired than the actual forecast that we have.

[Myles Allsop, Research Analyst at UBS Group]

Okay. No. That's very helpful. Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Yurai Domik from Lorraine Vian.

[Juraj Domic, Senior Associate at LarrainVial]

Hello. Hello. Good morning, everyone. Thanks for taking our question. Just a single one from our side.

[Juraj Domic, Senior Associate at LarrainVial]

Just to have your comments in how have been demand so far in the second quarter. Have you seen any variability or weakness in any of the markets? Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

I'm so sorry, Hirag. Could repeat it? Because I couldn't get the are you referring to any specific market or or the copper market? Please, could you Sorry.

[Juraj Domic, Senior Associate at LarrainVial]

Can can no.

[Juraj Domic, Senior Associate at LarrainVial]

No. Not not any specific market. Just an an overall view that would be perfect.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Overall, we are positive in general on the copper future. We believe that the fact that we have what we're seeing is a replacement of demand coming from infrastructure, from Asia towards a new energy technologies, artificial intelligence that are kicking in at a very strong speed. And the the very positive news of that for us is that, generally speaking, for instance, if you consider a plant for solar energy, the tons of copper megawatt of installed capacity is much higher than the traditional ways to generate such as hydro or gas gas combustion or on some other carbon coal coal coal power. So in that regard, we're seeing a very positive development. EOLIC, for instance, overseas requires a much more copper per ton of installed capacity of generation.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

For instance, it may be 10 tons of copper per megawatt of installed capacity in an off land or an in sea eolip plant. When you the option to that is maybe two or three the gas facility for power generation. So, outlook in that regard is very positive. Besides that, we have the new developments of artificial intelligence that are requiring significant amounts not only for copper but some other materials such as zinc and silver. These three materials are being produced for us so we see good support for our prices in the next few years.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

The only one concern that we have is that when you have the two major economies in a commercial world, well, it's a concern that may slow down economic growth and indirectly affecting the copper demand. But that will be a short lived impact if any.

[Juraj Domic, Senior Associate at LarrainVial]

Okay, perfect.

[Juraj Domic, Senior Associate at LarrainVial]

Thank you very much.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Camilla Barter from Bradesco BBI.

[Camilla Barder, Equity Research Analyst at Bradesco BBI]

I have two questions here. The first one, you mentioned you see the funds raised to copper production 2026. I'm just I was just wondering if copper prices remain at a low level. Could you consider perhaps altering your production plans and going to areas of lower grades to increase production next year? That's my first question.

[Camilla Barder, Equity Research Analyst at Bradesco BBI]

And the second question, just a follow-up on costs. You mentioned cost after by products in the range of 0.7, zero point two eight for this year. Can you comment please on the expectations of cash cost before by projects for 2025? Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

I think I mentioned already that we're expecting copper cash cost to be at about $0.75 to $0.80 per pound through this year. Hopefully, with better by product prices, we may be a little bit better off than that, but that's our current expectation. And for copper prices, generally speaking, we don't move our long term production plans due to copper prices changes. We're doing our plants using a much lower copper price. We're very conservative in that regard.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Our plants are prepared using a long term price of $3.3 That is a very conservative price nowadays. For us, it will be more like if we can maintain our production next year that will be excellent. But so far the plant calls for a small reduction in our production that is currently under review.

[Camilla Barder, Equity Research Analyst at Bradesco BBI]

Okay. Thank thank you. Just the No problem.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Any other question?

[Operator]

Camilla, your line is still open.

[Camilla Barder, Equity Research Analyst at Bradesco BBI]

Can you hear me?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Yes. We do.

[Camilla Barder, Equity Research Analyst at Bradesco BBI]

On the cash cost, my my question was actually on cost before by products.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Oh, okay. Okay. Okay. That that one has decreased. And keep in mind that we are adding to that cost, the total cost of operation, the cost of the new zinc concentrator, which was not included two years ago.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

So our cash cost has decreased on a per pound basis given the productivity that the company has. And I think it's important to share this point. The concentrator that we have built for Buena Vista has made us to process zinc only this year. But we could do a mix between zinc and copper production in the Buena Vista facilities that we are not doing now because we have found that there is much more value in focusing only on zinc this year and in a few more than specifically copper on this specific facility. So, that has decreased the production that we may get from the Buena Vista facility for about 2,000 tons that we had last year.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

And we are not having that volume this year. So, is always possibilities of improving production. But in this case, we did a review the process and concluded that it was better to focus on zinc only production with the Buena Vista Zinc Facility than doing the mix between zinc and copper because by changing the processes from one metal to the other one, we spend some time that has generated less value if we were only focusing on zinc and that's what we're doing in this year and probably a couple of more.

[Camilla Barder, Equity Research Analyst at Bradesco BBI]

Okay. Thank you. Thank you very much.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Timna Tanners from Wolfe Research.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Hi, thanks for letting me back in. I just wanted to follow-up on my last question and fully appreciate that we haven't seen tariffs on copper exported to The U. S. Yet. But the market is obviously pricing in some chance of that happening.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

And it would be great to hear what Southern Copper's response could be to a 25% tariff on imports. How could Southern Copper react to that? Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

We believe that if we a tariff as the one that you mentioned, it will have will make us to reassign some of the production that we have to some other markets. By doing that, we will very likely have decreased significantly the impact that this may have to the company. At this point, we prefer to wait and see what's the end of this situation. As I mentioned, we are seeing we're pleased to see that the U. S.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Government has recognized the important role of copper as material to be imported with zero duties. And hopefully, that will be the case in the long term.

[Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC]

Okay. Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

You're welcome.

[Operator]

Thank

[Operator]

you. One moment for our next question. Our next question comes from the line of Emerson Viera from Goldman Sachs.

[Emerson Vieira, Equity Analyst at Goldman Sachs]

Hi guys, good morning. So I got two questions. The first one is on the Comax LME price arbitrage. So I understand that the company might have been benefiting from this exposure to to Comax sales. So so a few questions on this matter.

[Emerson Vieira, Equity Analyst at Goldman Sachs]

What percentage of your contracts are spot? And what is the average duration for the remaining ones? And just to follow-up on this ComX LME price arbitrage, for how long do you guys think you can benefit from this? I mean, US customers will not want to double pay the tariff, and no US customers would eventually switch to LME. That's what we're seeing.

[Emerson Vieira, Equity Analyst at Goldman Sachs]

So are you guys seeing clients in Comex contracts already asking for renegotiation or early cancellation? Those are my questions. Thank you.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Well, we we are generally speaking, we are not commenting on this. It has where our commercial team is is is talking with our customers on this matter. I'm so sorry to Emerson, but I I have no comments to your question.

[Emerson Vieira, Equity Analyst at Goldman Sachs]

No worries at all. Thank you. Just gonna just follow-up on another point then. We saw by late March some news regarding protest protest from local communities in Peru's Patapaki region. So do you guys have any any update on the situation, how this is being addressed?

[Emerson Vieira, Equity Analyst at Goldman Sachs]

And for Tia Maria specifically, do you guys already have local agreements? How you see this this relationship evolving in Tia Maria's region, please?

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

What we're seeing in in the case of Tia Maria is that the population of the area is much more focusing on seeing the opportunities and the advantages that the project is bringing them than protesting against Tia Maria. I mentioned before that the number of protesters is relatively small, vis a vis the 52,000 population of the Islay Province. And we believe that and we hope that this environment prevails through the construction phase. So far, we're we're not seeing any any significant we don't have any significant concerns regarding the the protest in Tia Maria.

[Emerson Vieira, Equity Analyst at Goldman Sachs]

Okay. Thank you, Raul and team. Thank you very much. It was very helpful.

[Operator]

Thank you. At this time, I would now like to turn the conference back over to Raul Jacob for closing remarks.

[Raul Jacob Ruisanchez, VP - Finance & CFO at Southern Copper]

Thank you very much, Gigi. With this, we conclude our conference of Southern Copper's first quarter twenty twenty five results. We certainly appreciate your participation and hope to have you back with us when we report the second quarter of this year results. Thank you very much for being with us today and have a nice day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Raul Jacob Ruisanchez, VP - Finance & CFO

Analysts

• Alejandro Demichelis, Managing Director - Equity Research at Jefferies Financial Group
• Tingshuai (David) Feng, Equity Research Analyst at China International Capital Corporation (CICC)
• Timna Tanners, Managing Director - Equity Research at Wolfe Research, LLC
• John Tumazos, Owner and CEO at John Tumazos Very Independent Research
• Myles Allsop, Research Analyst at UBS Group
• Juraj Domic, Senior Associate at LarrainVial
• Camilla Barder, Equity Research Analyst at Bradesco BBI
• Emerson Vieira, Equity Analyst at Goldman Sachs