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Southern Copper Corporation
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Fourth Quarter 2024
Earnings Results
Wednesday, 12th February 2025
Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
Fourth Quarter 2024 Earnings Results
Raul Jacob
VP, Finance & CFO, Southern Copper Corporation
Welcome
Good morning and welcome to Southern Copper Corporation's fourth quarter and
year 2024 results conference call. 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 fourth quarter and year 2024, as well as answer any questions that you may
have.
the company's results and prospects, which are subject to risk and uncertainties. Actual results
may differ materially, and the company cautions not to place undue reliance on these forward-
looking statements. Southern Copper Corporation undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new information, future
events, or otherwise. All results are expressed in full US GAAP.
Now, I will pass the call on to Mr. Raul Jacob.
Thank you very much, Carmen. Good morning, everyone, and welcome to
Southern Copper's fourth quarter and 2024 results conference call. At today's conference, I'm
joined by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board member, as well as
Mr. Leonardo Contreras, who is also a Board member.
Agenda
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 ESG. After this, we will open the session for questions.
2024 Highlights
Let me, before we go into the details of the good operational and financial results that we had
last year, let me please highlight that during 2024, we had an excellent ramp-up of the new
zinc concentrator in Buenavista. We're pleased to report on the outstanding performance of
this new facility, which is currently operating at full capacity. The new zinc concentrator of
Buenavista has exceeded the annual production plan by 18%, producing 64,300 tons of zinc
with an annual all-in cash cost of $0.19 per pound of zinc produced, one of the most competitive
of the industry.
Copper Business
Now, let us focus on the copper market.
London Metal Exchange
The London Metal Exchange copper price increased 12% from an average of $3.71 per pound
in the fourth quarter of 2023 up to $4.16 this past quarter. Based on the supply and demand
dynamics, we estimated 2024 to end in balance, where demand grew 3% and supply 3.5%.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
Demand expectations
For this year, we expect demand to grow around 4%, driven by economic measures announced
in China to promote economic expansion, resilient consumption in the U.S. economy, and new
demand on the back of energy transition and growth in artificial intelligence technologies. This
positive outlook for demand may be impacted by U.S. import duties on China and other
countries, and by slow growth or even a recession in several European countries and emerging
markets.
Supply expectations
On the supply side, we expect growth to stand at 3% as of the beginning of 2025, and we
expect a market deficit for the year of approximately 250,000 tons. This is our view at this
point. We estimate that inventories are currently covering about one week of world demand.
In summary, even though we see some risks, particularly for demand in this year, we are
optimistic about the strong support copper market prices will have in 2025.
Fourth quarter production
Now let's look at Southern Copper's production for the past quarter. Copper represented 75%
of our sales in the fourth quarter of 2024, and 77% for the full year 2024. Copper production
registered an increase of 2.1% in the fourth quarter of last year, in quarter-on-quarter terms,
to stand at 238,888 tons. Our quarterly results reflect higher production at our Buenavista,
IMMSA, and Cuajone mines, which was attributable to better ore grades and recoveries.
However, these positive results were partially offset by a decrease in production at our
Toquepala and La Caridad mines.
The decrease in mineral processing at Toquepala was attributable to biennial preventive
maintenance work at both concentrators. So, the two concentrators that we have in Toquepala,
had a maintenance that is scheduled for every two years, and that affected the production of
this mine by 11%. That reduced the production of Toquepala, vis-à-vis the fourth quarter of
2023, by 11% after an outstanding performance of Toquepala through 2024.
2024 production
For 2024, copper production increased by 7% year on year to 973,851 tons. Our annual results
reflect higher production at all our operations, where the Peruvian ones grew 11% and the
Mexican by 4%. For 2025, we expect to produce 965,800 tons of copper, a slight decrease
over 2024's final print.
Molybdenum Business
Molybdenum represented 11% of the company's sales in the fourth quarter of 2024, and is
currently our first byproduct. Molybdenum prices averaged $21.61 per pound in the quarter.
This compared to $18.41 per pound in the fourth quarter of 2023. This represents an increase
of 17.4% in price.
Fourth quarter production
Molybdenum production dropped by 2.6% quarter on quarter, driven primarily by a decrease
in production at La Caridad and Toquepala mines due to lower ore grades in both operations.
These results were partially offset by higher production at the Cuajone and Buenavista mines.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
Annual figures
Molybdenum production increased 8.1% year on year in 2024 after production grew at
Toquepala, Cuajone, and Buenavista, and, well, it was partially offset by lower production at La
Caridad. In 2024, we expect to produce 26,200 tons of molybdenum, which represents a
decrease of 10% over our 2024 production level.
Silver Business
Silver represented 6% of our sales in the fourth quarter of last year, with an average price of
$31.36 per ounce in the quarter, which reflected an increase of 35%. Silver is currently our
second byproduct.
Mined production
Mined silver production increased 18.3% in the fourth quarter of 2024 vis-à-vis the same period
of 2023. This was propelled by production growth at all our mines except Toquepala.
Refined production
Refined silver production rose 25% quarter over quarter, which was mainly driven by growth
at all our refineries. In 2024, we produced 21 million ounces of silver, which represents an
increase of 14% over our 2023 production level. It was mainly due to an increase in production
at all our mines.
2025 expectations
For this year, 2025, we expect to produce 23 million ounces of silver, an increase of 10%
compared to 2024.
Zinc Business
Buenavista concentrator
For zinc, we already mentioned the excellent performance of our new Buenavista zinc
concentrator. As I mentioned, it's operating at full capacity after a successful ramp-up in 2024.
Well, I already mentioned it increased. It was 18% over its production plan, with a cash cost
of $0.19 per pound of zinc produced.
Zinc as a whole represented 5% of our sales in the fourth quarter of 2024, with an average
price of $1.38 per pound in the quarter, a 22% increase when compared to the same period,
the fourth quarter, of 2023. Zinc is currently our third byproduct.
Mined production
Mined zinc production increased by 155% quarter on quarter and totaled 43,148 tons. This
was mainly driven by the full ramp-up of the Buenavista zinc concentrator that produced 26,496
tons over the period and by an increase in production at Santa Barbara, at the Santa Barbara
mine of IMMSA.
Refined production
Refined zinc production dropped by 7% in the fourth quarter vis-à-vis the same fourth quarter
of 2023. Zinc production almost doubled in 2024. It increased by 99%. This was fueled by a
contribution of 64,297 tons from the Buenavista concentrator and higher production at the
Santa Barbara and Charcas mines. This was partially offset by lower production at the San
Martín mine.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
2025 production
For 2025, we expect to produce 171,700 tons of zinc, which represents an increase of 32%
over the 2024 production level and 162% above the 2023 mark. This growth will be mainly
driven by the expected 105,000 tons of production of our new Buenavista zinc concentrator.
Financials
Focusing on the financial results of the company, for net sales in the fourth quarter of 2024,
sales were $2.8 billion. This is $489 million higher than sales for the fourth quarter, or a 21%
increase.
Sales by product
Copper sales value increased 17% and volumes were up 5%, spurred by better prices.
Regarding our main byproducts, sales value of molybdenum rose due to better prices and were
slightly offset by a decrease in volume. Zinc sales, in turn, grew 80% due to an increase in
prices of 22% and volumes, thanks to the contribution of the Buenavista zinc facility. Lastly,
silver sales were up 68% due to better prices and volumes.
Costs and expenses
Our total operating costs and expenses in the fourth quarter increased $50 million, or 4% when
compared to the fourth quarter of 2023. Main cost increments was in the labor cost due to a
one-time charge of $62 million, resulting from labor contracts signed with five of our six
Peruvian unions. This was at the end of 2024. As of now, all the unions in Peru have signed
these new labor contracts. The signing bonus was for about $65 million in total. $62 million
of them were charged in last year's results. And this somehow explains – this plus the
maintenance, the biennial repair of the two Toquepala concentrators somehow explain the much
higher cost that we are reporting in this quarter. Well, these contracts, the labor contracts, will
help ensure that our operations in Peru evolve in a peaceful labor environment for the next four
to six years.
In addition to this charge, we registered higher expenses for repair materials and a decrease in
capitalized leachable materials. These cost increments were partially offset by decreases in
inventory consumption, fuel cost, energy, water, and other factors.
EBITDA and margin
For EBITDA, the fourth quarter 2024 adjusted EBITDA was $1,507 million, which represented
an increase of 43% with regard to the $1,056 million registered in the fourth quarter of 2023.
The adjusted EBITDA margin in the fourth quarter was 54% versus 46% in the fourth quarter
of 2023. Adjusted EBITDA in 2024 for the whole year was $6,406 million. This is 27% above
the figure in 2023. The adjusted EBITDA margin for the year, last year, was 56% versus 51%
in 2023.
Operating cash cost
Cash cost. Southern Copper's 2024 operating cash cost per pound of copper net of byproduct
revenue credits was $0.89 per pound. This $0.14 reduction in the cash cost compared to the
$1.03 reported in 2023 was mainly attributable to a $0.04 decrease in production costs and to
a unit-cost effect generated by both, an increase in pounds of copper produced and a $0.09
increase in byproduct revenue credits.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
For the fourth quarter of 2024, SCC's operating cash cost net of the benefit of byproduct credits
was $0.96 per pound. This cash cost was $0.20 higher than the cash cost of $0.76 for the third
quarter of last year. I mentioned already that we had an unusual charge to labor cost in the
fourth quarter due to the new contracts with the six unions in Peru and the maintenance cost
and lost production for the Toquepala concentrators’ maintenance.
The operating cash cost per pound of copper before byproduct credits was $2.32 cents per
pound in the fourth quarter of 2024. This is $0.37 above the value for the third quarter of this
year, that was $1.95. This 19% increase in operating cash cost was a result of higher costs
per pound from production cost, increases in treatment and refining charges, and administrative
expenses and lower premiums.
Byproducts
Regarding byproducts, we had a total credit of $679 million, or $1.36 per pound, in the fourth
quarter of last year. These figures represent a 14% increase when compared with the credit of
$639 million or $1.19 per pound in the third quarter of 2024. Total credits have increased for
zinc and silver, remained flat for molybdenum, and decreased slightly for sulfuric acid.
Net income
Regarding net income, the net income in the fourth quarter was $794 million, which represented
a 78% increase with regard to the $445 million registered in the fourth quarter of 2023. Net
income margin in the fourth quarter was 29% versus 19% in the same period of 2023.
The full-year net income, for 2024, was $3,377 million. This is 39% higher than the 2023 mark.
These improvements were driven by the aforementioned increase in net sales and by our strict
cost control measures.
The net income margin in 2024 was 30% versus 25% in 2023.
Cash flow
Cash flow from operating activities in 2024 was $4,422 million, which represents an increase
of 24% over the $3,573 million in 2023. This result, which was mainly driven by higher net
income, was partially offset by an increase in net operating assets.
Capital investments
For capital investments, our current capital investment program exceeds $15 billion and
includes investment in the Tia Maria, Los Chancas, and Michiquillay projects in Peru and in
El Pilar and El Arco projects in Mexico. This capital forecast includes several infrastructure
investments, including key investments to bolster the competitiveness of the El Arco project.
In 2024, we spent $1,027 million on capital investments, which reflected a 2% increase year
on year and represented 30% of net income last year.
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. For our Mexican projects, Minera
Mexico is planning to invest more than $600 million in 2025 at both its open-pit metallurgical
facilities and underground mines. 50% of this investment will be used to guarantee the viability
of long-term operations by actively modernizing and updating assets. Over 31% of the
investment will target improvements in water usage and tailings management to ensure safety
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
and efficiency at our operations. Remaining funds will be invested in efforts to bolster
optimization and growth.
El Pilar
For our growth projects, we have El Pilar in Sonora, which is a low capital-intensity copper
greenfield that is expecting to contribute to our copper production with 36,000 tons of copper
cathodes. The budget for Pilar is $210 million, and for now, the results of experimental pads
in the leaching process have confirmed adequate levels of copper recovery, and we're
evaluating different options for optimization. The company is engaging in project development
and on-site environmental activities. The mine life is estimated at 13 years for now.
El Arco
In the case of El Arco in the Baja California Peninsula, this is a world-class copper deposit
located in the central part of the Baja California Peninsula with sulfide ore reserves of over
1,230 million tons and an average ore grade of 0.40%. It has also 141 million tons of leach
material with an average ore grade of 0.27%, which is one very good ore grade for SX-EW
technology, by the way. The project includes an open-pit mine with a combined 120,000 tons
per day concentrator and a 20,000 tons per year SX-EW operation. The company has
completed environmental baseline study for the mine. Currently, more detailed engineering is
being conducted for concentrator, SX-EW plant, as well as for water desalinization, logistics,
infrastructure, and power delivery.
Other Mexican projects
SCC, on top of these projects in Mexico, the ones that I just mentioned, El Pilar and El Arco,
has some other 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 Angangueo, Chalchihuites, and the Empalme smelter, which could bolster our position as a
fully integrated copper producer.
Tia Maria
For the Peruvian projects, we have Tia Maria. This project, after a thoughtful and detailed
review, has set a new project budget at the value of $1,802 million to complete the Tia Maria
investment. As of December, of last year, December 31st, the company has generated more
than 614 jobs, almost 500 of which were filled with local applicants. To the fullest extent
possible, we intend to fill the 3,500 jobs estimated for the Tia Maria's construction phase
prioritizing workers from the Islay province. When we start operations in 2027, the project will
generate 764 direct jobs and 4,800 indirect jobs.
This year, we expect construction to begin. Work will initiate with construction of roads and
access points to the project, as well as railways, installing a temporary camp, earthmoving
efforts for mine clearing activities. To date, we have installed a 59-kilometer live fence and
delimited the property.
Los Chancas
For Los Chancas project in the Apurímac region of Peru, in coordination with the Peruvian
authorities, efforts continue to eradicate illegal mining activities. Once this process has
concluded, we will resume our environmental impact study and begin hydrogeological and
geotechnical studies. We will also begin a resource verification drilling campaign of about
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
40,000-meter in-fill to gather additional information on the geological characteristics of the
Los Chancas deposit.
Michiquillay
For the Michiquillay project in Cajamarca, as of December 31st of 2024, the total progress of
the exploration project was 35%. We have drilled 140,130 meters on a total program of
148,000 meters and obtained about 45,800 drill core samples for chemical analysis. Diamond
drilling will continue and will provide information for the interpretation of geological sections
related to mineralization, geological modeling, and mineral resource evaluation.
Geometallurgical studies are currently underway and hydrological and hydrogeological studies
have also initiated. A geotechnical study for the project is scheduled to begin shortly.
ESG Update
Regarding environmental, social, and corporate governance practices, ESG as it's known,
Sustainability
Southern Copper Corporation is among the top ten mining companies with the highest ratings
for sustainability in 2024. Corporate Sustainability Assessment of S&P Global, which published
an annual performance review of the sustainability practices of 13,000 companies from across
the globe, considers Southern Copper Corporation among the best rated companies of 248
companies in the mining and metals sector for 2024.
With a score that is twice the average registered for our peers in the mining industry, SCC's
sustainability rating rose nine points year over year. And this marks our sixth consecutive year
on the Dow Jones Sustainability Index. We have also been included in the Sustainability
Emerging Markets Index.
Occupational health & safety
Occupational safety and health of our workforce. Operating discipline and the strength of our
preventive safety culture led to a 28% reduction in the number of employee accidents involving
lost time injuries in 2024. For Tia Maria, we already mentioned some of the advances on the
project, but on the community area, the company has been implementing the Technology for
Agriculture program with the participation of 28 out of the 38 organizations from the Tambo
Valley. These programs have increased the productivity of the different crops in the area by
14%, and 95% of the families of the valley have benefited from this program.
Tailings management
And finally on ESG, the best international practices for tailing management with a preventive
focus and an eye on minimizing risks, we are making progress in our efforts to implement the
Global Industry Standard on Tailings Management of the International Council of Mining and
Metals, or ICMM, at our main operations. We have completed a gap analysis of our open pit
mining operations and are on track to ensure that all SCC facilities comply with this standard.
Financing
Regarding financing, on February 5th of this year, that is last week, our subsidiary, Minera
Mexico, issued a $1 billion seven-year note of fixed-rate senior unsecured notes. This debt is
due in 2032 and has an annual interest rate of 5.62%. During our marketing effort, we held
meetings with 85 global and local fixed income investors and received purchase orders from
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
high-quality institutional investors. We received orders for $3.5 billion, a demand that is 3.5
times the offering. Proceeds will provide the company with additional liquidity to finance our
Mexican capital expenditures and Minera Mexico's general corporate purposes.
Dividends
Regarding dividends, as you know, it is the company policy to review our cash position,
expected cash flow generation from operations, capital investment plans, and other financial
needs at each Board meeting to determine the appropriate quarterly dividend. Accordingly, on
January 23rd, 2025, Southern Copper Corporation announced a quarterly cash dividend of $0.70
per share of common stock and a stock dividend of 0.0073 shares of common stock per share,
payable on February 27th, 2025, to shareholders of record at the close of business on February
11th.
Ladies and gentlemen, with these comments, we end our presentation today. Thank you very
much for joining us, and now we would like to open the forum for questions.
Thank you so much. And as a reminder, to ask a question, simply press star one-
one on your telephone and wait for your name to be announced. To remove yourself, press
star one-one again. Please stand by while we compile the Q&A roster.
And our first question is from the line of Gabriel Simoes with Goldman Sachs. Please proceed.
Gabriel Simoes (Goldman Sachs): Hi, thank you for the presentation. Thank you for taking
my questions. I actually have two.
So, for the first one, so you provided a new guidance for the Tia Maria project, right, of
$1.8 billion. I just wanted to understand what's included in the CAPEX. So, you've been
mentioning a few changes you were expecting to the project. So, just wanted to understand if
the new road, the desalination plant, are all included in this new guidance. And how much has
been already invested into the project, right? So, this is the first question.
And for the second question, I'd like to understand a little bit better your production guidance,
right. So, if you could comment on the main reasons for the slight change, right? So, the
slight, around 10,000 tons, drop that you expect for 2025 production, that'd be interesting.
And also, you have lowered, right, you have decreased the horizon for which you give guidance,
your forecast for production guidance and CAPEX guidance in the third quarter. Are we going
back to the longer guidance at this point? And if not right now, when can we expect a longer
guidance for production and guidance and CAPEX going forward? Thank you.
Okay. Well, Gabriel, thank you very much for your questions. And I'm going to
address them. And I may ask you for one of them to remember us what was it.
But, well, for the Tia Maria, you mentioned that we have set this budget in $1.8 billion in round
numbers. So far, we have invested a little bit north of $400 million in the project. We have
made some changes in the initial design of the project. We were not considering as part of the
project a new road that will go through the desert areas that we have purchased in the last few
years, all the way from where Tia Maria is to the coast. This is like about a 22-kilometer road
that will help to move in the materials and everything that we require for the project
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
construction at the very beginning. And the reason for that is that by doing this, we will avoid
passing through the valley and generating inconvenience to the Tambo Valley people.
So I think that that is one of the reasons. The other one is the inclusion of the desal plant.
And a third element that is affecting the budget is inflation. The last time that we had this
budget was a few years back. Even though we have found some savings in certain facilities,
well, inflation has taken a toll on the total budget. And so that's basically the reasons behind
the increase in the original, the historic budget of $1.4 billion up to $1.8 billion.
The reason for the drop in production for 2025, mainly, it's a matter of ore grades and
recoveries. It's nothing specific affecting the production or the use of our facilities. Actually, I
mentioned on the Toquepala concentrators maintenance that we did in the fourth quarter. This
is going to be very helpful for production this year. My personal expectation is that we will be
at the 2024 level or a little bit better than that, hopefully a little bit better.
Well, the five-year guidance, we usually – we have been mentioning that in our meetings as
well as distributing to those interested in this matter. I can share this with you for the next
few years. I mentioned already production for 2025. For 2026, we have a reduction in
Toquepala production due to ore grades mainly and in Cuajone as well. And that affects our
ore production, should be at about 900,000 tons for 2026. 950,000 tons 2027; 1,021,000 tons
2028; 1,070,000 tons 2029; and about that in 2030 as well. So that's for copper.
We already mentioned on zinc what we are expecting to produce this year, which is 172,000
tons. We'll be a little bit better for the next few years. We'll be close to 180,000 tons. And for
molybdenum at about 26,000 tons, between 25,000 and 26,000 will be the production mark
for this year and next year. In the case of byproducts, particularly the open-pit operations, the
driver of the mining plan is optimizing the copper production. Obviously, it comes with
molybdenum, silver, and some other metals, but the plans are made to optimize the cost of the
main product, which is copper, as you know, about 75% of the company sales.
That's great, Raul. Thank you very much.
You're welcome.
Thank you. One moment for our next question, please. And it's from the line of
Alejandro Demichelis with Jefferies. Please proceed.
Alejandro Demichelis (Jefferies): Yes, good morning, gentlemen. Thank you very much for
taking my questions. Just to follow up on Tia Maria, please, can you please give us an indication
of how you're thinking about kind of cash cost for Tia Maria with the new changes that you have
made? That's the first question.
And then the second question is for 2025-26, how are you thinking about cash cost for the
entire business for Southern Copper?
Okay. On the Tia Maria cash cost, obviously it has been affected by inflation. Let
me mention that the first time that we did a financial evaluation on Tia Maria, we used a copper
price of $2.00 per pound. Today, as you know, the market is, if you are at Comex, well, a little
bit north of $4.50. And in the case of LME, a little bit north of $4.10 today. So, the cost has
also increased. Now we're considering a cost of $1.12 per pound, cash cost. That's our current
long-term view for the cash cost of Tia Maria.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
That’s great. Thank you.
Cash cost. I forgot to comment on cash cost for the company. For 2025, we're
expecting a cash cost in the range of $0.90 per pound. This is using the current prices, should
hold at that level or increase a little bit up to $1.00 in the following years. If you consider this
year’s prices, we're usually much more conservative in our long-term view. We want to be sure
that we have – we will be generating the funds that are required for all of our growing plans.
So for that reason, we tend to be a little bit more conservative in prices. But if we consider the
prices that we are looking at now, $0.90 about that, or between $0.90 and $1.00, I would say.
Okay. That's very clear. Thank you very much.
You're welcome.
Thank you. One moment for our next question. That comes from the line of Camilla
Barder with Bradesco BBI. Please proceed.
Camilla Barder (Bradesco BBI): Hi, good morning. Thank you for taking my question. I
have two questions. The first one on the copper market. If you can comment on your views
on the supply side, given the current low TC/RC environment, do you see any risk for smelters
of cutting supply?
And the second question, just a quick one. Can you provide an updated estimate for CAPEX
and free cash flow expectations for 2024? Thank you.
Sorry, Camilla, I couldn't get your last question.
The last question is on expectations for CAPEX and free cash flow in 2025.
Okay. On the view on the supply side, what we're seeing, what you mentioned,
the extremely low, if not zero or even negative TC/RC, the discounts that we have on the copper
market, that is reflecting a significant scarcity of copper concentrates worldwide. Today we
have news from China that the Chinese government has put some restrictions to new smelter
constructions in China, and so that reflects how we're seeing the market for copper concentrates
at this point.
On prices, we already mentioned that we believe that they will hold at the current level. There
is a huge arbitrage between Comex – in favor of Comex, between Comex and LME. We believe
that that should close after we find a new area of activity, different ones, obviously, because of
the high spread between the two prices.
On, well, CAPEX, I'll mention on the CAPEX, on the free cash flow, depending on your
assumptions for prices and production, we already report on the production, I'm going to
mention on the CAPEX. For this year, our Board has approved a budget of $1.6 billion for
capital expenditures. For 2026, when we believe we will begin strong construction on Tia Maria,
we were expecting to spend $2.4 billion. That number should be at about $2.1 billion in 2027,
and 2028 $2.5 billion, and 2029 $2.8 billion. That's our current forecast for the next few years
on CAPEX.
Okay, thank you very much.
You're welcome
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
Thank you. One moment for our next question, please. And it's from the line of
Alex Hacking with Citi. Please proceed.
Alex Hacking (Citigroup): Yeah, thanks, Raul. Just to follow up on those CAPEX numbers
that you gave, the $1.6 billion this year, $2.4 billion next year, how much of that is Tia Maria?
Thank you.
Sure. For this year, Tia Maria is about a little bit north of $200 million,
$210 million to put it simply. And in 2026, it's $980 million. And let me mention, in 2027,
when we should be finishing the construction phase of the project, $460 million.
Okay, thanks. And then I guess also on Tia Maria, you know, Peru has elections
next year, 2026. Do you see any risk that Tia Maria becomes politicized due to the elections?
I'm not familiar with the candidates, what their platforms are, but I've just had some questions
from investors on this topic. Thank you.
Thank you very much for your questions, Alex. We don't see a risk at this point.
What we're seeing is that the people, the population in the Tambo Valley and the Islay Province
and the Arequipa region, are all engaged in receiving the benefits of this phase of the project,
which is the construction. Later on, we will be contributing from day one to local taxation,
which will be very important for the progress of the Arequipa region, as well as the Islay
Province in particular.
Let me mention that the operations that we have in the Toquepala and Cuajone operations, as
well as the Ilo smelter and refinery complex, has over time contributed to the regions where
we operate. We have put a focus particularly in education and health. And you see the indexes
for quality of living in these two regions, the ones where our current operations are, are among
the top three, top five in Peru.
local population. And over time, they will leave poverty behind and be prosperous regions as
the ones that we see for Toquepala, which is the Tacna region, and for Cuajone, which is
Cuajone and Ilo, which are both in the Moquegua region.
So we believe that that is a consequence. And I believe, my personal take is that the local
population has already understood this after having very hard years because of Covid and then
political instability at the beginning in 2021, 2023, up to 2023. So being, as you mention, Alex,
being to next year, a year of election, we will certainly keep working but we expect to pass
through this part of the political cycle with no specific issues for Tia Maria.
Thank you, Raul.
You're welcome.
Thank you. One moment for our next question, please. It's from David Feng with
CICC. Please proceed.
David Feng (CICC): Thank you. Good morning, Raul and team. My first question is just a
follow-up on your unit cost. Since we have seen a quarter-on-quarter increase in your unit
operating cost before byproduct credit in the fourth quarter, so do we know if the increase is
mainly because of the maintenance works at Toquepala, or what are the other reasons behind?
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
And also, you just mentioned your estimate for cash costs in 2025 is $0.90 per pound, so what
shall we expect for the unit cost before the byproduct credits? That's my first question.
Okay. In the fourth quarter, we had two major cost issues. The one that you just
mentioned, the maintenance of the two plants that we have in Peru. And on top of that, and
very expensive as well for a quarter, for a given quarter, not for a four-year or six-year contract,
the charge in labor cost that we have due to the new – the signing of the new labor contracts.
Those are the two effects that were significantly affecting the cash cost in the fourth quarter.
Cash cost before byproduct credits is expected to be at $2.17 per pound for this year. Last
year was $2.13, so it's a negligible increase. This is our plan. We usually focus on improving
on top of what we have planned. So my expectation is that we have a lower cash cost before
byproduct credits and a better cash byproduct contribution at the end of 2025.
That's great to hear. Thank you so much, Raul. And my second question is we've
seen that your cash balance has been increasing quickly in the past few quarters, and I believe
it might be higher in the first quarter of 2025, given the $1 billion proceeds from the senior
note issuance. So I just wonder, shall we expect your CAPEX will accelerate soon in the next
few quarters, or would there be any other use for the excess cash position we are seeing right
now?
Well, as we indicated for the bond issue, for the Minera Mexico bond issue, this is
basically the same for our cash position. We're going to use it for our organic growth, for our
CAPEX, as well as for some other uses that the corporation may have. As you know, we declare
all the quarters a dividend, and that is something that is one of the possible uses of cash. I'm
not saying that we're expecting anything different than what we have been doing on this. This
is up to the Board. So, I believe that we have to wait for the Board to discuss it and see the
appropriation of any cash that we have in hand.
Understood. Thank you so much. That's really helpful. Thank you.
Thank you very much.
Thank you. Our next question is from the line of Alfonso Salazar with Scotiabank.
Please proceed.
Alfonso Salazar (Scotiabank): Thank you. Hello, Raul. I have a follow-up question on
CAPEX. You mentioned what are you including for Tia Maria for the next few years. The
question that I have is, based on your asset base today, what would be the level of sustaining
CAPEX to expect for you in the coming years on the sustaining CAPEX or maintenance CAPEX?
And the second question is also on capital allocation and the fact that you are having extended
these dividend payments using both cash and stock. You are accumulating plenty of cash. Your
cash balance has been increasing. Any other comment on potential investments in, or use of
this cash that you can mention, apart from all the projects that there are in the pipeline? You
have talked about M&A in the past, opportunities, anything opportunistic that you may be, you
know, able to comment in terms of going to look for other commodities or for other metals or
considering only copper at this stage going forward? Any comment that you can make could
be very useful. Thank you.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
Okay, let me focus first on the CAPEX, the level of sustaining CAPEX for the next
few years. We are forecasting about $500 million for maintenance CAPEX. In some cases, we
are considering what otherwise would be a maintenance CAPEX as part of a project.
For instance, we are considering replacing truck haulage by conveyor belt haulage at certain
operations once the distances are – make it reasonable to consider that. At the end of the day,
as you may know, the kilowatt-hour of power that propels a 400-ton truck is much more
expensive than what you will pay for moving one ton through a conveyor belt in terms of
energy, probably one-fourth of that. So that's one of the reasons why we are not considering
certain expenditures as part of our maintenance, but that's what we have. It's about
$500 million.
On the other potential investments, it depends on where we see good opportunities for the
company to grow, an asset that fits our current characteristics of being a low-cost copper
producer, very efficient copper producer with a significant pipeline of byproducts as well that
make our cash cost even more competitive. We will certainly review it and make a
recommendation to our Board. For now, that's basically what we're focusing on, Alfonso.
Okay. Excellent. Thank you so much.
And Raul, the maturity that we have in April?
Yes, thank you very much, Oscar, Oscar Gonzalez Barron. We have a maturity of
$500 million that will be due in April, so we will be using a portion of our cash position for that.
Thank you very much. I forgot about that, Oscar.
Thank you. One moment for our next question. That comes from the line of John
Tumazos, with John Tumazos Very Independent Research. Please proceed.
John Tumazos (John Tumazos Very Independent Research): Could you give us a little
more precision on the timetable, please, for the El Pilar Deep Leach Project in Sonora and Tia
Maria in Peru? Which quarter should we expect them to begin making copper?
In the case of Tia Maria, we will be doing the initial testing of the equipment, but
that's our current plan by the second quarter of 2027. We do operate more than five SX-EW
plants. One that is quite similar to the one that we will be building in Tia Maria is currently
operating at our Buenavista mine in Mexico, so we believe that the ramp-up of these facilities
should be relatively quick through the year. Hopefully, we will get into the fourth quarter of
2027 with all the ramping up finished, the operating facilities at full speed. That's our
expectation and goal. That's for Tia Maria.
In the case of El Pilar, which is also an SX-EW technology process, we are expecting to finish
the build-up of the plant by the end of 2027, so production should be more expected for 2028
in this case.
Thank you.
You're welcome.
Thank you so much. One moment for our next question. And it comes from the
line of Juraj Domic with LarrainVial. Please proceed. Your line is open from LarrainVial.
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Southern Copper Corporation 4Q 2024 Earnings Results Wednesday, 12th February 2025
Juraj Domic (LarrainVial): Oh, hello. Good morning. Thanks for the presentation. I was
wondering if you could confirm us that the maintenance activities have finished in Toquepala,
and if we should not expect any impact in 2025?
And my second question is, perhaps, have your comments on the recent announcements on
copper tariffs in the U.S. Thank you.
Okay. First, on the maintenance activities for the Toquepala, two concentrators,
yes, it was finished in December, so we had – in November, I'm sorry. In November. So, we
already finished the biennial maintenance in these two concentrators. Well, the impact in 2027
is that you will have the facilities running at full speed all the year. That is what is happening
right now.
In the case of copper tariffs, we did a review on the possible impact on the company of a copper
tariff as well as, I should say, tariffs in general, because we not only sell copper to the U.S.,
but also sulfuric acid and silver and so on. So in the case of our sales in Mexico, about 10% of
the Mexican sales are directed to the U.S. right now. Of those 10 points, 10 percentage points
of the sales in Mexico, 1.5 percentage points will be absorbed by the customer. We already
have some talks with the customers that we have over there, and they believe that they will
keep buying our materials even though they have to pay a higher tariff. It would be the case,
by the way, for all the U.S. consumers of these products.
The rest, say 8.5 percentage points of the 10 points that are the 10% of our total sales, that
can be redistributed if it is necessary. We can redirect these sales to some other markets. At
the end of the day, we operate producing commodities, and that is one of the characteristics of
the commodities, that you can send it to different markets. Particularly in the case of copper,
we believe that the copper deficit that the U.S. has vis-à-vis its production versus its
consumption would require some material that goes to the U.S., and then we'll see. We haven't
had any talks regarding specifically on copper. Hopefully, this will not materialize. We hope,
this is our expectation, but if so, it will affect 10% of the sales, and we believe that most of
that can be redirected to different markets, to some other markets.
Perfect. Thank you very much.
You're welcome.
Thank you. And as a reminder, if you do have a question, simply press star one-
one to get in the queue. Mr. Jacob, I don't see any further questions in the queue.
Thank you very much, Carmen. With this, we conclude our conference call for
Southern Copper's fourth quarter of 2024 and the full-year results. We certainly appreciate
your participation and hope to have you back with us when we report our first quarter of 2025
results. Thank you very much for being with us and have a nice day.
And with that, thank you, everyone, who participated in today's conference. You
may now disconnect.
[END OF TRANSCRIPT]
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