Southern Copper Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Copper Market: LME copper price increased 7% and COMEX price 14% from Q1 2024 to Q3 2025. Estimated copper market deficit of almost 400,000 tons; copper inventories cover ~8 days of global demand.
• Southern Copper Results: Q3 2025 saw new records in net sales, adjusted EBITDA, and net income. Driven by higher byproduct production and better metal prices. Cash cost per pound of copper was $0.42 in Q3 2025, one of the industry's lowest.
• Production: Copper production down in Q3 2025 due to lower grades in Peru and Mexico; byproducts (zinc, molybdenum, silver) had significant production increases. Zinc production up 46% YoY in Q3 2025, molybdenum up 8% YoY, silver up 16% YoY.
• Sales and Financials: Q3 2025 sales $3.4 billion, up 15% YoY. Adjusted EBITDA $1,975 million, up 17% YoY. Net income $1,108 million, up 23% YoY.
• Capital Projects: Tia Maria project 23% complete, with 2,109 jobs created; Los Chancas and Michiquillay projects ongoing; SEC Mexican projects in pipeline.
• ESG: Sustainability ratings improved; GHG emissions reduced; community projects (e.g., school modernization, health train); dividend of $0.90 per share announced.

Segment Performance

• Copper: Represented 73% of sales in Q3 2025. Copper production in Q3 2025 was 234,892 tons, a 7% decrease YoY; YTD 2025 copper production was 714,098 tons, a 3% decrease YoY. Expected 960,000 tons of copper for 2025.
• Molybdenum: Represented 13% of sales value in Q3 2025. Molybdenum production in Q3 2025 increased 8% YoY; expected 30,000 tons of molybdenum for 2025, a 4% increase YoY.
• Silver: Represented 7% of sales value in Q3 2025. Silver production in Q3 2025 increased 16% YoY; expected 23 million ounces of silver for 2025, a 10% increase YoY.
• Zinc: Represented 4% of sales value in Q3 2025. Zinc production in Q3 2025 increased 46% YoY; expected 174,700 tons of zinc for 2025, a 34% increase YoY.

Guidance

• Q4 2025 Cash Cost: Expected to decrease to $2.15-$2.20 per pound before byproduct credits, driven by partial recovery in Peruvian production.
• 2026 Outlook: Forecasted copper production ~911,000 tons; CapEx expected ~$2 billion, including ~$866 million for Tia Maria project. 2025 copper production expected 960,000 tons, ~1% below plan.
• Long-Term: Aim to produce 1.6 million tons of copper at lowest cost; actions to mitigate ore grade decline in existing operations and rely on new projects (Tia Maria, Los Chancas, etc.) for growth.

Risks

• Political/Social Unrest: Potential impact of political situation in Peru on projects like Los Chancas; need to regain control of Los Chancas due to illegal miners.
• Environmental Remediation: Government negotiations in Mexico regarding spill remediation in Sonora; potential financial impact not yet materialized.
• Ore Grade Decline: Existing operations face ore grade decline; need for mitigation actions (e.g., Cuajone concentrator expansion) to maintain production levels.

Question and Answer

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

A: For Q4, likely decrease to $2.15-$2.20 per pound; 2026 cash costs dependent on byproduct prices, but expected to be in current range or better if prices hold.

Q: How much of purchases of third-party concentrate or cathodes did the company do in the third quarter? And any expectations for Q4?

A: Acquisitions for Mexican operations to fill facilities; likely continue buying some materials from third parties in Mexico to blend with own materials.

Q: Thoughts on silver production and M&A?

A: Silver production up in 2025; focusing on organic growth, with M&A considered if a good opportunity arises.

Q: 2026 volumes, CapEx, Peru political impact?

A: 2026 copper forecast ~911,000 tons; CapEx ~$2 billion; no political impact on operations in Peru currently.

Q: Tia Maria permits, financing, next projects?

A: Tia Maria has all permits for construction and mining activities; considering debt financing for Tia Maria; Los Chancas expected to be next project after Tia Maria.

Q: Cash position, Tia Maria political risk?

A: Comfortable cash position due to strong cash generation; working with authorities in Islay province on Tia Maria, no current concerns about political impact.

Q: LPR project update, Los Chancas illegal miners?

A: No major progress on LPR project; no extension of illegal mining permits in Los Chancas area, working with authorities and communities.

Q: Dividend rationale, hedging?

A: Stock dividend due to Board decision to provide liquidity; no current discussions on hedging copper or byproducts.