Southern Copper Corporation Aktie

Good morning, and welcome to Southern Copper Corporation's Second Quarter and 6 Months 2026 Results Conference Call. With us this morning, we have Southern Copper Corporation's Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the second quarter and 6 months 2026 as well as answer any questions that you may 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 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 U.S. GAAP. Now I'll pass the call on to Mr. Raul Jacob.

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's Second Quarter of 2026 Results Conference Call. At today's conference, I'm accompanied by Mr. Leonardo Contreras, CEO of Southern Copper and also a Board member. Let me first begin by mentioning that Southern Copper delivered another exceptional quarter, registering record-breaking results in sales, adjusted EBITDA and net income. These outstanding achievements are driven by operating excellence and reflect our commitment to creating long-term value for our stakeholders in a context marked by sustained demand for copper and the other minerals we produce.

Today, 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. The London Metal Exchange copper price increased 40% from an average of $4.32 per pound in the second quarter of 2025 to $6.04 this past quarter. In the COMEX market, we saw a 31% increase with an average of $6.16 per pound this quarter. Based on current supply and demand dynamics, we estimate a slight copper market deficit for 2026.

Copper inventories worldwide, the total combining stock held in London Metal Exchange, COMEX, Shanghai and London warehouses, but the sum of these inventories stood at 1,123,000 tons as of yesterday, July 21. We estimate that this inventory can currently cover approximately 15 days of global demand. Now let's look at Southern Copper's production for the past quarter. Copper represented 73% of our sales in the second quarter of 2026. Copper production registered a decrease of 3.5% compared to the trend in the second quarter of last year, standing at 230,662 tons this past quarter.

Our quarterly result reflects a 12% drop in production in Peru, mainly attributable to lower ore grades and recoveries at both Toquepala and Cuajone. However, these results were partially offset by an increase in production at our Mexican operation of 3.2%, which was driven by higher production at our Buenavista, La Caridad and IMMSA mines. For 2026, we expect to produce 917,000 tons of copper, an increase of about 1% over our initial plan. For molybdenum, it represented 11% of our sales in the second quarter and is currently our first by-product. Molybdenum prices averaged $29.44 per pound this quarter compared to $20.57 in the second quarter of 2025. This represents an increase of 43%.

Molybdenum production dropped 11% in the second quarter of this year compared to the same period of last year. This was mainly driven by a decrease in production at all our mines due to lower ore grades. In 2026, we expect to produce 27,900 tons of molybdenum. This is 7% above our initial plan. For silver, it represented 9% of the company's sales value in the second quarter of this year. Silver prices averaged $73.49 per pound -- per ounce excuse me, per ounce this quarter compared to $33.62 in the second quarter of last year. This represents an increase of 118% in price.

Silver is currently our second by-product. Despite higher production at our La Caridad and IMMSA mines, silver production fell 4% in the second quarter of 2026, driven by the lower production at the Toquepala, Cuajone and Buenavista mines. Refined silver production decreased 0.3% quarter-over-quarter, driven mainly by a drop in production at the Ilo refinery in Peru. In 2026, we expect to comply with our plan to produce 24 million ounces of silver.

Zinc was 4% of our sales value in the second quarter of 2026, with an average price of $1.57 per pound in the quarter, which represents a 31% increase compared to last year's second quarter. Mine zinc production decreased 14% quarter-on-quarter to total 39,257 tons. This decrease was mainly driven by lower production at the Buenavista, San Martin and Charcas mines. Refined zinc production decreased 6% in the second quarter of this year vis-a-vis the same second quarter of 2025. This was principally due to lower ore grades. For this year 2026, we expect to produce 163,900 tons of zinc.

Financial results. For the second quarter of 2026, sales were $4.3 billion. This is $1.2 billion higher than the print in the second quarter of 2025, a 41% increase. Copper sales increased 38%, while the volume fell 1.5% in a scenario of the mentioned better prices. Regarding our main by-products, we registered higher sales for molybdenum by 34%. Zinc sales in turn rose 24%. Silver were up 86% in the 3 cases of these by-products due to higher prices, and these sales were partially offset by a decrease in volume.

Our total operating costs and expenses increased $202 million or 14% compared to the second quarter of 2025. The main cost increments were in operating materials, purchased copper, diesel and fuel, workers' participation and translation difference as well as other factors. These cost increments were partially offset by a decrease in repair materials and inventory consumption. The second quarter 2026 adjusted EBITDA hit a record high of $2,856 million, which represented an increase of 60% with regard to the $1,791 million registered in the second quarter of 2025. The adjusted EBITDA margin in the second quarter of this year stood at 67% versus 59% in the second quarter of last year.

Adjusted EBITDA year-to-date was $5,569 million. This is 58% higher than the print in the 6 months of 2025. The adjusted EBITDA margin in the 6 months of this year stood at 65% versus 57% for the 6 months of 2025. Operating cash cost per pound of copper before by-product credits was $2.29 per pound in the second quarter of 2026. That is $0.02 lower than the value for the first quarter of this year. The 1% decrease in operating cash cost is a result of lower cost per pound from production and administrative expenses and higher premiums. This result was partially offset by a decrease in treatment and refining charges.

Southern Copper operating cash cost, including the benefit of by-product credits, was $0.05 per pound in the second quarter of 2026. Even though this cash cost was $0.15 higher than the cash cost of minus $0.11 for the first quarter, we think that this is an excellent mark for the company. Regarding by-products, we had a total credit of $1,106 million or $2.24 per pound in the second quarter of 2026. These figures represent a 7% decrease compared to a credit of $1,189 million or $2.41 per pound reported in the first quarter of 2026. Total credits have increased for molybdenum and zinc and decreased for silver and sulfuric acid.

The second quarter of 2026 net income hit a record high of $1,670 million, up 72% versus the $973 million registered in the second quarter of last year. This was the result of higher net sales, mainly the result of higher net sales and the cost control measures that we imposed in our operations. The net income margin in the second quarter of 2026 stood at 39% versus 32% in the second quarter of 2025. On a year-to-date basis, net income was 69% higher than in 2025 due to higher net sales.

Cash flow from operating activities in the 6 months of this year was $3,683 million, which represents an increase of 117% compared to the $1,698 million posted in the 6 months of last year. This improvement was attributable to a strong cash generation at our operations, which was driven by higher sales and a decrease of $719 million in operating assets and liability requirements. This year, on June 24, the company issued $1.25 billion in a 10-year fixed rate senior unsecured notes. This debt is due in 2036 with an annual interest rate of 5.35%. Demand for the notes was $4 billion, which was 3.2x greater than the total issuance amount.

Proceeds will be used exclusively by Southern Peru Copper Corporation, our Peruvian branch, to develop the Tia Maria project, finance its capital expenditure program as well as general corporate purposes for Southern Peru Copper Corporation. Regarding capital investments, Southern Copper current capital investment program for this decade exceeds $20.5 billion and includes investments in projects in Peru and Mexico.

In the second quarter of this year, we spent $423 million on capital investments, which reflected a 79% increase over the figure reported in the second quarter of 2025 and represents 25% of this quarter's net income. In the first half of the year, we spent $865 million on capital investments, which represented 27% of net income and reflects the impact of a 56% increase in capital expenses year-on-year. Looking at our Peruvian projects, as Peru is poised to begin a new executive cycle, we're encouraged by the initial statements made by President-elect, Mrs. Keiko Fujimori. Accordingly, SCC reiterates its commitment to work with the incoming administration to promote economic growth and social development in Peru through the advancement of our Peruvian projects, Tia Maria, Los Chancas, and Michiquillay, which represent a combined investment of approximately $10.3 billion.

Given that there is a description of our main capital project in Southern Copper's press release, I'm going to focus on updating new developments for each of them. In the case of the Tia Maria project located in the Peruvian region of Arequipa, as of June of this year, June 30, the company has committed $1,101 million to various project activities, of which $693 million has already been invested. Mass earthworks have moved 13.8 million metric tons of material from La Tapada deposit. This is a 71% progress. And also most purchase orders for the project's major equipment has been issued -- regarding the leaching process, purchase orders have been placed for key state-of-the-art equipment and procurement activities for the remaining major equipment continue.

Regarding the power supply, electromechanical works are underway at the main electrical substations and efforts continue to build the 220-kilowatt transmission line. Concurrently, the mass earthworks required to develop both the dry and wet areas are in their final stage. Civil works and steel structure assembly have commenced in key facilities, including the primary, secondary and tertiary crushing circuits as well as the Solvent Extraction and Electrowinning facilities, among others.

At the close of June, the Tia Maria project had reached 42% completion and 5,817 new jobs has been created. Of these positions, 1,254 has been filled with local applicants. For the Los Chancas project in Apurimac -- in the region of Apurimac in Peru, as of June 30, the presence of illegal miners within the project area continues despite the state's on-site enforcement efforts through the environmental prosecutor's office. This has hindered the project's progress. Meanwhile, community development and environmental management programs continue in the communities of Tiaparo and Tapayrihua, both located within our direct area of influence.

In the case of the Michiquillay project in the Peruvian region of Cajamarca, studies to estimate mineral reserves and develop the mine plan, coupled with hydrological and hydrogeological assessments are currently underway. In addition, geotechnical research is progressing and entering its final phase. Focusing in our Mexican projects, Southern Copper 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 Angangueo and Chalchihuites, which are part of the Mexican copper circuit and the Empalme Smelter,, which are expected to bolster our position as a fully integrated copper producer.

We're engaged in talks with the current administration to continue rolling out SCC's Mexican investments for $10.2 billion. El Pilar in the Sonora state, it's a greenfield project that has obtained the necessary environmental permits and will begin early site preparation works in September of this year, next September in other words, to develop energy lines, water pipelines, roads, workers' accommodation and some other facilities. Project construction will commence in the first quarter of 2027 and production is expected to begin in the second half of 2029.

This project is located in Sonora in Mexico, approximately 45 kilometers away from the Cananea and Buenavista mine. Its copper oxide mineralization contains estimated proven and probable reserves of 317 million tons of ore with an average copper grade of 0.249% and a life of mine of 18 years. It will operate as an open-pit mine with annual production capacity of 36,000 tons of copper cathodes, utilizing cost-efficient and environmentally friendly SXEW technology. SXEW stands for solvent extraction and electrowinning. With an investment of $551 million, this project will employ a direct workforce of 450 people during the construction phase and 300 during the operational phase.

For environmental, social and corporate governance, or ESG practices, over the last 5 years, we have reported several times on the Cularjahuira dam located in the Candarave area in Southern Peru. This is in the Tacna region in Peru. This dam has transformed the lives of 18% farmers of the area and their facilities by providing year-round access to water. According to the Ministry of Agricultural Development, crop yields in the area have risen around 20%. This infrastructure with a capacity of 2.5 million cubic meters was built by our company through an alliance with the Peruvian state and local farmers. We continue to work with authorities to build the Callazas and Calientes dams also in the Candarave area. And with these additional dams, more than 90% of farmers' water needs will be covered.

Moving to Mexico. Students from Nacozari and Esqueda schools, both in Sonora, Mexico, performed admirably in national and international competitions, including the Mexican Mathematics Olympics and Infomatrix 2026. These achievements reflect the company's commitment to education and the development of STEM skills. The company currently benefits 3,000 students through 11 education centers it operates in Mexico and Peru.

Sports drive community integration and well-being. To promote integration and well-being through sports, our company joined the Global Social Initiative of the Mexican government. Our efforts, which focus on communities neighboring our operations has brought together 2,629 participants who are organized into 206 teams of employees and community members, with categories for children and youth. Alongside this initiative, 580 volunteers worked to create 14 community murals and recondition sports venues, which strengthens harmonious relations, inclusion and the social fabric. These sports and cultural programs cover approximately 41% of the young population close to our Mexican operations.

Dividend announcement. 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 July 16 of this year, Southern Copper Corporation announced a quarterly cash dividend of $1.10 per share of common stock and a stock dividend of 0.012 shares of common stock per share. This will be payable on August 27 of this year, 2026 to shareholders of record at the close of business on August 11, 2026. Let me mention that factoring in both the cash dividend and the equivalent value of the stock dividend, the total estimated dividend payment is $3.23 per share. 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.

[Operator Instructions] Question is from Richard Garchitorena with Barclays.

Just want to talk about copper production in the quarter was down 3.5% year-over-year. Can you just talk about how the grades have progressed at Toquepala and Cuajone? And what do you see that doing in the second half of this year? And is that impacting your full year production expectations at all?

Thank you very much for your question, Richard. Well, we have been reporting, and we mentioned this at the beginning of the year that our expectation was at the first part of the year, we were expecting to produce in 2026 about 910,000 tons of copper. Now we're expecting for this year 917,000 tons of copper. So we're improving a little bit on our plan.

But the main reason for the change or for the lower production vis-a-vis last year, it's ore grades, particularly at the Cuajone mine, where we had a reduction that translates into about 35,000 tons of lower copper production and the difference comes from Toquepala. As I mentioned, we have been, at the same time, doing some important efforts to increase production for the Mexican operations, and that has been -- that has allowed us to maintain our production levels in Mexico, but having a lower volume in the range of 40,000 tons in total at the Peruvian site.

Great. And if I can just ask a bigger picture question. You talked about $10.3 billion in CapEx required for your Peruvian projects. And with the new administration, is the expectations that there will be some additional funding incentives that could be potentially in place for local production growth? And then relative to that, you did issue $1.25 billion of debt for Tia Maria. Is funding going to be the main expectation for financing these new projects? Or how do you think about financing the remainder of the projects?

The latest bond issue, the one that we mentioned in our press release for $1.25 billion was for -- mainly for financing the Tia Maria project. As you know, we expect to spend in total $1.8 billion in Tia Maria. So with this bond, we should cover a significant portion of it. If by any reason, we have -- we finished Tia Maria before spending this money, we'll have some other projects that could absorb a portion of the funds. But if that will be the case, that will be a very small amount.

For the Peruvian projects, we are indicating the expected capital expenditures for each of them for Los Chancas and Michiquillay. Those numbers are -- will be reviewed and updated when we have a goal for the project as we have done in this past quarter with El Pilar, where we have already a budget that is what we expect to spend in the construction of El Pilar. Generally speaking, the company considers use of some debt at a certain point in the developing of the projects of the company.

Well, as a good practice to have a balance or a better balanced capital -- debt capital structure in our financial statements. That's basically it. So even though I cannot assure you that we will issue bonds or some other forms of financing at each time that we go on with the project, this is what we have been doing in the last few years. So I believe that we could move on in that same direction for the future projects as well.

Our next question is from Emerson Vieira with Goldman Sachs.

I have 2 questions. The first of them, I want to just talk a little bit more about Tia Maria project. I understand that...

I'm sorry, Emerson.

Can you hear me?

I can't copy you well.

Is it better now?

Yes.

I have 2 questions. The first of them is regarding Tia Maria project. I understand that the physical progress is advancing, right? But there is a critical equipment component, which is the desalination plant. So I just wanted to double check if the...

Emerson, please. I think -- sorry for saying this, but could you separate a little bit your -- from the microphone because it doesn't copy you well.

Okay. How about now? Better?

Excellent.

Okay. Yes, got an issue here with the mic. So yes, I have 2 questions. First of them on the projects. On Tia Maria specifically, it's good to see that physical progress is advancing. But I understand there's a critical component, which is the desalination plant. So I wanted just to double check if the order to purchase that equipment has already happened. And if not, if this is a risk for delaying the project. If I recall well, last quarter, it was mentioned start-up in the third quarter of 2027. And in this press release, the company mentioned start-up in the second half.

So just trying to understand if you guys see a risk of some delays in the project. That's for Tia Maria. Also on the Mexican project, El Pilar. Just trying to understand here if the company was able to obtain the water license that was expired. You mentioned that all environmental license have been obtained, but just double checking if everything is indeed well placed to start the early works. So these on the projects. And then I have just another question, but I'll do later on.

Okay. Let me start by El Pilar because that's the easiest to answer. We already have the license -- the water license renewed. So we're ready to go, and that's why we are reporting it, beginning initial works of construction in September, and then a full construction process in the first quarter of next year. For Tia Maria, well, there are several -- we are putting purchase orders and doing the proper contacts to different suppliers of the major parts of equipment, among them, the desal plant. For now, we don't expect a delay in the project. That's what we're reporting. But if there is a perception that the project will delay a little bit, we will certainly report that to the market. But for now, we don't have nothing to report on this.

All right. Just a second one right now on sales, right? There was a gap this quarter. Sales was a little bit below production. So just trying to understand if you guys expect to see a reversal in the second half. I don't know, maybe inventories being consumed so that we see sales coming above production for the second half of this year.

No. I think we should do a little bit better in terms of volume in the second half. The reason for that is that we have been increasing a little bit our material in process at our operations in the first half of the year. So I expect that metal to show up and be available for sales at a certain point in the second half of this year. So that's my personal view. For now, we are advising the market on 917,000 tons of total production for the year. So that's basically what we're thinking now.

Our next question comes from Rafael Barcellos with Bradesco BBI.

So the first question, I just wanted to get your views on the overall political environment in Peru. I mean we are about to start a new government. So if you can give your broad view on what can change going forward on the regulatory backdrop. And on top of that, if you can comment specifically about 2 projects, right, of course, the first one, Tia Maria, what can it change for the project? And I understood from your last -- from the last question that you see Tia Maria on track, but I just wanted to get more insights on where are the main risks for us to keep an eye on here on the execution of the project, particularly because 2027 is a key year in terms of CapEx disbursement, right? So I just wanted to understand what do you see the risks?

And in the case of Los Chancas, also in this context on the political environment, I mean, you've been facing these illegal mining activities, right? So I just wanted also to understand how can those things change given the new government. And as a second question, can you comment a bit more on the outlook that you see for copper and by-products production for the second half and -- for the second half of the year and 2027? I mean -- I'm understanding that you can -- you have a chance to beat the previous guidance for the year, which was 911,000 tons, right? But I just wanted to understand how does it change your view for '27 as well?

Okay. Thank you for your questions, Rafael. On the political environment, well, we see -- we have to review the plan that was presented by the elected President for the elections, Keiko Fujimori. It was very few -- they are considering several initiatives that we believe will be positive for the mining industry in Peru, in general for the economy, but particularly in the mining industry. I think that at the same time, the priorities that the incoming administration have mentioned are important because one of them is the fight to illegal mining, which is something that is affecting us on Los Chancas.

So we believe that some initiatives that are twofold, a new law for artisan mining, which is something that is widespread in Peru and has centuries of activities being Peru, a strong mining country. So for that, I think that we'll see some positive developments. Some of them will be favorable for Los Chancas, we believe so. For the Tia Maria project deployment, I think that the risks are the usual ones that you may expect for a project under construction. Even though we have reviewed very detailed -- very strong detail all the matters that may impact the project, well, sometimes things are not as expected. But for now, we don't see anything like that showing up.

The social environment is positive for the project. We are working with the local population in several initiatives. They are, as we reported a significant amount of people from the area that, in many cases, were former protesters of the project or family of those persons, and they are okay. We are fine in that regard. I already comment on the -- what we're seeing, how are we seeing right now the project. On the outlook for copper and by-products for the second half, I mentioned already for this year, our goals for the 4 materials that we -- copper, moly, silver and sulfuric acid -- and zinc and sulfuric acid.

So you already have this information. For next year, for copper, we will -- we are expecting to produce more or less the same that we have this year. For now, that's what we have to report. In 2028, we will -- and with this, it will have for next year, some help for -- we expect to have it some help from Tia Maria's tonnage, hopefully in the later part of 2027. For 2028 and on, we expect Tia Maria to fill in and increase our production level to about 970,000 tons.

In 2029, our copper production should be -- should be over 1 million tons, 1,060,000 tons. That's our current expectation. A portion of that will come from Tia Maria and from recoveries in ore grades at Toquepala and Cuajone. And basically, in 2029, we will have the positive benefit of El Pilar and some other better ore grades at the Mexican operation. So we are very positive. As you know, our goal is to be over 1.6 million tons of copper by 2033, 2034. And that's what we are heading towards with organic growth in projects pretty much fully owned by the company.

Just as a follow-up, can you be more specific when you say about expectations for a new or a revision on the mining law in Peru, which sort of aspects you believe could improve in the medium term?

No, it's more than reviewing the mining law. It's improving the safety, the security, excuse me, the security environment in the country. That by itself will be very useful for mining projects in Peru. Besides that, we expect the government to maintain the fiscal accounts order. And on top of that, there have been some changes in the institutional arrangement of the country. We will have a Senate in Peru that we haven't had for over 30 years.

And some other changes that will make the political environment much more stable. That's our expectations. We have to see what the elected President, Fujimori, proposes in her speech in July 28, when she will take over the position of President. That's when we will see specifically what their goals are and have more clarity on this. But the general view is a positive one, as I mentioned.

Our next question is from David Feng with CICC.

My first question is a follow-up question on the new administration. We saw that the incoming administration has proposed distributing up to 40% of the mining canon directly to the residents in producing areas. So based on your experience in local communities in Peru, do you believe this would materially improve community acceptance? Or could it make the existing community agreements more complicated?

In this case, David, we will not comment on this until we see specifically what's the proposal. If it holds, that's the first -- very first thing, if it will hold or they have to review it, and that will -- we will know that as the policies of the new administration are deployed. So for now, we don't have anything to comment on this.

Okay. Understood. And I have another question on Tia Maria. So we saw that you have provided a cash cost estimate of $1.16 per pound. Just would like to double confirm if it's after by-product credits? And if so, what by-product price assumptions underpin this estimate? And should we expect it to be a lot of mine average cost or cost can be reached at the initial years of the projects, let's say, 2028 or 2029?

Okay. Well, Tia Maria has no by-products. So it's just copper, what we will be produced. And as you mentioned, the cash cost estimate that we have, it's $1.16. So it's $1.16. That's the cash cost that we have as an estimate right now. Hopefully, well, we have seen some changes in fuel prices and some other materials. But so far, this is the estimate that we're looking at right now.

And our next question is from John Tumazos with John Tumazos Very Independent Research.

I want to try to understand a little better some of the project delays. And maybe El Pilar is a simple one, just 36,000 tons of copper production, smaller open pit. The predecessor, Mercator bought it in 2009 for $40 million from Stingray. You bought it out for $100 million in 2015 from the Mercator bankruptcy. It's now 11 years that you've had it. Please explain the delays in engineering and permitting and why it takes so long. This seems to be much easier than Tia Maria or Michiquillay or Los Chancas or some of the other projects.

Thank you for your question, John. Well, it's -- each project has its own challenges. And in the case of El Pilar, we had a technical -- an in-depth technical review in order to be absolutely sure that we will get in the recoveries on copper that we were expecting for the project. That was something that took us a little bit longer than what we believed when we acquired the project, and you mentioned already the year.

Besides this, in the meantime, we have to renew some of the permits that we have for the project, and we have finishing this process recently, and that's why our last Board meeting, the project was presented for approval and we got it. So that's why we are moving forward with it. So usually, projects have different challenges. In this case, it was at the very beginning, as I say, some technical issues that have to be quite clear before we go into the investment. And the second point is, well, some permitting that given the time that we spent in solving all the technical issues, it took a little bit longer as well.

How much was the impact when Obrador wanted to halt the open pits in Mexico? Did that delay it?

For us, it has no impact since we already have our concessions, including the open-pit ones. And so there's no point on this. For instance, El Pilar is open pit, and we are fine moving forward with it with all the permitting for the project.

I just -- I wait many years, and I hope God gives me enough years to see everything get built.

We hope so.

And thank you. And this concludes our Q&A session. I will pass it back to Raul Jacob for closing comments.

Thank you, Carmen. Well, with this, we conclude our conference call for Southern Copper's second quarter 2026 results. We certainly appreciate your participation and hope to have you back with us when we report the third quarter of this year results. Thank you very much for being with us today, and have a nice day.

And this concludes today's conference. Thank you for participating, and you may now disconnect.

Good morning, and welcome to Southern Copper Corporation's Fourth Quarter and Year 2025. 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 2025 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. 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. Raul Jacob.

Thank you very much, Gigi. Good morning, everyone, and welcome to Southern Copper's Fourth Quarter and Full Year 2025 Results Conference Call. At today's conference, I'm 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. 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.

Our performance in year 2025 delivered new company records for net sales, adjusted EBITDA and net income. These milestones are a testament to the strength of our strategy, execution and commitment to sustainable growth. This strong performance was primarily driven by a rise in by-product production and improved metal prices for all our products. Mined zinc production rose 36% year-on-year, bolstered by an additional 52,500 tons from the Buenavista zinc concentrator. Mined silver production increased 15% in this year -- in last year primarily driven by higher production at all our mines. Molybdenum production was 31,200 tons in 2025, which was 7% above the figure in 2024.

The combination of higher production volumes and better copper and by-product prices enabled us to achieve record sales of $13.4 billion. This is 17% more than in 2024, a record high for EBITDA of $7.8 billion, that's 22% on top of 2024 and net income of $4.3 billion, which is 28% higher than 2024. We remain firmly committed to enhancing productivity and cost efficiency driven by strategy anchoring in discipline and focus on achieving a long-term goal to produce 1.6 million tons of copper at the lowest possible most competitive cost per pound.

Looking into the metal markets and prices. For copper, the London metal copper price increased 21% from an average of $4.16 per pound in the fourth quarter of 2024 to $5.03 per pound this past quarter. For the COMEX market, we saw a 22% increase, averaging during the past quarter $5.15 per pound. Based on current supply and demand dynamics, we're currently estimating a copper market deficit of about 320,000 tons for 2026. Copper inventories worldwide, the sum of the London Metal Exchange, COMEX and Shanghai and bonded warehouses, where as of January '26, this past Monday, approximately 14 days of global demand.

Let's look at Southern Copper's production for the past quarter. Copper represented 75% of our sales in the fourth quarter of 2025. Copper production registered an increase of 1.4% in the fourth quarter of last year on a quarter-over-quarter terms to stand at 242,172 tons. Our quarterly result reflects higher production at our La Caridad, Toquepala, Cuajone and IMMSA mines, which was attributable to better ore grades and recoveries. These positive results were partially offset by a decrease in production at our Buenavista operations.

For 2025, copper production decreased 1.8% to 956,270 tons. This figure is 1% lower than our 2025 plan of 965,000 tons. Our year-on-year result reflects lower production at our Buenavista and the Peruvian mines, partially offset by a rise in production at our IMMSA and La Caridad mines. For 2026, we expect to produce 911,400 tons of copper, which represents a decrease of 4.7% compared to 2025 annual trend. This slight drop was primarily attributable to lower ore grades at our Peruvian operations.

For molybdenum, it represented 8% of the company's sales value in the fourth quarter of 2025 and is currently our first by-product. Molybdenum prices averaged $22.75 per pound in the quarter compared to $21.61 in the fourth quarter of 2024. This represents an increase of 5%. Molybdenum production increased 10% in the fourth quarter of last year compared to the fourth quarter of 2024. This was mainly driven by an increase in production at Toquepala and Cuajone mines due to higher ore grades at both operations. These results were partially offset by a decrease in production at the Buenavista and La Caridad mines. Molybdenum production increased 7.4% year-on-year in 2025 after production grew at Toquepala and Caridad and was partially offset by lower production at Buenavista and Cuajone. In 2026, we expect to produce 26,000 tons of molybdenum.

For silver, it represented 9% of our sales in the fourth quarter of last year with an average price of $54.48 per ounce in the quarter, which is reflected in an increase of 74%. Silver is currently our second by-product. Mined silver production increased 15% in the fourth quarter of 2025 versus the same period of the prior year. This was boosted by production growth at all our mines. Refined silver production increased 10% quarter-over-quarter driven mainly by increased production at all our refineries. In 2025, we produced 24 million ounces of silver, which represents an increase of 15% over the 2024 production level. This was due to higher production at all our mines. In 2026, we expect to produce 24 million ounces of silver, a slight decrease of 2% compared to 2025.

For zinc, it represented 4% of our sales in the fourth quarter of 2025 with an average price of $1.44 per pound in the quarter. This represents a 4.3% increase compared to the fourth quarter of 2024. Zinc is currently our third by-product. Zinc mined production increased 7% quarter-on-quarter and total 46,223 tons. Growth was mainly driven by higher production at the Buenavista zinc concentrator and by an increase in production at San Martin mine. Refined zinc production increased 2% in the fourth quarter vis-a-vis the fourth quarter of 2024. Zinc production for the full year 2025 increased 36% due to additional production of 52,500 tons from Buenavista zinc and an upswing in production at our Santa Barbara mine. This was partially offset by lower production at our Charcas and San Martin operations. For 2025, we expect to produce 165,500 tonnes of zinc.

Financial results. For the fourth quarter of 2025 sales were $3.9 billion. This is $1.1 billion higher than sales in the fourth quarter of 2024. Copper sales increased 39% and volume was up 3%, supported by better prices. In the case of LME it was 21% higher and in the case of COMEX 22% higher. Regarding our main by-products, we reported higher sales for molybdenum of 6% due to an increase of volume of 10% and better prices. Zinc increased its value -- the value of sales in 23% due to higher volume for 21% and better prices. Silver increased its value in -- 106% due to an increase in volume of 11% and better prices. 2025 net sales hit a record high of $13.4 billion, topping the 2024 net sales by 17%. This expansion was mainly driven by higher sales volume for molybdenum, zinc and silver. Growth in sales volumes remain -- for copper, growth in sales volume remained stable in [ 2025 ].

Operating cost. Our total operating cost and expenses increased $282 million, that is a 19% when compared to the fourth quarter of 2024. The main cost increments were in workers' participation, purchased copper, inventory consumption and operation contractors and services. We have also, in the quarter, a onetime adjustment of $60 million for asset retirement obligations at the Mexican operations, mainly at the Buenavista one. These cost increments were partially compensated by labor -- lower labor costs at the Peruvian operations.

The fourth quarter 2025 adjusted EBITDA was $2.3 billion which represented an increase of 53% with regard to the $1.5 billion registered in the fourth quarter of 2024. The adjusted EBITDA margin in the fourth quarter was 60% versus 54% in the fourth quarter of 2024. For the year 2025, adjusted EBITDA hit a record high of $7.8 billion, reflecting a robust 22% increase over the figure in 2024. The adjusted EBITDA margin in 2025 was 58% versus 56% in 2024. Cash cost. Operating cash cost per pound of copper before by-product credits was $2.29 per pound in the fourth quarter of 2025. This is $0.06 higher than the value for the third quarter of $2.23 per pound. This 3% increase in the operating cash cost was driven by higher cost per pound from the production cost, administrative expenses and lower premiums, which were partially offset by lower treatment and refining costs. Southern Copper operating cash cost including the benefit of by-product credits was $0.52 per pound in the fourth quarter of last year. This cash cost was $0.10 higher than the cash cost of $0.42 for the third quarter of 2025.

Regarding by-products, we have a total credit of $920 million or $1.77 per pound in the fourth quarter of 2025. These figures represent a 3% increase when compared to a credit of $895 million or $1.81 per pound in the third quarter of 2025. Total credits have increased for zinc, silver and sulfuric acid and decreased for molybdenum. 2025 operating cash cost per pound of copper before by-product credit was $2.17 per pound. And this was higher than the $2.13 per pound that we reported in 2024. This is a $0.04 increase. Net of by-product credit 2025 cash cost was $0.58 per pound. This $0.31 reduction in the cash cost compared to the $0.89 per pound reported in the fourth quarter for the full year -- excuse me, for the full year 2024, and this was mainly attributable to a $0.34 increase in byproduct revenue credits.

Net income in the fourth quarter was $1,038 million, which represents a 65% increase with regard to the $794 million registered in the fourth quarter of 2024. The net income margin in the past quarter was 34% versus 29% in the fourth quarter of 2024. 2025 net income hit a record high of $4.3 billion, which is 28% above the figure in 2024. These improvements were driven by an increase in net sales and by our strict cost control measures. The net income margin in 2025 was 32% versus 30% in 2024. Cash flow from operating activities in 2025 was $4.8 billion, which represented an increase of 8% over the $4.4 billion posted in 2024. This result, which was mainly fueled by higher net income, was partially offset by an increase in net operating assets, particularly accounts receivables.

For capital investments, our current capital investment program for this decade exceeds $20.5 billion and includes investments in projects in Peru and Mexico. In 2025, we spent $1.3 billion on capital investments, which reflected a 29% increase year-on-year and represented 30% of net income in 2025. Given that there is a description of our main capital project in Southern Copper's press release, I'm going to focus on updating new developments for each of them.

Regarding the Peruvian projects and focusing on the Tia Maria project currently under construction at the Arequipa region in Peru. This project represents a landmark investment for Peru and the Arequipa region. The current estimated capital budget is $1.8 billion. As of the end of 2025, the project was 24% complete. At current copper prices, Tia Maria will generate $20.2 billion in exports and $4.6 billion in taxes and royalties over its first 20 years of operation. The project has already created 3,589 jobs, with strong focus on local hire. When operations begin in 2027, Tia Maria will provide 764 direct jobs and nearly 6,000 indirect jobs, demonstrating our commitment to sustainable growth and long-term regional development.

As of December, 31st of last year, the company had committed about $800 million to different project activities. Large-scale earthmoving works have mobilized 1.7 million tons of material from the La Tapada deposit. Purchase orders to acquire metallic structures for secondary and tertiary crushing has been issued for the dry area. At the SX-EW process level, state-of-the-art technology has been selected for our main equipment. Access roads and platforms as well as temporary contractor camp has been completed. Regarding energy supply, all earthworks for the electrical main substation has been completed. Foundation works are currently underway, and the transmission line is being built. Next efforts will focus on developing the main and secondary components of the project's dry and wet areas and setting up a temporary camp.

For Los Chancas in Apurimac, as of December of last year, we continue to implement environmental and social programs in the communities of Tapayrihua and Tiaparo, which are located within the direct area of influence of the Los Chancas Mining Project. Despite these efforts, the presence of illegal miners within the project area has prevented the project from advancing. In this context, the company continues to take actions with the relevant authorities to regain control of the project area.

For the Michiquillay project in Cajamarca, also in Peru, this is a world-class greenfield mining project that we expect to produce 225,000 tons of copper per year, with an estimated investment of about $2.5 billion. The comprehensive review of the geological information to estimate the project's mineral resources has been duly audited in accordance with the SEC's mining disclosure standards and the Regulation S-K 1300. Subsequently, the company intends to use this information to estimate mineral reserves and develop the corresponding mine plan.

Regarding environmental, social and corporate governance, or ESG practices, the company in recognition of our efforts in the ambits of prevention and minimizing risk, our Buenavista mine in Sonora, in Mexico as well as our Toquepala and Cuajone mines in Peru, received the accreditation from The Copper Mark for compliance with the Global Industry Standard on Tailings Management set forth by the International Council on Mining and Metals. These accreditation guarantees that best international practices are followed to provide authorities, the community neighboring our operations and other stakeholders with assurances that operations are safe.

For the SX-EW plant at the La Caridad Unit in Sonora, Mexico, this unit has been awarded with the Casco de Plata, the silver helmet, in the category of metallurgical plant with up to 500 workers. This is in recognition of its status as one of the country's safest operations. This recognition, which was bestowed by the Mexican Mining Chamber known as Camimex, it was handed during the opening ceremony of the 36 International Mining Convention in Mexico. And this attests to the company's commitment to risk prevention and employee safety.

In the case of the Peruvian branch, Southern Peru was recognized by the Peruvian government as a mining company with the largest number of projects awarded under Public Works for Taxes in 2025. The company is currently rolling out 4 investments for a total of $28 million that would benefit more than 5,000 people. Over time, Southern Copper has worked on 40 projects through this mechanism and has invested more than $400 million in infrastructure to bridge social gaps.

In 2025, also about 5,000 residents benefit from the health campaigns conducted in the communities near our mining operations and projects in the Peruvian regions of Moquegua, Arequipa, Apurímac and Cajamarca. Teams of specialists in internal medicine, ophthalmology, pediatrics, gastroenterology, among other disciplines, visited communities to provide comprehensive medical care. This is on the nearby communities of our operations.

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 22, 2026, Southern Copper Corporation announced a quarterly cash dividend of $1 per share of common stock and a stock dividend of 0.0085 shares of common stock per share. This is payable on February 27 of this year to shareholders of record at the close of business on February 10.

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.

[Operator Instructions] Our first question comes from the line of Timna Tanners from Wells Fargo.

Wanted to start off with any updated thoughts on your cost guidance and how you're seeing that shape up in particular, given the currency inflation, your local currencies versus the dollar? Anything you can do to combat that.

Well, we -- I think we have passed the most -- the worst part of the inflation that we had after COVID mainly. Our costs are currently being more affected by currency appreciation for the peso and the Peruvian sol than specific inflation from Mexico or Peru.

Okay. Do you have any guidance on where we might see the cost before by-products shape up in the next quarter or the year ahead?

Sorry, could you repeat it, please, Timna?

Sure. Any guidance on how we could expect to see cost shaping up into the next quarter and the year?

No. It's -- for operating costs, we believe it's going to be relatively flat on a per pound basis, since we will be producing a little bit less than last year, it may have some impact on that. And -- but then we have a very strong production of by-products, which is something that was considered as part of the -- as part of our mining operations for last year and this year. So that is going to help us on the credit for sure.

Okay. Helpful. I'll ask one more and hand it off. This past year, you started out with a lower guidance for silver production and at the end of the year, we're able to exceed your expectations. And of course, silver has been quite hot. Any ability in light of these strong prices to maybe eke out some more tons of -- or ounces, I should say, of silver in 2026 than your initial expectations?

Well, we already gave a guidance on the silver production for this year. Obviously, we would like to improve on that. But at this point, that's basically what we are expecting is -- it's in silver, about 24 million ounces. One thing that we have done in 2025, and we're still maintaining is that our new zinc concentrator of Buenavista that has right to -- the mine of -- the zinc area of the mine, we have found a pocket of very good ore grades for both zinc and silver and that has made us to focus this concentrator that can switch between copper and zinc to focus only on zinc. So that's one of the reasons why we have a much stronger silver production in last year regarding silver specifically and zinc. We're still working in that area. So that's why we were holding to a very good silver expectation on production and hopefully it could improve. Let me say, Timna, that if we were to have the prices that we're having for silver this year with the expectation of production that we have, silver may become our main by-product.

Our next question comes from the line of Emerson Vieira from Goldman Sachs.

I have a couple of questions. First one on by-products, just trying to understand here better the reason why molybdenum production in 2026 should decline. I understand that you guys have been prioritizing zinc production at Buenavista zinc concentrator, but that production should also decline in 2026. So just trying to understand here the reason for the declining moly production for next year. That's the first question. And then I have a follow-up with the remaining ones.

Okay. On the molybdenum production, you mean the production because it was a little bit cut when you speak, Emerson? You meant the molybdenum production?

Yes. I mean, yes, for 2025 [indiscernible].

We're getting into some areas of the operations where we have -- we have a lower ore grades for both copper and molybdenum. Usually molybdenum should -- could improve a little bit or -- usually in this kind of circumstances, we have a little bit more molybdenum but at this point, this is what we are forecasting. So hopefully, we will be improving on what I mentioned as our forecast for the year.

All right. And then second one on Cuajone's concentrator. Can you guys provide us with the latest update here? When you expect an investment decision to be made for instance?

Well, we haven't -- we have to prepare all the information on a possible Cuajone expansion, and that has to be submitted to our Board. We haven't done it yet. We are still working on this project. We see it very positively, but we need to finish our work and present it to the board for a decision.

All right. And then the last one on Tia Maria. I mean the committed CapEx of $800 million. It's roughly the entire amount you guys should disburse this year. So just trying to understand here about the timing of this.

I am so sorry, Emerson, there's some noise when you speak. If you could you repeat this?

Okay. I will repeat. On Tia Maria, you guys mentioned that there is already $800 million of committed CapEx, and that's roughly the amount you guys plan to spend this year at Tia Maria. So just trying to understand here the timing if this CapEx is more skewed towards second half of this year. And then in order to deliver the 30,000 tons in 2027, when should the construction be completed in your estimates?

Okay. As I say, we are -- we have commitments of about $800 million of those. In terms of cash flow, we should be spending a little bit north of $500 million -- $508 million is our current forecast for cash out during 2026 related to Tia Maria. Construction should be finished by the end of the first half of 2027, and we are expecting to produce about 30,000 tons in the second half of 2027 and then in 2028 and on at full speed of 120,000 tons per year.

All right. So just to confirm my understanding here. You mentioned that you expect to disburse $500 million in Tia Maria in 2026. That's it?

Yes. That's what I said, $508 million is our current forecast.

All right. And how does that compare to the roughly $900 million that was disclosed in the preliminary guidance? I mean what's the reason for this CapEx in about half?

I'm so sorry, Emerson, could you repeat it, please?

Yes. I mean you mentioned that you guys plan to disburse $500 million for Tia Maria in 2026, right? But looking at the company's presentation, the prior guidance, you mentioned that it was expected to disburse almost $900 million actually instead of the $500 million. So just trying to understand what is the reason? Why the lower disbursement?

We did -- when we put the specific purchase orders, which are the commitment of $800 million, we obtain better payment terms than what we were expecting initially, and that's why we have this positive reduction in our cash out for next year. In Tia Maria, obviously, the budget hasn't changed significantly. So we will be spending that money in [ 2027 ]. Usually, you kept a portion of your budget for final payments once the vendors has -- or once you have confirm that the equipment that you have acquired are producing what was offered at the time of the sale.

Right. And this doesn't imply any postponement of the projects start up, right? I mean it's just the cash outflow that is being delayed, where construction will follow at another pace, a faster pace, I would say, right?

We're in line with our -- the pace of the investment. We believe it's going to be finished, as I say, basically a midpoint of 2027, we should be charging material to the system of Tia Maria and start producing in the second half about, as I say, about 30,000 tons of refined copper for that year and then 120,000 tons, which is the full capacity of the project.

[Operator Instructions] Our next question comes from the line of Alfonso Salazar from Scotia Bank.

I have 2 questions. The first one is going back to the cash cost question. If -- correct me if I'm wrong, but if production falls some 5% in 2026, then before by-products, we should expect an increase in cash cost by right now similar to that number, right? And the second is, can you remind us how much of your cost in the Mexican mines are in Mexican pesos and same for Brazil -- sorry, for the Peruvian mines, how much is solutions? Just to have a sense of how much it could impact the depreciation of the weakening of the U.S. dollar.

And the second question is regarding your long-term production guidance. If we look -- first of all, it says that it will be updated in January, the last that you have already in the website. Just want to make sure that you have any of that or we can continue to work with this one.

No, we are doing -- let me answer your questions as you did them. In terms of -- yes, we are having a reduction in copper production this year. So that will increase our -- yes, that alone should have an impact in the range of the 5% that you mentioned for our production cost. We are doing -- we're taking certain initiatives for us to control cost and, if possible, reduce maintenance expenditures and contractor services at both the Peruvian and Mexican operations, that should help. In terms of cost control, as you know, we are quite keen on maintaining costs under control. The cash -- the cost in Mexican pesos is 39% of our cost and the cost in Peruvian sols is 10% of our cost. So we have about 51% of our cost in U.S. dollars denominated. Okay. The next one is...

Yes, regarding the guidance.

Yes. The guidance is basically -- we are updating it. For this year, I already mentioned it's 911,400 tonnes. For 2027, a little bit north of 900,000 tons. We are being affected by lower ore grade simultaneously at Toquepala and Cuajone. In the case of Toquepala, it's a temporary thing. That's why we are expecting this to correct over time. In the case of Cuajone, we are considering an expansion of the Cuajone operation, so we can bring back the lower production that we're having given the current installed capacity of Cuajone. For -- I'm going to give you the forecast for the next 5 years. So 911,400 for this year, a little bit north of 900,000 about -- I believe, about the same that we're doing for 2026. In 2028, we will have the full year of Tia Maria that will bring in 970,000 tons of forecast. In 2029, 1,060 million tons and 2031 same number, 1,060 million.

Around 160? Okay. That's helpful. Just one quick question. In your previous guidance, we can see that Buenavista and Caridad, the production in those 2 mines were in a downtrend. Is that going to continue after 2030? Or what are you expecting in these 2 mines?

No. We will be taking different actions to put back on track our production on both sites. In some cases, it's finding new reserves, which is very likely the Caridad circumstance. And in the case of Buenavista, we may consider also an expansion of the capacity of the operation. But these are things that are still under review. So no -- nothing that I could -- we could report on that at this point.

[Operator Instructions] Our next question comes from the line of David Feng from China International Capital Corporation Limited.

Congratulations on the strong results. My first question is from a capital management perspective. With a much stronger cash inflow based on current copper price, is it possible to boost your growth plan with the extra cash? Or is it more likely for you to increase the portion of cash dividend over stock dividend? I'll come back with my second question.

I think that in the case of dividends, it's up to the Board. The Board has been increasing the cash portion of the dividend as prices and results are coming in. And I guess that they may increase the cash portion of it if we have more better results, but that is up to them. So I can't comment on that much. Your next question, please?

Okay. My second question is with the much higher copper price, for projects like Los Chancas, we know on one hand, the higher price will allow you to leverage more resources to solve issues related to the project. But on the other hand, the higher prices also provide stronger incentives for illegal miners to continue or even enhance their operations. So overall, does the higher copper price make the project development like for Los Chancas easier or more challenging?

Obviously, you want to have better prices than worse prices to go with projects, but we have made this -- all of our projects has been evaluated with the prices significantly lower than the ones that we're seeing nowadays. I think that in general, we're happy of having very good returns with prices that I'd say it's more like an average long-term view for us. In the cases -- the specific case of Los Chancas, we have had some progress. We had some initiatives taken by the government that will be -- illegal mining. But so far, we haven't -- we don't have much to report at this point. We believe that the government -- the Peruvian government will take action and allow the company to move on with this important project.

[Operator Instructions] Our next question comes from the line of Matheus Moreira from Bradesco BBI.

My first question is on copper markets. I just wanted to get your overall view here on copper markets. We've been seeing, of course, very supportive price environment for copper, right, with prices holding of near historical highs. However, demand in China appears to be deteriorating at a relatively fast pace, right? So just wanted to see how do you view these dynamics going forward? Do you expect the current price momentum to be sustained? So that's my first question, and then I'll come back for the second one.

Okay. On the copper market, we are expecting a deficit of about -- we're expecting a deficit in the market. And that 320,000 tons is our current -- the view of our commercial team. In terms of price, it's hard to know. We are seeing that the copper demand is being hold by electric vehicles, artificial intelligence, power centers. And at the same time, we see that -- well, in several places, particularly in China, the real estate market is not doing well. So that -- those are the factors. We were not forecasting copper prices. That is not our business. Our businesses to focus on controlling costs and producing as much copper as we can on a competitive base and with high returns for our shareholders. That's our business.

Okay. Perfect. That's clear. And then my second question on the Buenavista concentrator. I mean I understand you continue to prioritize on the zinc production over copper given the stronger zinc grades in the areas you're currently mining. Should we expect the strategy to remain in place for 2026, especially considering these copper prices at these levels? And maybe the question here, is there a copper price level that would incentivize you to shift back your production towards copper?

Okay. Just for knowledge of everybody on the call, we do have 2 concentrators in Buenavista. One is the concentrator that is -- that are producing a pure copper. Those are copper concentrator. And the other one is -- there is one zinc concentrator that can switch between zinc and copper. In this case, we did an analysis at a certain point at the beginning of the year, and with the prices that we have had and the prices are still holding in terms -- in relative terms between zinc, silver and copper. And we found that it was on the best interest of the company and our shareholders to focus on zinc production with more silver content coming with the zinc. Just to be clear, we do have 2 concentrators that produce -- that are copper concentrators and one zinc concentrator. I believe that I skip that when I explain this matter.

So we're doing this on an ongoing basis. If there is a significant change in the relative prices between zinc, silver and copper, we will review our strategy. But for now and particularly on the areas that we are at the zinc production areas of the mine of Buenavista, it still makes sense to be producing silver and zinc rather than copper. But if there's a change, we'll do it in a way that we produce the best value for our shareholders and the corporation.

[Operator Instructions] Our next question comes from the line of Alex Hacking from Citi.

Raul, I just have one question. Could you maybe discuss the cadence of your copper production next year? Should we expect 1Q to be the strongest and 4Q to be the weakest with grades in Peru kind of falling through the year or it's going to be more even than that?

It's going to be more even, Alex. We will be reporting on that. But that's basically -- we're getting into low ore grade patch for Toquepala. Cuajone is more or less stable at the level that it is now. And the reason for that is that Cuajone has a new structural ore grade, which is lower, that's why we're considering an expansion on this operation.

[Operator Instructions] Our next question comes from the line of Myles Allsop from UBS.

Great set of numbers. Just maybe on Tia Maria to start with. How -- what is the lead time for an SX-EW operation and what do you see as the key risks in terms of achieving the time line of first production mid-2027?

Well, the -- we do have about 5 SX-EW operations in the company currently that are -- that we're working with them. Obviously, where we have selected the newest and best technology that is available for SX-EW operations right now. Basically, we are expecting to have the whole plant assembly in operation at the second half of 2027. That's a little bit more than a year from now. We think that -- well, at this point, we don't want to have any delays on getting the production that we're looking for 2027. Our expectation is to have everything assembled and ready to initiate the tests by May or June of 2027. And with that occurring, we will be putting charge in the equipments and start producing refined copper, which is the final product of SX-EW operation.

And does -- how is the sort of mood on the ground? I mean there's a few small process, I think, in December. I think there's some more planned for March ahead of the elections. I mean, what's the sense on the ground in terms of going full steam ahead with the project?

You mean on the Peruvian elections?

Actually around Tia Maria and obviously stepping up production aggressively given what happened last time and the disruption you suffered?

Well, no, we believe that the work that we're doing with the local groups, the population in the area, it's -- well, we mentioned that we have -- our initial expectation was to have about 3,500 workers in Tia Maria. Now we do have more than that. 3,589 jobs have been created. We believe that the right number now is more in the range of having 5,000 workers when the project is at full speed in terms of construction. This has been very well received by the local population. I think we made our -- the points that this project is not going to be a problem for them, but a big opportunity for the people at the province of Arequipa.

And what we're seeing is that they understand this and are focusing on getting either job opportunity or a business opportunity related to the company or the programs that the company has. As I mentioned, the company has been investing using the tax for works mechanism in Peru very heavily. $400 million has been invested using this mechanism plus all the other programs that the company has. So I believe that we're bringing in good news to the population and the locals are understanding that correctly.

That's encouraging. Maybe just a couple of other small questions. In terms of percentage of COMEX sales, has that changed meaningfully since last year? Or is it broadly unchanged?

We don't make comments on that, I'm so sorry.

Okay. And maybe last question then just on Mexico and the ability to get licenses to move projects forward, has the atmosphere improved? Is it looking more probable we'll see investments in the mining industry in Mexico being announced during 2026?

We're seeing a better -- generally speaking, a better environment in our relationship with the Mexican government. And I think that this is going to be also reflected in the speed that we can move on with projects. But so far, there's nothing specific to report.

And have any open pits been approved over the last 12 months or last few years?

I'm so sorry, I couldn't get what you said.

So any open pit projects being approved in Mexico over the last few years?

Well, there are some projects that have been moving on. And we have our own El Arco and some other projects that we will keep working on them. But so far, on this matter and on our projects, we have not much to report at this point.

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

Thank you very much, Gigi. With this, we conclude our conference call for Southern Copper's fourth quarter of 2025 and full year results. We certainly appreciate your participation and hope to have you back with us when we report the first quarter of this year 2026 results. Thank you very much for being with us today, and have a nice day.

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

Good morning, and welcome to Southern Copper Corporation's Third Quarter and 9 Months 2025. 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 third quarter and 9 months 2025 as well as answer any questions that you may 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 from 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 U.S. GAAP. Now I will pass the call to Mr. Raul Jacob.

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's Third Quarter 2025 Results Conference Call. At today's conference, I'm 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. 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.

Our performance in the third quarter delivered new company records for net sales, adjusted EBITDA and net income. These milestones are a testament to the strength of our strategy, execution and commitment to sustainable growth. This strong performance was primarily driven by a rise in byproduct production and improved metal prices across all our products. Zinc production rose 46%, mainly on the back of significant production at our Buenavista zinc concentrator. Silver and molybdenum output grew 16% and 8%, respectively.

The combination of higher production volumes and better copper and by-product prices enabled us to achieve a cash cost of $0.42 per pound of copper in the third quarter of this year, one of the industry's lowest. We remain firmly committed to enhancing productivity and cost efficiency driven by a strategy anchored in discipline and focus on achieving our long-term goal to produce 1.6 million tons of copper at the lowest possible, most competitive cost per pound.

Looking into the copper market, the LME copper price increased 7% from an average of $4.17 per pound in the first quarter of 2024, up to $4.44 this past quarter. For the COMEX market, we saw a 14% increase. Based on current supply and demand dynamics, which include the negative production effects that we're seeing in Indonesia and Chile, we're currently estimating a copper market deficit of almost 400,000 tons. Copper inventories worldwide, which is the sum of the London Metal Exchange, COMEX and Shanghai warehouses as well as other bonded warehouses, copper, this inventory -- the sum of these different inventory at the end of September were 609,000 tons.

We estimate that this inventory currently covers approximately 8 days of global demand. The recent U.S. tariff policy changes have thus far had a limited impact on our results. As such, we're confident now that the long-term fundamentals of prices for copper and other metals will remain very positive.

Now let's look at Southern Copper's production for the past quarter. Copper represented 73% of our sales in the third quarter of this year. Copper production registered a decrease of 7% compared to the third quarter of 2024 and stood at 234,892 tons this past quarter. Our quarterly result reflects a 7% drop in production in Peru, which was triggered by a decrease in production at our Toquepala and Cuajone mines. Production at our Mexican operations fell 7% quarter-on-quarter, driven by a decrease in production in our Buenavista mine due to lower ore grades and by the fact that the new Buenavista concentrator was fully dedicated to maximizing zinc and silver production to leverage the favorable ore grades identified in an important segment of the mine.

On a year-to-date basis, copper production fell 3% in 2025 to stand at 714,098 tons, mainly driven by a decrease in production at our Mexican and Peruvian operations due to lower ore grades. For this year 2025, we expect to produce 960,000 tons of copper. This is slightly lower, less than 1% than the plan and a decrease of 2% over 2024's finance plan. Molybdenum represented 13% of the company sales value in the third quarter of 2025 and is currently our first by-product. Molybdenum prices averaged $24.30 per pound in the quarter compared to $21.68 per pound in the third quarter of 2024. This represents an increase of 12%. Molybdenum production registered an increase of 8% in the third quarter of this year compared to the same period of 2024. This was mainly driven by higher production at our La Caridad and Toquepala mines, which were partially offset by lower production at our Buenavista and Cuajone operations. In 2025, we expect to produce 30,000 tons of molybdenum, which represents an increase of 4% over our 2024 production level.

For silver, it represented 7% of our sales value in the third quarter of 2025 with an average price of $39.56 per ounce for the quarter. This reflected an increase of 34%. Silver is currently our second by-product. Mine silver production increased 16% in the third quarter of 2025 vis-a-vis the next -- the same quarter of 2024 after production growth in our Mexican operations, and this was partially offset by lower production in the Peruvian mine.

Refined silver production increased 2% quarter-over-quarter. This evolution was mainly driven by higher production in our Ilo refinery, which was partially offset by a drop in production in La Caridad refinery.

In 2025, we expect to produce 23 million ounces of silver, an increase of 10% compared to last year. Zinc represented 4% of our sales value in the third quarter of 2025 with an average price of $1.28 per pound in the quarter. This represents a 2% increase compared to the third quarter of 2024. Zinc is currently our third by-product. Mine zinc production increased 46% quarter-on-quarter and totaled 45,482 tons. This was mainly driven by an increase in production at the Buenavista zinc of 108%. This Buenavista zinc concentrator has been processing high ore grade material that we found in a segment of the Buenavista mine that -- well, it was reviewed and decided on the base of the value that this additional production is contributing to this year's results.

For the year 2025, we expect to produce 174,700 tons of zinc, which represents an increase of 34% over our 2024 production level. This growth will be driven by the production of our Buenavista zinc concentrator, which I already mentioned is operating at full capacity dedicated to zinc production. For the third quarter of this year, sales were $3.4 billion. This figure was $446 million or 15% above the third quarter of 2024 trend. The copper sales value increased [indiscernible] volume dropped 4% in a scenario of better prices. The London Metal Exchange price increased 7% and the COMEX price increased 14%.

Regarding our main by-products, we registered an increase in sales of molybdenum by 46% due to growth in volume, volume of molybdenum sales increased 8% and better prices. Zinc sales increased 12% due to an uptick in volume of 7% and better prices for this material zinc. Finally, silver sales increased 65% due to higher volume, 22% and better prices for lubricant. Our total operating costs and expenses were up to $128 million or 9% compared to third quarter of 2024. The main cost increments were in purchased copper concentrate, workers participation, labor, operations contractors and services, energy and sales. These cost increments were partially offset by a drop in inventory consumption and other factors.

The third quarter of 2025 EBITDA -- adjusted EBITDA was $1,975 million. This represented an increase of 17% with regard to the 1,685 million registered in the third quarter of 2024. The adjusted EBITDA margin in the third quarter of this year stood at 59% versus 58% in the third quarter of 2024. Adjusted EBITDA year-to-date was $5,512 million. This is 13% than the mark for the 9 months of 2024.

The adjusted EBITDA margin in the 9 months of this year stood at 58% versus 57% in the 9 months of 2024. Operating cash cost per pound of copper before by-product credits was $2.23 per pound in the third quarter of 2025. This is $0.12 higher than the value for the second quarter of 2025, which was $2.11. This 5% increase in operating cash cost is a result of higher cost per pound from production cost, administrative expenses and lower premium and was offset by lower treatment and refining costs.

Southern Copper's operating cash cost, including the benefit of by-product credits, was $0.42 per pound this past quarter. This cash cost was $0.21 lower or 34% lower than the cash cost of $0.63 that we had in the second quarter of 2025. Regarding byproducts, we had a total credit of $895 million or $1.81 per pound in the third quarter of 2025. These figures represent a 22% increase in byproduct credits when we compare them to a credit of $756 million or $1.48 per pound in the second quarter of this year 2025.

Total credits have increased for molybdenum in 23%, for silver 29%, and decreased a little bit for zinc 1%, and sulfuric acid, where we have lower volumes due to major maintenances at our smelter. For net income, in the third quarter of this year, net income was $1,108 million, which represented a 23% increase over the $897 million registered in the third quarter of 2024. The net income margin in the third quarter of this year stood at 33% versus 31% in the same quarter of last year. These improvements were mainly driven by an increase in sales and cost containment activities.

On a year-to-date basis, net income was 17% higher than in 2024 due to growth in net sales. The net income margin year-to-date stood at 32% versus 30% for the 9 months of last year. Cash from operations or -- cash flow from operating activities in the third quarter was $1,560 million, 8.4% above the figure in the third quarter of 2024. For the 9 months of 2025, cash flow from operating activities stood at $3,258 million, which represented an increase of 6% over the $3,061 million posted in the 9 months of 2024.

Capital investments. For the Peruvian projects, our investments in Peruvian projects that are being built or for which basic or detailed engineering is being conducted could surpass $10.3 billion in the next decade. 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 of them. In the case of the Tia Maria project in the Arequipa region in Peru, as of September 30 of this year, progress at Tia Maria stood at 23% and 2,109 new jobs have been generated. 809 of these jobs were filled with local advocates.

To the fullest extent possible, we intend to fill the 3,500 jobs estimated to be required during the Tia Maria construction phase with workers from Islay province. In 2027, when we start operations of Tia Maria, the project will generate 764 direct jobs and 5,900 indirect jobs. In the early construction phase, progress on access roads and platforms stands at 90%. We will advance this effort alongside work to set up a temporary camp, engaging in massive air work and roll out mine opening activities.

Recently, on October 14 of this year, the company received authorization from the Ministry of Energy and Mine to begin exploitation activities on the Tia Maria project. This authorization is based on considerations outlined in the supporting technical report and the environmental certification approved for the project. Consequently, we will soon initiate pre-stripping activities in La Tabara and begin building main project components.

For the Los Chancas project in the Apurímac region of Peru, as of September 30 of this year, social and environmental management programs are underway in the communities directly influenced by the project, in accordance with the Framework Agreement signed between the Tiaparo Peasant Community and the Los Chancas Mining Project. Necessary actions are being undertaken to regain control of the project in response to the presence of illegal miner. This control is essential to us for continuing advancing the development of our r Los Chancas project.

In the case of the Michiquillay project in the Cajamarca region of Peru, the geological information obtained from drilling programs has been used to develop the models required to estimate the deposit mineral resources. These models are currently being audited by a third party under the SEC's mining disclosure standards, S-K 1300. A conceptual study is underway to determine the best location for our conventional or filtered tailings storage facility.

Hydrogeological and geotechnical studies are also being conducted. SEC 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 Angangueo, Chalchihuites, and the Empalme Smelter, which could bolster our position as a fully integrated copper producer. We're conducting talks with the current administration to continue rolling out SCC's Mexican investments for $10.2 billion. We have in Mexico also the El Arco in the Baja California state project. In this case, we have -- we're not reporting additional progress in these projects for now.

Regarding environmental, social and corporate governance or ESG practices, our sustainability ratings are improving. In the Corporate Sustainability Assessment 2025, S&P Global increased SCC rating by 4 points over last year's print. This result positions the company among the leaders in the mining sector's performance ranking with a rating that is more than twice the industry's average. Some of SCC's disaggregated ratings were the highest reported for the sector. That is the case for transparency and reporting, environmental management, biodiversity, cybersecurity, labor practices, human rights and community relations.

Regarding greenhouse gas emissions at our operations, the electricity that our underground mines have received from the Fenicias wind farm has enabled us to curb greenhouse gas emissions by 180,000 tons of carbon thus far in 2025. This is equivalent to electricity supply needed to sustain 40,000 households in Mexico.

We're recovering ecosystems in Mexico and Peru. So far in 2025, we have conducted advanced work to restore 67 hectares at our Buenavista recovery installations in Sonora, and about 10 hectares in the Ite wetlands in Peru. These efforts entail incorporating areas of the landscape that were previously impacted by our operations and providing important environmental services. Additionally, we're preparing stocks and services and are installing assisted irrigation systems on approximately 200 hectares in Sonora, which will be reforested in 2025.

In the case of the Tia Maria project, through the work for taxes mechanism, we're financing modernization and upgrades at an emblematic secondary school in the district of Cocachacra, which will serve 400 students and also using this work for taxes mechanism, we're working on the construction of the Biomedical Sciences Laboratory at the University of San Agustín in Arequipa, which will be used by about a little bit more than 3,000 students and researchers.

During its tour of Sonora in 2025, Dr. Vagón Health train sponsored by Grupo México imparted more than 20,000 free consultations in 8 municipalities, marking an all-time high in Dr. Vagón's history. Over its 9 previous visits to the region, more than 59,000 medical consultations and 70,000 prescriptions were provided at no cost. With these results, Dr. Vagón has become one of the most important traveling health projects in Sonora, Mexico.

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 October 23 of this year, Southern Copper Corporation announced a quarterly cash dividend of $0.90 per share of common stock and a stock dividend of 0.0085 shares of common stock per share. This is payable -- this will be payable on November 28, 2025, to shareholders of record at the close of business on November 12 of this year.

Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us. Now we would like to open the forum for questions.

And thank you so much. [Operator Instructions] It comes from Carlos De Alba with Morgan Stanley.

What is the expectations in terms of cash cost before byproducts in the fourth quarter and maybe in 2026?

For the fourth quarter, Carlos, we will very likely decrease our cash cost because we will be having a partial recovery of production, particularly at the Peruvian operations, we believe that production will improve in the fourth quarter. So we are operating at about $2.23, if I recall it well. And we're expecting to have in the range of $2.15 to $2.20 in the fourth quarter.

Okay. And how much of -- how much purchases of third-party concentrate or cathodes did the company do in the third quarter? And if you could comment on any expectations for the fourth quarter?

Yes. These acquisitions were for the Mexican operations. It was to fill up some of our facilities at the IMMSA mines. We don't -- we will very likely maintain buying some copper -- some materials from third parties in Mexico because of the way that they blend with our own materials. So that was the main driver of these acquisitions.

But you're buying concentrate, you didn't buy cathodes even if the Ilo smelter was down.

No, no. We just -- we sold more copper concentrate for the Peruvian operations because of the maintenance that the Ilo smelter and refinery had. We didn't acquire any copper cathodes, Carlos.

Okay. Good. And if I may, just one more. We regularly see headlines in Mexico about the government engaging with Southern Copper on discussions to try to remediate what they believe or some people believe are still pending actions by the company after the spill in Sonora. Can you maybe give us some comments as to what is the company's perspective on these negotiations and what impact -- initiatives and the potential financial impact those may have in the company?

Well, we have -- we are having these conversations now, and we are basically -- well, for us, this is a matter that was solved already. However, there are always good possibility of making progress in government talks for other objectives that the company may have. So there's not much to report at this point, Carlos, on this.

Our next question is from Timna Tanners with Wells Fargo.

I wanted to ask with regard to silver, I realize you don't move your volumes on a dime, but the guidance seems to imply a quarter-over-quarter drop into Q4, and I wanted to make sure I understood that. But given the strong price of silver, is there anything you can do to try to produce a bit more in the next medium term?

Thank you for your question, Timna. This is what we have been doing through 2025. We have the new concentrator in Buenavista, which is a concentrator that has the capacity of producing copper and zinc. In other years, last year, for instance, 2024, we did bundles of copper production as well as zinc production. But looking at the areas that we were getting into in 2025 and the zinc content, the zinc ore that we were finding in this part of the Buenavista mine, we decided to not produce copper with this new concentrator of Buenavista in this year, but zinc.

And the reason for that is that the zinc content is much higher. That's why we are producing a significant much important amount of zinc than last year. And obviously, the copper that we produced with this facility last year that was in the north of 12,000 tons was not produced in the same facility in 2025. So that explains why we are not producing as much copper as in 2024. Now as I mentioned before, we're very close to less than 1% of getting all the copper that we did -- that we forecasted in our plan now. We're hopefully making the plan and the plan when we announced it last year, had a reduction in copper production of about 2%. Obviously, if we see opportunities to improve this, we will certainly try to do it. But that's so far what we're considering for this year, Timna.

Okay. My question was more about silver just because of the strength of that market. But if you could comment on silver. And then my second question was more about any updated thoughts on M&A given some additional M&A in the space? Are you still preferring your organic projects? Or given some delays there, would you start to look at maybe buy versus build?

Okay. On the silver, Timna, we're producing more silver this year, not less than last year. And we made -- we already update our silver production forecast. This is a 23 million ounces, which will be 10% more than last year than 2024. Coming to your question on M&A. Well, no, we're basically focusing on organic growth. These projects that we're undertaking are excellent projects. The economics of them are much more better than what we see outside the company. Obviously, if there is a good opportunity, we will certainly review it and make a recommendation to our Board. But so far, this is what we're considering now.

Our next question is from the line of Alejandro Demichelis with Jefferies.

A couple of questions, if I may. Raul, could you give us some kind of indications of how you're seeing 2026 in terms of volumes, CapEx and so on? That's the first question. And then the second question is, obviously, we have seen the change in government recently in Peru. We have seen some protests and the state of emergency. So have you seen any kind of impact on the areas in which you are producing or in the ports in the South where you're kind of exporting from?

Okay. Let me go to your last question first. We are seeing no political -- no impact on our operations coming from the political situation in Peru. I'd just like to mention that the current President has an approval of 45% regarding the last poll. And I think that the protests that you mentioned has -- I believe there are diminishing as we have seen and particularly at the southern part of the country where we have our operations, where our projects are in the center of Peru in Apurimac, they are okay. We have a legal mining issue over there that we have -- that we're working with the authorities to fix.

And the northern part, we will have Michiquillay where with no issues regarding social unrest. And in the Tia Maria project, we are moving forward with the construction, as I reported before. Looking into 2026, we are still looking into what we expect for next year. We, at this point, have a forecast that is under review to produce about 911,000 tons of copper next year. We expect to review this and hopefully improve it a little bit more. But that's our current forecast for copper next year.

Cash costs, well, obviously, depending on contingent of the byproduct prices, it's hard to say. But let's say that it's in the range of where we are now in terms of the year-to-date cash cost or better if prices hold as they has been the case in the past quarter. On CapEx, we have -- we do have -- we're getting into the construction of Tia Maria next year. This would require -- Tia Maria alone would require about $866 million of CapEx. And consequently, we have -- we are expecting a much higher CapEx in the range of $2 billion for next year.

Our next question is from Myles Allsop with UBS.

Maybe with Tia Maria, could you just give us a sense, you've got the authorization to start exploitation now. Do you have all the permits that you need to push ahead with the project? And when do you think we'll get to completion of the project and the ramp-up phase?

Sure. The straight answer to your question is yes. There are some -- for initiating the construction and developing mining activities, we have all the permits. Once you are finishing the construction, you need to get a final permit from the authorities to begin operations, but that's kind of more routine type of a permit. Now we are expecting to have the ramping up of the project through 2027. Hopefully, it will be at the half of 2027 when we will be able to initiate the initial testing of the equipment and the ramping up. We do operate very similar plants than the one that we want to build in Tia Maria in some other locations in both Mexico and Peru. So hopefully, we will do a good ramping up in terms of time line for it. But that's something that we will be reporting as we move on with the project.

Okay. And in terms of the financing, I know in the past, you've done bonds to link to the kind of project, kind of CapEx. Is it still the intention that you'd finance it along those routes?

It's something that we look as we move on. Obviously, as interest rates are decreasing, we are seeing this as a more positive thing, but we're still evaluating if we want to follow that route for issuing one bond, et cetera, or doing some other using our own CapEx -- our own cash position. But I think it's going to be more likely than not that we will go to the debt market at a certain point in time to finance our Tia Maria project.

Okay. And then maybe just as it's more of an organic kind of growth pathway that you're looking at. When we look at the next projects, Los Chancas and El Arco's, which one do you think will be ready to FID first? And what needs to happen with each of them to get there? Or is it a different project that we should -- as it comes forward next after Tia Maria.

Well, the time line that we have is that Los Chancas should be the next project in terms of execution. Michiquillay is also in line for that. The results of Michiquillay has been very, very interesting, very good, actually. We have -- we are quite encouraged to move on with it, but we still need to do some work that has been already done for Los Chancas. In the case of El Arco, it's also scheduled to move on entering in the next decade. And hopefully, we will be able to do that as well.

So assuming that the Los Chancas is the next project, how [indiscernible] the illegal miners of the land would you be in a position to actually FID a project. Is it still 2 years after getting the illegal miners? Or can that be brought forward?

It could be speed up a little bit. In this, we have to talk with the Peruvian authorities to see when are they taking some actions on regarding the legal mining activities that we're seeing there. We're working with the communities because we believe that this could be also be solved with -- if the communities look into the matter and talk with the authorities on this issue as well.

Our next question comes from the line of Alfonso Salazar with Scotiabank.

I have 2 questions. And first of all, sorry to put you on the spot, but a moment ago, you said that you are focusing on organic growth, but we see that on the capital allocation front that you already are increasing -- you have been increasing your cash position quite fast. It's now at $4.5 billion. And if you continue with the hybrid dividends and given the cash generation that you are having today, this will continue to pile up. So I just want to understand how to reconcile these 2 things, especially what is the rationale behind having so much cash and increasing your cash position at this time?

The second question is regarding Tia Maria. And it's great to see that the project is moving ahead, but I think it's about to start a critical moment with elections in Peru and potential protest and noise against Tia Maria once again. So just wondering what is the action plan? What are you doing to deal with such situation in case it comes?

Okay. Regarding your comment on the company's cash position, well, we are not having at this point, the debt that was required to finance, say, Tia Maria, and that is why we are having a slightly higher than the usual cash, plus the fact that prices are really contributing to that. But that's mainly what we're -- currently, we're having a comfortable cash position for keep paying the dividends that the Board has approved as well as taking care of the projects that we have.

Now regarding potential social or political impact in the Tia Maria area, well, yes, that is always a possibility. But so far, we're not seeing anything like that. So we do have some plans. We are -- we have been working with both the people in the area as well as the authorities, particularly the majors of the Islay province where Tia Maria is located. And so far, what we're seeing is a calm environment that is very favorable for the project. Now obviously, we are continuously monitoring the social circumstances. And -- but at this point, we don't see any -- we don't have a concern regarding the impact of the political campaign in the area.

We have a question from the line of Tingshuai Feng from CICC.

This is David. Congratulations on the strong results. My first question is about LPR. We know that on your slides, LPR is still expected to start production in 2028. While the project is not mentioned in the latest quarterly press release. So I'm just wondering, can we have any updates on the project development progress at LPR? I'll come back with my second one.

Okay. Thank you for your question, David. No, we have not much to report on it. We are looking into the recovery that leaching part of the project has. And so far, we have no major progress on this at this point. So that's why we haven't mentioned it in our press release.

Understood. And my second question is just a follow-up on Los Chancas. We noticed that recently there is some discussion about extending the reinforce scheme by 5 more years. So just want from your perspective, any further extension of the scheme will have any impact on your development plan at Los Chancas, especially when you're dealing with the illegal miners.

Well, at this point, we have no people with this specific permit that you mentioned inside the premises of the project. So for us, it's a nonissue at this point. What you just said regarding this rainfall permit is something that has to be reviewed by Congress. We believe that Congress are realizing what we're seeing, which is that most of the population in Peru does not like to have illegal mining activities in general. That has been strongly shown in polls and different other -- different -- by some other different ways. So our view is that there should not be any extension of this type of permits.

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

Matheus, do you have a question? Okay. Let's move on. he may connect later.

Our next question is from Jon Brandt with HSBC.

Just 2 quick ones for me. I know this is a Board decision. But on the dividend, can you -- has the Board given you any rationale for why they're continuing the stock dividend? I mean the cash dividend is at $0.90, is pretty good. So I guess I just don't see the rationale for stock dividend. So I'm hoping you can sort of help me understand that.

And then the second question is just on hedging. If you've given any thought to potentially hedging, even if not copper, maybe some of the byproducts like silver and molybdenum, which have done well, particularly as you're going into a CapEx phase next year with Tia Maria and then even after that, I would suspect if you're going to start on Los Chancas, et cetera, that the CapEx will remain quite high. So I guess I'm wondering if there's any discussion about maybe locking in some of these higher metal prices.

Okay. Let me focus on your last question first. We have not had any specific discussions on hedging, copper hedgings or byproduct hedging at this point. In the past, when we did the Toquepala expansion, we did hedge using a zero cost collar. That was, I believe, a good idea because allow us to protect the copper -- the revenues from copper at that time when we were undertaking a major project.

On the rationale for the stock dividend, as you well mentioned, it's a Board decision. Well, we couldn't -- we wouldn't be able to pay the dividends that we have been paying without using a portion of the shares. So $0.90 in cash is what the company can pay out. But if we want to provide the stockholders with more liquidity, it has to be using the shares that were acquired in -- before 2016 at a much, much lower price. So that's what we -- what the Board has been considering and deciding.

Okay. Is it -- can you tell us how many shares are left? And should we assume that the stock dividend will continue until those shares are depleted?

We have about 65 million at this point, before paying the dividend, it's 72 million shares that we have in treasury.

Our next question comes from the line of Grant Sporre with Bloomberg Intelligence.

The question is really around about your sort of medium-term copper guidance. And I'm looking at your -- the chart that you put out after the second quarter results, which has 2027 going up by about 50,000 tons and then '28, by another 70,000 tons. Can you -- I know those are constantly under review, but if we assume that that's roughly in line with what you're still expecting, can you sort of guide us through the dynamics on how that works? Is it -- are you assuming a ramp-up for Tia Maria and then El Pilar and that offset some of the grade decline in your existing operations? Or how do we go about thinking about that?

Yes, Grant. Whole in effect is -- we have -- we're assuming for 2027, the ramping up of Tia Maria -- Okay, our production will increase as we get in operation, our major projects. In the case of Tia Maria, it will kick in with production in 2027. Later on in time, but it will be more in the 1930s (sic) [ 2030s ] , we will have Los Chancas and Michiquillay. But in the meantime, we're expecting to have El Pilar getting in 2028, and El Arco in 2029 -- '28, '29.

Now having said that, on the existing operations, we have for the long term, some ore decay that -- and we're considering some actions to contain the impact -- the full impact of that. Basically, in the case of Cuajone, we have -- we're expecting a reduction in ore grades starting next year. And for that, we will take some action as such expanding our Cuajone concentrator once again in order to fill up that material. That has not been approved by the Board, but it is something that we're looking as a possibility. We also have some other actions regarding different operations, and that's how we should comply or maintain our production level and increase it as we go towards 2030.

Okay. So if I can just sort of clarify. So if we take your existing operations in a sort of a do nothing scenario where you don't try and mitigate the impact of ore degradation or ore grade decline, your existing operations would probably decline sort of about 2%, 3% and you're hoping to offset that through various actions. And then the rest of your projects are all growth on top of that. That would be, I'm guessing your ideal scenario. Is that the...

That is current. What we're considering is basically on the existing operations, taking actions in order to maintain the production level or reduce as much as we can the decay due to ore reduction. I mentioned the Cuajone situation as an example. And besides this, we have new projects kicking in, which will provide new production and help us to maintain our production level and increase it up to 1.6 million tons by, say, mid-2030s.

And we have a question from the line of Marcio Farid with Goldman Sachs.

A quick follow-up on the 2 projects that you mentioned. Tia Maria, you're talking about potentially ramping up in the first half of '27. And a follow-up to the earlier question as well. It seems like in order for you to recover part of the loss in '27, you would need some significant volumes from Tia Maria, right, which I think is embedded in the guidance today. Can you remind us how confident you are -- you can get to Tia Maria at nearly 100,000 tons production by '27, considering the current schedule?

And then secondly, Cuajone, I think it's -- I think we've talked about it before potentially adding another concentrator at Cuajone as well. What's the sort of time line? When can you expect that decision to be discussed? Or being made by the Board, that would be great. And lastly, sorry, how does -- if there is any change to potential '26, '27 or '28 guidance, how should we think about costs in the context of lower fixed cost dilution as well?

Okay. Thank you for your question, Marcio. In the case of Tia Maria, we are expecting to initiate production in 2027. As a general comment, we're still looking in our plans for the next few years. I mentioned already that we are expecting to have more production over 911,000 tons for next year. Hopefully, we will improve that when we do our report in January. And same thing applies to our guidance for the next few years. I think that we will provide a more detailed and clear situation in our January report.

Coming to your other questions, the Cuajone expansion, we're still working on what to do. It is not a new concentrator. It's going to be a new line in the existing concentrator that may have a much lower cost than a new concentrator. Just to give you an idea, we're thinking about of something between $600 million and $700 million for that project, and it will provide about 40,000 tons of copper.

But as I said, this is not Board approved. So we're still working on having a solid case to present to the Board. When could be this approved? Well, let's say that we finish the work and present some guidance to the Board next year, then we could have an initial approval. And when we have all the permits and everything, then we could be able to go for a final and kind of construction approval to the Board. For -- I think I already answered your questions unless you have some other comment, Marcio.

Thank you so much. And this concludes our Q&A session for today. Thank you, everyone, and I will pass it back to Raul Jacob for any final comments.

Thank you very much, Carmen. With this, we conclude our conference call for Southern Copper's first quarter of 2025. We certainly appreciate your participation and hope to have you back with us when we report the fourth quarter and full 2025 results. This will be in January -- in our January call. Thank you very much for being with us today, and have a nice day.

Thank you so much. And this concludes our conference for today. You may now disconnect. Everyone, have a great day.

You too.