Grupo Mexico Aktie

Good day, and thank you for holding, and welcome to Grupo Mexico's Fourth Quarter Earnings Conference Call. With us this morning are Grupo Mexico's top executives, who will discuss the financial performance of the company during the fourth quarter 2025 results, giving you a summary of the latest news and addressing any questions you may have at the end of the call.

Before we begin, I would like to remind you that information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements. Grupo Mexico undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All results are expressed in full U.S. GAAP. The presentation may be followed through our webcast. [Operator Instructions] A copy of the slides and the company will be reviewing today is available on the website at grupomexico.com. [Operator Instructions]

Now we will begin with Ms. Marlene Finny.

Thank you so much, Carmen. Good morning, everyone, and thank you for joining us today for Grupo Mexico's Fourth Quarter Earnings Conference Call and 2025 full year as well. Sitting with me today are the top executives from all of our three divisions. During this call, as Carmen mentioned before, we will be following a presentation that can be downloaded from our website or followed by accessing the webcast. So if you want to go and see a presentation, you have a text.

You can find on Slide #3, the program we will be following today. So I'll kick off with Grupo Mexico's ESG highlights. followed by the quarter's scorecard and financial highlights. Then Mr. Leonardo Contreras will provide detailed information regarding our Mining division's main highlights and projects and comment on the industry's economic environment. She will be then followed by Mr. Fernando Lopez-Guerra, who will go through the financial results and main events of our Transportation division. And last but not least, Mr. Francisco Zinser will comment on the Infrastructure division's relevant events and financial highlights. As usual, at the end, the line will be open for questions and answers.

With that being said, let's go to our main ESG highlights in Slide #5. In 2025, we made significant progress in the road safety program for railway crossings, intervening in 33 level crossings across various regions of Mexico, reducing the risk for both communities and transportation operators. The second phase was completed during this last quarter, reaching 110 crossings and additional improvements along Ferromex and Ferrosur lines. This was an annual investment that reached almost $14 million.

The SX-EW plant at La Caridad unit in Sonora in Mexico was awarded the Casco de Plata, silver helmet in English, Casco de Plata, in the category of metallurgical plant with up to 500 workers granted by the Mexican Mining Chamber recognizing the company's commitment to risk prevention and employee safety.

The Infrastructure division obtained its environmental management system as part of its commitment to energy efficiency and environmental responsibility. This reduces environmental impact, ensures compliance with the regulatory requirements and establishes continuous improvement processes for the environmental performance of these facilities.

Continuing on Slide #6, our Buenavista del Cobre mine in Mexico, along with the Toquepala and Cuajone mines in Peru received The Copper Mark accreditation for compliance with the global industry standard on tailings management established by the International Council of Mining and Metals. This accreditation confirms commitment to international best practices, providing assurance to authorities, neighboring communities and other stakeholders that operations are conducted safely. And lastly, Southern Peru was recognized by the Peruvian government as the mining company with the largest number of projects awarded under public work for taxes in 2025. Through this mechanism, the company has carried out 40 projects and invested more than $400 million in infrastructure to help bridge to help bridge social gaps. It is currently implementing four additional projects totaling $28 million, which will benefit more than 5,000 people.

Now we will continue on Slide #7. Here, you have the scorecard with the main numbers for this quarter. Our revenues in 2025 reached a record high of more than $18 billion, representing an increase of 12.4% when compared to 2024 and a 34% increase year-over-year on a quarterly basis. Our EBITDA also reached a record high with almost $10 billion in 2025, an increase of almost 19% compared to 2024 and more than 50% when compared to the fourth quarter of last year. Our copper production in 2025 remained stable, showing a slight reduction of around 1% compared to the same period of 2024, totaling almost 1,070,000 tonnes compared to the same quarter of last year. We saw an increase of almost 2%. Our net cash cost amounted $89 per pound -- $0.89 per pound actually. This was a 22% improvement when compared to 2024, reflecting a reduction of $0.26 and a 34.2% improvement when compared to the fourth quarter of 2024. So we keep on -- as you know, we are -- we keep on being the mining company with the lowest cash cost worldwide.

As usual, you can find this summary of our financial highlights on Slide #8, which is there for you to have in case you need at any point in the presentation. It is also important to mention that our Board approved a MXN 1.50 per share during this quarter dividend, which translates into a 3.1% dividend yield and an almost 50% payout ratio.

On Slide #9. Thank you. Grupo Mexico continues to have a solid balance sheet with over $581 million generated during the fourth quarter of 2025. As you might already know, our debt is mainly issued in U.S. dollars, representing 79% of the total debt, while the rest is denominated in Mexican pesos and 87% of our total debt was issued at a fixed rate. Our stock had an excellent performance during the year. It increased over 99% in U.S. dollars and just shy of 72% in pesos.

On this slide, you can also see the dividend paid in 2024 and 2025. The payout ratio and the implied dividend yields, including the MXN 1.5 dividend for the quarter approved by the Board, which will be paid on March 22, 2026.

On the next slide, Slide #10, we show that we continue to have a comfortable debt maturity profile with no payments over $1 billion until 2028, while our cash position ended the quarter at $10.2 billion.

Now I'll pass the word to Mr. Leonardo Contreras to comment on the Mining division's performance.

Thank you, Marlene. Good afternoon, everyone, and thank you again for joining us today. I will start today with a brief remark on the current copper market on Slide 12. As you can see here, the LME copper price increased over 21% from an average of $4.16 per pound in the fourth quarter of 2024 to $5.03 this past quarter. For the COMEX market, we saw a 22% increase average during the past quarter, the fourth quarter of 2025 to $5.15 per pound. Now based on current supply and demand dynamics, we're currently estimating a copper market deficit of 320,000 tonnes for this year. Copper inventories worldwide at the end of September were around 1,054,000 tonnes. We estimate that this inventory currently covers approximately 14 days of global demand.

Now let's move on with the Mining division's financial highlights on Slide 13. Our accumulated sales reached $14.6 billion, 17.5% higher than last year due to volume increases of molybdenum, zinc and silver, together with an increase in prices of copper, LME was 8.7% more; molybdenum, 3.8% zinc, 3.2% and silver 41.6%. Sales showed a 42.5% increase compared to the fourth quarter of 2024. Our EBITDA totaled $8.2 billion for the year, 23.3% higher than 2024, with a margin of 56.2% and a 60.8% increase compared to the fourth quarter of 2024.

Now let's move to production. Our copper production remained relatively stable, totaling almost 1,070,000 tonnes, a slight reduction of 1% compared to the same period of 2024. Production increases were achieved at Asarco, IMMSA and Caridad operations as well as byproduct production showed excellent results. In cumulative terms, zinc, molybdenum and silver production grew 36%, 7.4% and 14.5%, respectively. Our net cash cost amounted $0.89 per pound, a 22.3% improvement compared to 2024, reflecting a reduction of $0.26 and a 30.2% improvement, a $0.02 reduction when compared to the fourth quarter of 2024, mainly due to higher byproduct credits. Regarding CapEx, we invested $1.4 billion in 2025.

And I would like to continue talking about our projects and the progress in Slide 14. Let's start with our Peruvian projects on Slide 14. As of December 31, 2025, Tia Maria has reached 24% completion. The company committed almost $800 million to project development, including mobilization of 1.7 million tonnes of material from La Tapada deposit. Completion of access roads, platforms and temporary contractor camp, issuance of purchase orders for metallic structures for the dry area and the selection of state-of-the-art technology for the SX-EW process. Significant progress also being made in energy infrastructure for Tia Maria. Now let's move on to Los Chancas, where environmental and social programs continue to be implemented throughout the year in the communities of Tapayrihua and Tiaparo located within the project's direct area of influence. Despite these efforts, the presence of illegal miners in the project area has hindered progress. In response, the company continues to work with the relevant authorities to restore control within that area. Lastly, in our Michiquillay project, the comprehensive review of geological information used to estimate the project's mineral resources has been duly audited in accordance with applicable SEC mining disclosure standards. Based on this information, the company intends to estimate mineral reserves and develop the corresponding mine plan going forward.

Now let's move on to Slide 15. To continue with our projects in the United States. We are analyzing the following projects with feasibility studies with a view to double our mine production and vertically integrate SX-EW operations with smelting and refining capacity. At our Ray mine, we are considering an expansion. We currently produce around 36,000 tonnes of concentrates, and it has a potential production increase of 58,000 tonnes of additional copper per year to reach a production total shy of 100,000 tonnes at around 95,000 tonnes, which is 161% increase. This requires an investment of $1.8 billion and will likely take approximately three years to be completed. Now let's move on to our Silver Bell mine, where we're looking to maximize lower ore grade sulfides through a concentrator plant that would represent an investment of USD 1.9 billion and resulting in an increase of 65,000 tonnes of copper per year as well as considerable silver and molybdenum byproducts. Currently, the feasibility studies are being completed, and we will have them by the end of the year. And we are proceeding with technical evaluation to reopen, expand and modernize the Hayden smelter and Amarillo refinery. This project could increase to initially smelt around 600,000 tonnes of copper concentrate and refine up to 450,000 tonnes of copper content per year in the United States. And lastly, we are proud to announce almost the completion of the pioneering autonomous haulage system at Asarco mine in Ray, Arizona, which is redirecting the future of the operation with 11 autonomous trucks with a capacity of 300 short tonnes.

Now continuing on Slide 16 with our project Los Frailes in Andalucia, Spain. This deposit is located within the Aznalcollar Mining District in the Iberian Pyritic Belt, a metallurgical zone of worldwide importance. The project consists of an underground mine with a milling plant of over 8,000 tonnes per day capacity that will produce zinc and copper concentrates with a reserve-based mine life of around 20 years and potential for exploration. Silver will also be obtained as a byproduct. The project will implement technology at the service of the circular economy in areas such as water management and waste treatment. In May 2025 last year, we obtained the mining project permit from Junta de Andalucia. And with this permit, the final engineering work started in order to begin construction in 2026 and production by 2029. It is estimated to require an initial investment of around $440 million. In 2026, a water treatment plant will be built to ensure the quality of the water currently in the pit. Additionally, in the first half of 2026, the company will initiate a diamond drilling exploration campaign on a satellite ore body, where 8.5 million tonnes of inferred resources have been identified.

Now going to Slide 17 with our Mexican projects. We have El Arco, where detailed engineering is still underway for the concentrator SX-EW plant, water desal, logistics infrastructure and power delivery. Lastly, El Pilar is a project that is approximately 45 kilometers away from our Buenavista mine and will operate as a conventional open pit mine with an annual capacity of 36,000 tonnes of copper cathodes. This operation will use a highly cost-efficient and environmentally friendly SX-EW technology.

Please, if you happen to have any follow-up questions, we'd be happy to address them during the Q&A session.

Now I will let Fernando comment on the Transportation division.

Thank you, Leo. Good morning, everyone, and thank you for joining us. Continuing with the Transportation division's results on Slide 19. I would like to talk about our financial highlights for this quarter. Our sales reached $3.4 billion. This is a 1.2% increase versus 2024, slightly impacted by an FX rate as it ended the year with a 6.6% increase in Mexican pesos. Our accumulated EBITDA by the end of the quarter has totaled $1.4 billion, which is basically flat versus 2024 and an 8.5% higher versus fourth quarter of 2024. Our EBITDA margin stood at 41.8%. Accumulated transported volume decreased 1.4% and 2.4% in net ton kilometers and carloads, respectively, ending the year with 1,986,000 railcars hauled. As for our net income, it totaled $487 million for the year, 2% lower than 2024, again, impacted by FX effect as it ended the year with a 5% increase in pesos. Lastly, a dividend of MXN 0.40 per share was approved by our Board.

As we continue with the main variations of our revenue on Slide 20, these variations consider the results in Mexican pesos. So this might vary using different currency. I'll start with the segment that delivered the strongest revenue growth this quarter. The auto segment led with a 15% increase driven by additional volume in longer hauls and production increase. These are automotive automakers shifting from over -- from using boats and vessels to get to the U.S. to return to the rail as efficiencies and time and velocity has improved throughout the network. The Agricultural segment grew by 14% due to the increase of grain border imports and the Minerals segment with an 11% increase driven by increased monthly programs due to higher demand of iron ore. The mid growth range, we have an Energy segment that showed a 7% increase in revenue with an increase in refined product imports from the U.S. into Mexico. Metal segment increased only 2% due to additional copper and pipeline volumes in longer hauls. This is partially offset by the lower demand in construction products, which also impacted cement shipments and partially offset by a lower demand for cement exports.

On the other hand, we saw revenue decline in a few segments. Intermodal decreased 4%. This is mainly due to imports from Asian markets, but basic -- the most significant impact was the systems of the Mexican customs that dropped or went offline on one hand and on the other, more intensive revisions from the Mexican authorities as they did this throughout the year, then cargo becomes hot and it is urgent for it to get to destination. So it shifts into over the road. Also in intermodal, we had at the beginning of the year and throughout the year, a lot of impact from what you call for legal fuels. But as the government has strengthened all their activities against the illegal fuel. This has allowed us to compensate substantially and be very competitive versus over the road. In chemicals, we have a decrease of 9%. This is mainly was chlorine and soda ash.

And talking about operating metrics on Slide 21. In general, metrics showed consistent improvement in performance during the quarter as we saw an increase in average train speed of 11% and an 18% decrease in dwell time that resulted in a considerable improvement of 18% in car velocity.

Moving to Slide 22. As you can see in our expected CapEx for 2026, GMXT's Board approved an investment of roughly $470-plus million for maintenance, special projects and the acquisition of locomotives. This CapEx allows us to maintain strategic and steady improvement. About half of our CapEx will be used in rail infrastructure, equipment, bridges, locomotive and machinery overhauls. 22% of the CapEx will be used in yards and terminals, focusing specifically in siding enlargements and yard reconfiguration so that we can run longer trains and start to move from 120 railcar trains to 150 railcar trains as the rest of North America currently does. In the U.S., we're running 150 railcars, and we need to shorten our trains at the border basically on the intermodal and automotive trains. So that's where we will be adjusting. And lastly, an investment of $70 million is planned for the acquisition of locomotives for our trains Long-haul trains. This is to an improvement in our fleet for long-haul trains, not the yard service locomotives.

On Slide 23, you'll find our 2026 outlook that implies between a 2% to 4% volume growth with a 5% to 7% revenue growth. With this, I conclude the overview for the Transportation division.

I will now let Francisco Zinser comment on the Infra division.

Thank you very much, Fernando, and good afternoon, everyone. I will start by going through the financial highlights of the Infrastructure division shown in Slide #25. Our sales reached $646 million during 2025, a 17.5% decrease when compared to 2024. This was due to the impact of the temporary suspension of four of our jack-up oil rigs and negative exchange rate effects. This was partially offset by the full year operation of the Fenicias wind farm and the integration of the new [ K8+Puebla ] portfolio in the real estate business unit. Our EBITDA totaled $309 million, a decrease of 27% versus 2024, with an EBITDA margin standing at 47.8%. Lastly, net income totaled $44 million, 57% lower when compared to last year.

To close the Infrastructure division highlights, I would like to go through some of our most relevant events on Slide #26 and 27. The energy business delivered another year of solid growth, reporting cumulative revenues of $303.5 million and a record EBITDA of $163.5 million, representing increases of 16.4% and 8.6% year-over-year, respectively. The results were supported mainly by the continued ramp-up of the Fenicias wind farm, which added 324 gigawatt hours of incremental generation, which is 10% higher than what we originally anticipated and produced $32.4 million in EBITDA during the year. In parallel, our energy platform continues to actively pursue growth and investment opportunities. The real estate business sustained its growth momentum in 2025, generating revenues of $95.6 million and an EBITDA of $59.3 million, an increase of 19.3% and 14.6% year-over-year, respectively. Performance was driven by the incorporation of the K8+Puebla portfolio, which added nine power centers to the platform, along with higher rental rates while maintaining an occupancy rate of 94.5%. On a peso basis, revenue and EBITDA increased 25% and 20%, respectively.

Going to Slide #27, our Construction and Engineering businesses reported cumulative revenues of $116 million and an EBITDA of $16 million in 2025. Results declined year-over-year due to the project completions and FX impact. In Mexican pesos, revenue contraction was limited to 3%, reflecting stable underlying activity. Although EBITDA margins were temporarily affected by the project mix and backlog, the business now maintains a strong technical capability, a healthy backlog and a proven record of execution. Our toll roads business continued to provide stable and strong performance, reporting cumulative revenues of $73 million and EBITDA of $50 million, representing year-over-year increases of 3%, respectively. Average daily traffic increased 3% to 23,000 equivalent vehicles, supported by tariff adjustments and sustained demand across the network. In peso terms, revenue and EBITDA grew 8% and 9%, highlighting strong operating leverage and effective cost management.

With this, I conclude our review of the main highlights of the Infrastructure division. We are happy to answer your follow-up questions. Thank you.

[Operator Instructions] Our first question comes from the line of Gabriel Barra with Citi.

We have two questions here from my end. So, the first one, when I take a look on the company balance sheet and the cash position that the company has today, it seems quite comfortable, right? So the question here is that it is more towards the capital allocation strategy going forward. How should we think about the company's strategy for the mid to long term in terms of M&As or even return this amount of money to the shareholders towards buybacks or dividends. So I want to hear your thoughts about that.

The second one, one thing that caught our attention here is the level of the holding discount that we are seeing for the stock today. And I don't know how much you guys are discussing about that, but it's something that I want also to hear from your thoughts about maybe have a med run or something like that in order to decrease this level of discount when you compare with some of the parts that the company has today. So those are the two questions that I have today.

Thank you. I didn't -- we didn't quite get the second question, but I think the first one was -- regarding the cash that we have, I think we're one of the companies that has the most, if not the only company with such a strong pipeline of projects to develop. As we recently commented, we are developing and we are Tia Maria, and we have a very strong pipeline in all of our three divisions to continue to grow. So the main -- we keep on -- we have a strong track record of dividend with the payout ratio that we normally have around 50%, which you saw this quarter as well. And then the strong pipeline of growth that is coming from all of the projects and investments that we're going to do.

And the second question, can you repeat that for me is regarding the discount to sum of the parts or something about the balance sheet. Can you repeat that for me?

Yes, sure, sure. It's more regarding the hold discount that you see for GMXT today when you compare with some of the parts of the company, right? So I don't know how much you guys are studying about maybe trying to decrease this level of hold discount, maybe listing the company in U.S. or something like that. I want to hear your thoughts about that.

And if I may, one follow-up on the first question. I understand and completely agree that you guys have today in terms of organic growth. But in terms of inorganic growth, should we expect something for the medium term? Or it's more towards the organic growth at this point?

Yes. We have -- we have always had a discount, a holding discount and sum of the parts. We have tried to do a lot of different strategies over the past many years to like decrease that discount. But I think this is something that we have always had. Even if we pay a very good dividend, the stock performance was very good during this year for Grupo Mexico. We keep on growing our transportation, the Asarco and the Infrastructure division.

So I think if we are trying to communicate it better. We will continue to give dividends if the Board decides that way. And I think it will be the case even with the strong projects that we have. And we will continue to analyze the possibility of doing buybacks. But as we have discussed before, it has tax implications. So we are trying to look around that to see if there's something that could work for us and the tax authorities as well.

One moment for our next question, please. It comes from the line of Regina Carrillo Villasana.

Congrats on the set of results. Maybe as a follow-up, you, Marlene, just mentioned the strong project pipeline that you have for the year, Tia Maria and Asarco and Spain. Is there -- are there any other relevant commitments or projects that you are looking at that we should be keeping in mind when thinking about CapEx and cash -- use of cash for the year?

Thank you, Regina. Thank you for your question. No, I think the main projects, as we mentioned, are right now, Tia Maria, we have Asarco, Minera Los Rales, the CapEx for the Transportation division for improving our operations and also to keep on growing in the Infrastructure division, but nothing else in particular to mention.

One moment for our next question, please. It comes from the line of Emerson Vieira with Goldman Sachs.

All right. So I want to focus here guys on the U.S. investments, chiefly the Hayden and Amarillo assets. So first question, I'd like to understand where will come from the rest of the anode capacity because in terms of concentrate, you guys have like 600 kt and then you have like 45 kt for cathodes, right? So just trying to understand where will the remaining portion come from? And if you guys are going to use scrap to fill up the refining capacity. So that's the first question.

And second one, what is exactly the time line for both Hayden and Amarillo to reopen? I mean, if you could tell us a specific time line in terms of when the studies will be concluded and when you should start constructing if that's the case?

And lastly, if there's any plan to add downstream capacity? I mean, are you guys going to sell the refined copper or maybe produce any other final product with the outcome from the refinery?

Emerson, let me address the first question in terms of Amarillo and the anode capacity, basically, what we are envisioning, we have to finalize our studies, but it is -- as you indeed mentioned, we will smelt around 150,000 tonnes of anodes that will go to the refinery, and we are evaluating if it's possible to complement with scrap so that we can reach the capacity that was outlined in the report. It will be a phased approach, and we need to conclude our studies. We are expecting to conclude it probably by the first half of this year.

And what was your last -- in terms of refined copper, I mean, yes, we will evaluate if the market for rod is as strong as it has been as we also have a rod plant in Amarillo. But for now, we're considering smelting and refining and rod will eventually come or not.

All right. And just a follow-up here. What would be the CapEx to modernize and reopen those assets?

Right now, we have rough estimates of around $220 million. But again, we need to finalize our studies for both the refinery and smelter.

So $220 million, correct? I'm sorry, can you confirm the amount? It could a little bit for me here.

Yes, it's $230 million.

$230 million. Okay. In terms of timing?

Timing, I mean, we will finalize the studies by the first half of this year, and then we will take it to the Board, and we will evaluate.

And what's the average construction time?

12 months.

12 months, okay.

One moment for our next question. And it comes from the line of Alfonso Salazar with Scotiabank.

I have three questions. The first one is again regarding Asarco. And this is regarding the expansions at the Ray concentrator and the Silver Bell mine. Just wondering about the timing, same thing about when can we expect to know all the details.

One question regarding also reserves to support these expansions. It would be good to have the information and all the details, especially with -- in terms of reserves to support such expansions.

The second one is regarding the infrastructure unit. How is management thinking about this division evolving in the next five years? So in other words, we see $10 billion in cash. Marlene just mentioned that this is going to support the pipeline of projects, Tia Maria and all the -- so projects. But what about expansion in the infrastructure unit? How do you see it? Do you want to expand and have more energy? Are you thinking about more real estate? Just is there any target on how EBITDA will be generated in this division?

And the final one I have is for the transportation division. Given that we have Mexico imposed tariffs to Chinese imports, is there any impact expected for transported volumes for GMXT.

Thank you, Alfonso. Let me address first the Asarco question in terms of the expansion at Ray. And at Silver Bell, at Ray, we would be expecting to have more information by the next quarter that we could share with everyone. Currently, the reserves at Ray are around 65 years. And at Silver Bell, basically, what we have is we're almost done with all the exploration. We're compiling it and doing all the QA/QCs to have a new life of mine plan for the sulfides. And we would have that probably by the third, but more towards the fourth quarter of this year. I don't know if you have any follow-up questions. If not, I will pass it.

Our next question comes from the line of Matheus Moreira with Bradesco BBI.

Two questions here on my side. The first one on Asarco, which delivered a very strong quarter in Q4, right, with production reaching multiyear highs. I wanted to understand what drove this strong performance? And is this a new normalized level of production going forward? Also, if you could share what you expect in terms of costs for the division in 2026?

Then my second question on the Infra division. I mean, 2025 was, of course, a challenging year, right, with -- given especially the curtailment of the PEMEX rigs. I was wondering what are your expectations for the division in 2026 in terms of volumes? Should we maybe anticipate higher contributions from other segments such as real estate or toll roads that could maybe help offset the continued weakness in oil rigs? Those are my two questions.

Let me address the first question for Asarco. What happened in the fourth quarter was that we were stable. We were able to run our plants with no issues in maintenance. I think we're getting there. We're just not there with that stability, but that's something that we're striving for this year. Hopefully, we can maintain that rhythm. And the cash cost for Asarco should be around $0.15 lower from the previous year. And I don't know if you wanted AMC's cash cost as well.

And sorry, Matheus, regarding your infrastructure question, yes, as you said, 2025 was a challenging year. For 2026, we are expecting -- I mean, all of our business lines are generally healthy and growing. So real estate, highways, power. And as you know, the challenge was with our oil rigs division. We've been having conversations with PEMEX throughout the past few weeks. And our expectation is that we can put our platforms to work at some point this year. They obviously help PEMEX with their own objectives of increasing oil production, and we've been having a good collaboration and communication with them. So we are very hopeful, and we are expecting them to get back to work as soon as we can. That's our expectation for this year. Hopefully, we will make it happen working with PEMEX as a team.

One moment for our next question. That comes from the line of John Tumazos with John Tumazos Very Independent opinions.

When you travel the output of Ray and roughly double the output of Asarco mining, smelting, refining, how much might the cost per pound reduction be? My first instinct was 10%, but maybe it's much more.

John, I just couldn't hear the last part on.

How much will you reduce the cost per pound of the Ray mine and the entire Asarco system with the large production increases and modernization expansion?

Look, with the expansion at Ray, currently, we're in the 95 percentile, and we would expect to be in the 50th percentile. That along with autonomous implementation hauls that we have implemented during the second half of last year. In terms of smelting and refining, we're still doing the numbers, but we should be around between $0.25 and $0.30 per pound in smelting and refining, we're still analyzing the numbers. But we will send you a note when we have a detailed number. I'm happy to share it.

Do you think the returns will be more than twice your cost of capital?

I have to revisit that and get back to you.

I'm just trying to give you a cream puff, way easy question.

One moment for our next question, please. We have a follow-up from Emerson Vieira with Goldman Sachs.

Just a follow-up on Hayden and Amarillo. Just trying to understand here if you guys would eventually begin the reopening and construction in partnership with U.S. government, for instance, as we have seen in other minerals? And also what types of incentives could happen so the asset could become economically viable given that TC/RCs are -- have been just, I mean, revised to zero this year in some contracts. So just trying to understand here what are the incentives to put the asset back into operations and if there's any potential partnership with the government?

Emerson, again, I think we're still undergoing studies. All of the items that you put on the table, they are still being analyzed. And not until we have further details, we're still studying. So probably by the second half of this year, we will have something more to talk about.

[Operator Instructions] Our next question is from Marcio Farid with Goldman Sachs.

Just a quick follow-up. I think, obviously, it's good to see Grupo Mexico having a series of projects lined up on the core corporate operations, right, including Mexico, the U.S. and also Spain as well. Just wondering if all of those CapEx would be done on a GM basis or in Southern corporate and eventually be a part of developing some of those projects from a CapEx, from an operational expertise perspective as well. Just to understand how the use of cash and use of balance sheet can look like.

I think your line is a little bit -- we couldn't hear very clear your question, but it is related to the use of cash and the CapEx that we were going to spend.

I think the projects we already mentioned in the Mining division in Southern Copper, we have Tia Maria and all the pipeline that we mentioned during the call. We can go through any specific projects if you want. We have also Los Frailes in Spain and the CapEx in Asarco that was just mentioned before by Leo. But I don't know if that was your question.

Yes. No, just the CapEx that is now exclusive on Asarco, right, I mean in the U.S. and outside of Southern Copper. If eventually, there could be a partnership between Asarco and NMAC or Southern Copper to develop those projects together or the idea, those $6.5 billion in the U.S. plus the Spanish CapEx, are those going to be done solely by Grupo Mexico or by Asarco itself and not in partnership with Southern Copper?

I mean, not at all. Right now, how they are -- it Asarco is independent of Southern Copper, and that's how it's been studied. So there are no discussions in that sense.

And this will conclude our Q&A session for today. I will pass it back to Marlene for closing comments.

Thank you so much, everyone, for being here today. Hope to see you next quarter. And if you have any follow-up questions, we'll keep in touch. Natalia will be here. Thank you, and thank you, everyone. Have a good day. Bye.

Thank you, Marlene. This concludes our conference, and thank you all for participating. You may now disconnect.